Daiwa
House
REIT

Leveraging comprehensive strengths of Daiwa House Groupand aiming to continuously increase unitholder value

Sustainability Report 2023

Index
Message from the Management
Message from the Management Environment
3

Governance

Climate Change 13Governance 

29

Information Disclosure Based on TCFD Recommendations 

14Compliance 

32

Environmental Certifications 

19

Risk Management 

33

4

Biodiversity 

20

Sustainability Policy 

5Environmental Conservation 

21

Sustainability Promotion System 

6

Waste Management/Pollution Prevention 

21

Supported Initiatives

7

External Evaluations7

SocialHighlights

8

Diversity, Equity, and Inclusion 

23

Improving External Evaluations8

Human Rights and Labor Standards 

24

Initiatives for Local Community 

25

Initiatives for Tenants and Supply Chain 

26

Investor Relations Initiatives 

27

Sustainability
Sustainability History Special Features
Special Feature 1: Financial Capital 

9Special Feature 2: Human Capital 

10

Editorial Policy

Issue Date

: August 2023 (Issue frequency: Annually, Next issue: July2024 (subject to change))

This report describes the overall efforts of Daiwa House REIT
Investment Corporation (hereinafter referred to as “DHR”) and its
asset manager, Daiwa House Asset Management Co., Ltd.
(hereinafter referred to as the “Asset Manager”) to contribute to therealization of a sustainable society and to maximize unitholder value
over the medium to long term.
This report has been prepared based on information on the website
as of August 2023. For the latest information thereafter, please referto the website, which will be updated as needed.
This report contains forward-looking statements, but thesestatements are based on judgments made with information available
at the time each material was prepared, and are not guarantees of
future financial results.
Yen amounts of less than the units indicated are truncated in thisreport.

Scope: In general, Daiwa House REIT Investment Corporation
and Daiwa House Asset Management Co., Ltd.

Period: April 2022–March 2023 (including details of activities
before or after as necessary)

Reference
Guidelines: Sustainability reporting standards, GRI
Environmental Reporting Guidelines 2018, Japanese
Ministry of the Environment
Final Report: Recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD)GRI Content Index

2

FinanceGreen Finance 

36

Sustainability Finance 

37

Relevant Data
Relevant Data 

NavigatingThis Report38

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ForwardClick or tap toproceed to thenext pageXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXClick or tap to go to the relevant
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page in this report

Environme

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Message from the Management

Toshiharu Asada

Koichi Tsuchida

Executive Director

President and CEO

Daiwa House REIT

Daiwa House Asset

Investment Corporation

Management Co., Ltd.

DHR will work to continuously increase unitholder value by
ensuring stable revenue and steady growth of its assets overthe medium to long term through fully utilizing
Daiwa House Group’s comprehensive strengths andknowhow regarding real-estate development.

Daiwa House REIT Investment Corporation’s Sustainability Policy and Strategy

Leading-edge Initiatives for Achieving Net Zero GHG Emissions

GRESB Real Estate Assessment.

Aiming to ensure stable revenue and steady growth of assets over the medium
to long term, we will strive to manage assets in a manner that embraces ESG
considerations while appropriately disclosing such performance

At the 27th United Nations Climate Change Conference held in Egypt in

Daiwa House REIT Investment Corporation and its asset manager Daiwa

November 2022 (COP27), the parties of the UNFCCC voiced the world’s

House Asset Management Co., Ltd. share the Daiwa House Group’s basic

unwavering commitment to reducing GHG emissions to achieve the 1.5°C

approach of “Creating Dreams, Building Hearts.” To attain a sustainabletarget.

society, it is essential that we include environmental, social, and governanceIn October 2020, the Japanese government declared that Japan would(“ESG”) considerations in real estate investment management operations.

realize carbon neutrality by 2050, and in October 2021, revised its target for

We also believe that this will contribute to ensuring stable revenue andthe fiscal year 2030 to an ambitious 46% reduction in GHG emissions

achieving steady asset growth over the medium to long term, which iscompared to the fiscal year 2013. Companies and organizations now face

DHR’s basic policy. As such, the Asset Manager established thethe crucial task of actively shifting to renewable energy sources.

Sustainability Policy in April 2017, and has been applying it to its real estate

Supporting these trends, DHR has set targets for achieving net zero GHG

investment management business.

emissions by the fiscal year ending March 2051, becoming the first J-REIT

and the 30 by 30 Alliance for Biodiversity, a coalition promoting efforts to

Additionally, DHR’s growth strategy calls for efforts to increase unitholder

to receive certification from the Science Based Targets initiative (SBTi) that

achieve 30 by 30, an initiative to halt the loss of biodiversity and put it on avalue by combining business (economic) value and social (non-financial)these targets are consistent with the levels required by the Paris Agreement

recovery track (nature positive) by 2030 with the goal to effectively conserve

value. Strategies to increase social (non-financial) value include (1) improving

and are based on scientific evidence.

at least 30% of land and sea as healthy ecosystems by 2030.

ESG ratings from GRESB, CDP, and other third-party organizations, (2)reducing greenhouse gas (GHG) emissions, (3) promoting the conservationof biodiversity, (4) reducing asset management risk through the AssetManager’s human capital and health management, and (5) committing toincreasing social value by introducing sustainability index-linked fees.
This constitutes our Sustainability Report, prepared for providing an
opportunity for unitholders and other stakeholders to learn more about thevarious ESG initiatives and approaches implemented by DHR and the AssetManager thus far. Going forward, DHR will keep striving to enhance its ESG
initiatives further with respect to its real estate investment managementbusiness, while endeavoring to appropriately disclose such performance.

Promoting leading-edge initiatives for achieving
net zero GHG emissions

selected as a Regional Listed Sector Leader (Asia/Diversified) in the 2022

Acquiring External Evaluation

We aim to acquire external evaluation and improveassessment results in order to achieve greater objectivity
and reliability with respect to our sustainability initiatives
DHR gained recognition as a climate change A List company for the second
consecutive year under the 2022 CDP Climate Change Program, upon
having received the highest-rated “A” score in recognition of exhibiting highstandards internationally when it comes to addressing issues of climatechange and disclosing information in that regard.
DHR was also awarded the highest rating of 5 stars for the first time and3

Additionally, DHR became the first J-REIT to be named an Environmentally
Sustainable Company—fulfilling the requirements for fullness of
disclosures—in the Fourth Annual ESG Finance Awards Japan.
Biodiversity Initiatives
DHR and the Asset Manager believe climate change, human rights, diversity
and inclusion, and biodiversity are important social issues to address. By
joining the initiatives related to the above, we will continue to actively workon solving social issues. The Asset Manager became the first asset manager
of a J-REIT to join the Japan Business Initiative for Biodiversity (JBIB), agroup of Japanese corporations actively working to conserve biodiversity,

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ForwardSustainability History
Obtained External Certifications and Evaluations as the First J-REIT and Implemented Leading-edge ESG Initiatives• The first J-REIT to be named on Supplier
Engagement Leaderboard

External certifications and evaluations• The first J-REIT to receive “ZEB” certification (highest ZEB• For the first time, DHR was awarded the• The first J-REIT to be named an Environmentally

rating) in addition to the highest BELS rating of 5 stars

highest rating of “5 Stars” and selected as
Regional Listed Sector Leader (Asia/Diversified)Sustainable Company in the ESG Finance Awards Japan• The only J-REIT to be named on the
Leaderboard for three consecutive years

DPL Nagareyama III• The first J-REIT to becertified by Science Based
Targets initiative (SBTi)• The first J-REIT to be named on“A List” (highest recognition) in
CDP Climate Change Program• Recognition for two consecutive
years

February
2021

Leading-edge initiatives

Reduction in GHG
emissions
GRESB Rating
CDP Score• Information disclosure basedon TCFD recommendations

October2021• T he first J-REIT to introduce Sustainability
Index-linked Fees
Asset management fees
are calculated according
to the degree ofachievement of each index

Reduced amount to be used for the measures
to reduce GHG emissions and improve
environmental certifications• R emuneration for Executive Director of DHR
is also linked(Note) In chronological order of the date of announcements• For the first time, the Asset Manager was certified as one of the“Bright 500,” the top 500 corporations in the “2023 Health &Productivity Management Outstanding Organizations (SME category)”

December
2021

March
2022

• The first J-REIT to purchase FIT non-fossil
certificates in the renewable energy value
trading market

April
2022

October2022• T he first J-REIT to join “Race to ZERO” and“RE Action – Declaring 100% Renewable”• Joined/signed on to total of 9 initiatives
related to climate change, human rights,
diversity & inclusion, and biodiversity

Achieved zero emissions in Scope 2(market-based)

Sustainability Committee

Sustainability• Raised to a formal committee Promotion Department• Held at least once a month• Newly established• Outside expert advisor
appointed

4

January
2023

March
2023

• T
 he first asset manager of a
J-REIT to join the Japan
Business Initiative for Biodiversity(JBIB) and the 30 by 30 Alliancefor Biodiversity (Asset Manager)

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ForwardSustainability Policy
Policy and Basic Approach
Sustainability Policy
The Daiwa House Group’s basic approach is “Creating Dreams, Building
Hearts.” As a group that co-creates value for individuals, communities andpeople’s lifestyles, the Daiwa House Group aims to build trusting
relationships with stakeholders and contribute to society through its
businesses, and to realize a sustainable society by meeting the challenge ofachieving “zero environmental impacts.” Daiwa House Asset Management
Co., Ltd. shares the Daiwa House Group’s basic approach as DHR’s asset
manager, and considers that including consideration for ESG in its realestate investment management operations contributes to DHR’s basic
policy of ensuring stable revenue and steady growth of assets over the
medium to long term. Therefore, we have established the following“Sustainability Policy” to guide our real estate investment management.

Stakeholder Engagement

We will aim to build trusting relationships with external stakeholders and we will work on our
suppliers to enhance the satisfaction of tenant customers and promote CSR in our supply chain.
We will undertake neighborhood co-existence activities with local residents.

3. Conservation of natural resources (protecting water resources, reducing waste)

7. Promotion of communication through information disclosure

We will work towards the realization of a recycling-oriented society by promoting water
conservation measures through the installation of water conservation equipment. We will
also promote 3R activities (reduce, reuse, and recycle) for resources.

We will proactively disclose ESG-related information and utilize dialogues with stakeholders,such as investors, in our future business activities. Furthermore, we will aim for continuous
acquisition of Green Building Certification.

4. Prevention of chemical pollution

8. Compliance with laws and regulations, and risk management

We will aim to realize a society where people and ecosystems do not suffer adverse effects fromchemical substances by promoting reduction, substitution and appropriate management ofharmful chemical substances when managing real estate, and taking efforts to minimize risks.

We will comply with ESG-related laws and regulations. Moreover, we will strive to implement
appropriate risk management, such as giving consideration for the environmental and social
impacts in risk evaluations when acquiring real estate and promoting awareness of human rights.

Tenants•T enant satisfaction
surveys•C ooperation programswith tenants,
etc.

• Reporting to the Board of Directorsof the Asset Manager and DHR
Board of Directors atleast four times a year
as a general rule• Setting environmental
performance targets

ActionPlan

Materiality
Climate ChangeDo• Verifying progress ofsustainability promotion at the
Sustainability Committee• Checking progress ofenvironmental performance results5• Human resource development (training andcareer development)• Promotion of diversity• Improvement in the health, safety, andcomfort of tenants• Cooperation with tenants (promotion of Green Leases)

Employees and Tenants
Governance• Participating in GRESB Real Estate
Assessments and providing responses
to the CDP Climate Change Program• Addressing priority issues

G

Check

• Energy efficiency (energy savings)• Promotion of reduction of greenhouse gas
emissions (renewable energy)• Improvement of building resilience• Cooperation with tenants (promotion of Green Leases)

Employees and TenantsSocial•D iversity andinclusion•H uman resource
development,etc.

• Reviewing sustainability promotion
according to fiscal year results

Identified Materiality

S

Sponsor•U
 se of the value chainof Daiwa House Group•D aiwa House Group’s
pipeline support,etc.

6. Building of trusting relationships with external stakeholders

We will aim for a society that is able to pass on abundant natural resources to future
generations in order to protect and improve natural capital. We will also promote planting
and management considering harmony with the surrounding environment.

Environmental•C ontinuous evaluation forproperty managementcompanies and building
management companies• ESG training,etc.

2. Harmony with the natural environment (preservation of biodiversity)• Reviewing and formulating
various policies and measuresrelated to sustainability

Officers andemployees

Supply chain

We will establish an internal framework for promoting sustainability and take steps to develop
human resources by conducting regular education and training for employees. We will also aim
to create workplaces where people can work safely and healthily, and workplaces where diverse
employees can work flexibly.

E• Investment inexisting urban
development zones• Local job creation,etc.

•R esults briefing•H olding presentation
meetings for unitholders,etc.

5. Establishment of an internal framework and initiatives for employees

We will promote energy conservation measures through the installation of energy
conservation equipment and so forth to realize a carbon-free society. We will also consider
introduction of renewable energy power generation facilities and acquisition of properties
that have such equipment installed.

Concept of Sustainability Promotion Based on the PDCA Cycle

Unitholders
Localcommunities

1. Prevention of global warming• Ensuring compliance (appropriate
transactions with interested parties)• Acquisition and improvement of Green
Building Certification and ESG assessments

Materiality

Goals related tothe main SDGs

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Sustainability Promotion System
Sustainability Promotion System, Supervision by Board of Directors, and Role of Top Management
Sustainability Committee

Organizational chart

General Meeting of
Shareholders• Deliberates and resolves on sustainability-related
policy and strategy development•D eliberates and resolves on execution ofsustainability-related operations

Supervision by Board of Directors

Corporate Auditor

Receives and monitors reports from theSustainability Committee on sustainability-

Board of Directors

related matters (considerations for

Sustainability Committee
Committee Headclimate-related, biodiversity, and other: President and CEO

Operating officer : General Manager, Sustainability Promotion Department
Executing officer : Head of Daiwa House REIT Division, Head of Private Fund Division
Members: All full-time Directors, Heads of Division, General Managers (excluding
Compliance Officer) and other selected officers and employees

Observers: Outside expert advisor, Compliance Officer

Frequency of
meetings
Function androle: At least once a month: Deliberations and approvals regarding sustainability-related
policy and strategy development and execution ofsustainability-related operations, and reporting to the Boardof Directors and the DHR Board of Directors as appropriate

Sustainability Committee

Compliance Committee

Daiwa House REIT Investment
Management Committee

Private Fund Investment
Management Committee
President and CEO

Sustainability Promotion
Department

Compliance Officer

Role of President and CEO
As the Chief Executive on sustainability-related
matters at Board of Directors and the Chief
Executive of the Sustainability Committee,
provides final approval of various goals andmeasures, evaluates the status of efforts andgives instructions for review

Number of reports on sustainability-related matters

Fiscal year ended March 2023
12

management for natural disasters, etc.)

Compliance Department

Number of meetings held
Sustainability Committee

global environmental issues and risk

Daiwa House REIT
Division
Fund Management
Department

Investment Department

Administration andAccounting Department
Fund Management
Department

Asset Management
Department

Fiscal year ended
March 2023

Private Fund Division

Asset Management
Department

Asset Manager Boardof Directors
DHR Board of
Directors

12
12

Main Items Reported and Resolved (Fiscal Year Ended March 2023)
Sustainability Committee

Asset Manager Board of Directors and DHR Board of Directors(Reports)(Monthly reports)
Sustainability budget and performance management, climate change-related matters, external evaluation-related matters,
environmental certification of portfolio properties, seminar attendance, etc.

Sustainability implementation plan and results, annual schedule of sustainability-related operations, creation of sustainability reports,
sustainability evaluations, submittal of responses to/reception of results of GRESB assessments, submittal of responses to/reception of
results of CDP Climate Change Program, status of environmental certifications, listing on CDP Supplier Engagement Leaderboard,
application for/acquisition of 2023 Health & Productivity Management Outstanding Organizations (SME category) certification, selection
as an Environmentally Sustainable Company in the ESG Finance Awards Japan, sustainability evaluations (outside expert advisor)(Individual reports)
Purchase of non-fossil certificates, ESG website improvements, creation of sustainability reports, status of conclusion of Green
Lease agreements, status of environmental performance, questions from investors about ESG-related initiatives in IR activities,
status of initiatives on principles of customer-first operations, climate change-related risk assessment, participation in initiatives,
status of climate change-related initiatives, status of internal training(Resolutions)Purchase of non-fossil certificates, ESG website improvements, revision of Sustainable Procurement Policy, fundraising (Green
Loans, Sustainability-Linked Loans), joining the Japan Business Initiative for Biodiversity (JBIB), participating in the 30 by 30
Alliance for Biodiversity, formulating sustainability-related budgets(Resolution)
Payment of sustainability index-linked fees

6

ForwardMessage from the Management

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Forward

Supported Initiatives
DHR and the Asset Manager believe climate change; human rights; diversity, equity, and inclusion; and biodiversity are particularly important social issues to address to attain a sustainable society. By joining the initiatives
related to the above, we will continue to actively work on solving social issues.
First in J-REITs

First in J-REITs

United Nations Global
Compact (UNGC)
United Nations Global Compact(UNGC)

Principles for Responsible
Investment (PRI)

Task Force on Climate-related
Financial Disclosures (TCFD)

TCFD Consortium

Japan Climate Initiative (JCI)

Science Based Targets

RE Action – Declaring 100%
Renewable

Human rights

Diversity and inclusion

Overall ESG

Climate change

Climate change

Climate change

Climate change

Climate change

Climate change

Biodiversity(Asset Manager)(Asset Manager)(Asset Manager)(DHR/Asset Manager)

(DHR)

(DHR)

(Asset Manager)
First in J-REITs

First in J-REITs
New

First in J-REITs
New

World Wide Fund for
Nature (WWF) Japan

Race to Zero

Principles for Financial Action forthe 21st Century

Climate change

Climate change(DHR)(Asset Manager)

Named on the CDP Climate
Change Program “A List” for two
consecutive years(DHR)

World Wide Fund for Nature(WWF) Japan

Japan Business Initiative for
Biodiversity (JBIB)

30 by 30 Alliance for Biodiversity

Eco Action 21

Biodiversity

Biodiversity

Environmental management system(Asset Manager)(Asset Manager)(Asset Manager)(DHR/Asset Manager)

Listed on the CDP Supplier
Engagement Leaderboard (the highest
rating) for three consecutive years

Awarded the highest rating of “5Stars” in the GRESB Real Estate
Assessment

Selected as a Regional Listed Sector
Leader (Asia/Diversified) in the GRESBReal Estate Assessment

Awarded a BBB rating in the
MSCI ESG Ratings

Named an Environmentally
Sustainable Company in the ESG
Finance Awards Japan

(DHR)

(DHR)

(DHR)

(DHR)

(DHR)

Climate change

Biodiversity

External Evaluations

Named one of the “Bright 500,” the top
500 corporations in the “2023 Health &Productivity Management Outstanding
Organizations (SME category)”(Asset Manager)

For overviews of individual initiatives and assessments, click the relevant organization’s logo to visit its website.

(Note) “DHR” and “Asset Manager” represent Daiwa House REIT Investment Corporation and Daiwa House Asset Management Co., Ltd., respectively

7Message from the Management

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Sustainability Report 2023

ForwardHighlights

1.
2.

Financial Capital

In May 2022, DHR issued the world’s first publicly offered annual performance-type Sustainability-Linked Bonds with the aim of further expanding the investor base and securing a stable means of financing.
Sustainability-Linked Bonds have conditions that depend on whether the prescribed sustainability target has been achieved, and are a new initiative wherein the results of sustainability initiatives are reflected in
the form of economic value, namely the bonds’ interest rate. By achieving growth in both business and social value, these bonds will further advance the growth strategy of DHR—to maximize unitholder value.

(Sustainability-Linked
Bonds)The Asset Manager formulates the Sustainability Policy, under which it will establish an internal framework for promoting sustainability, take steps to develop human resources by conducting regular educationand training for employees, and aim to create workplaces where people can work safely and healthily, and workplaces where diverse employees can work flexibly. To take advantage of the abilities and uniquetalents of our employees and develop human resources capable of contributing to society, we implement various training and programs. We are also working to promote work-life balance, improve healthliteracy, and manage health through many initiatives, including efforts to improve on health-related issues and promote mental health care.

Human Capital(Health Management)

Improving External Evaluations
CDP Climate Change Program

GRESB Real Estate Assessment and GRESB Public Disclosure

MSCI ESG Rating• 2022 CDP Climate Change Program:Awarded the highest score of “A” andnamed on the “A List” for the second
consecutive year

• 2022 GRESB Real Estate Assessment:Awarded the highest rating of “5 Stars” forthe first time (top score in a peer group of 14)• Rating was upgraded from “BB” to “BBB” in March 2022

• 2
 022 GRESB Real Estate Assessment: Selected
as Regional Listed Sector Leader (Asia/Diversified)• 2022 CDP Supplier Engagement
Rating: The only J-REIT listed on the
CDP Supplier Engagement
Leaderboard (the highest rating) for
three consecutive years• GRESB Public Disclosure Levels: Awarded an “A” rating(the highest of 5 levels) for the fourth consecutive year

Each external ESG evaluation improved

CDP Score

GRESB Real Estate Assessment
A

A

A

A-

AB-

5
4

C-

★★

D
D-

F

F

2018

2019

A
BBB
BB

2

B

★

2020

2021

2022

AAA
AA

4

3

★★★

C

MSCI ESG Rating

★★★★★
★★★★

B

F

Disclaimer
The use by DHR of any MSCI ESG Research LLC or its affiliates(“MSCI”) data, and the use of MSCI logos, trademarks, service
marks or index names herein, do not constitute a sponsorship,endorsement, recommendation, or promotion of DHR by MSCI.
MSCI services and data are the property of MSCI or its information
providers and are provided “as-is” and without warranty. MSCI
names and logos are trademarks or service marks of MSCI.

BB

BB

Jan-20Jan-21BBB

BBB

Mar-22

May-23

B

C

2018

2020

2019

8

2021

2022

Feb-19Message from the Management

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Sustainability Report 2023

ForwardSpecial Feature 1: Financial Capital (Sustainability-Linked Bonds)
Overview of DHR Sustainability-Linked Bonds
Policy and Basic Approach

Overview
Name

Business value (economic value)

Structure
Rate adjusted according to SPT judgment

18th Unsecured Investment Corporation Bonds (Sustainability-Linked Bonds)(also referred to as “DHR Sustainability-Linked Bonds”)

Issue date May 25, 2022

Social value (non-financial value)Term

7 years

SPT

DHR named on “A List” (highest recognition) in CDP Climate Change
Program
Initial interest rate: 0.575% per annum

Initialinterest
rate

Interest rate after SPT assessment: Based on level of achievement
as shown on the table below

SPT achieved

CDP score of “A-”

-0.025%

CDP score of “A”

Interest
payment

Interest
payment

Apr. Judgment

May

Mar.

Jan.

Feb.

Dec.

Oct.

Nov.

Sept.

July

 ustainability Performance Target (SPT): A prescribed sustainabilityS
related target.

2025
Aug.

Interest
payment

Duration of post-judgment adjusted interest rate•

June

Interest
payment

Apr. Judgment

May

Mar.

Jan.

Feb.

Dec.

Oct.

Nov.

Sept.

July

0.600% per annum(+2.5 bp from initial interest rate)

2024
Aug.

B, B-, C, C-, D, D-, FInterest
payment

0.585% per annum(+1 bp from initial interest rate)

June

A-

Duration of post-judgment adjusted interest rate

Repeat until redemption

Sustainable
Finance

Assessment of
Qualification

Bond
FeaturesFirst-everIssuing entity

Annual performance-type

ES+0.010%Interest rate decreases
after judgment

2023
Apr. Judgment

0.550% per annum(-2.5 bp from initial interest rate)

May

A

Mar.

Interest
rate

Interest rate

Jan.

D
 HR will continue to promote sustainability initiatives and meetdemand from experienced ESG investors with the aim of further
expanding the investor base and securing a stable means offinancing.

CDP ScoreFeb.

Issuance of Our First Sustainability-Linked
Bonds to Promote ESG Strategy in Terms of
Finance•

CDP score of “B” or lower

Schedule of SPT judgments and adjustments to interest rates(on and after May 26, 2023)

 HR’s sustainability initiatives in the context of investment
D
corporation bonds include issuing environment-related green
bonds since 2019 and sustainability bonds, which are related
to both the environment and society, in 2021. Additionally, as
a new sustainability initiative in the context of finance, DHR
issued Sustainability-Linked Bonds in 2022.

Annualjudgment+0.025%(May 26, 2022–May 25, 2023)

Maximization of unitholder value•

Interest rate increases
after judgment

SPT not achieved

Issue amount ¥4 billion

CDP Climate Change ProgramG

Fi n an ce

KPIInterest rates
adjustedaccording to
SPT judgments

Interest
payment

Investors

Investment•S ustainability-Linked Bonds have conditions that depend onwhether the prescribed sustainability target has been achieved

18th Unsecured Investment
Corporation Bonds(Sustainability-Linked Bonds)(also referred to as “DHR
Sustainability-Linked Bonds”)• By achieving growth in both business and social value, thesebonds will further advance the growth strategy of DHR—tomaximize unitholder value

SPT

DHR named on “A List”(highest recognition)

DHR chose this SPT based on the belief that using the
CDP Climate Change Program—recognized as a highquality external evaluation that reflects the latest global
trends and what stakeholders want—for the SPT
would contribute to improving unitholder value throughthe promotion of the sustainability initiatives of DHR.

Here are the names of investors that havedeclared their intent to invest in these
Sustainability-Linked Bonds.

9

Verification organization
Verification ofconformity, etc.

Third-party
written opinion• They are a new initiative wherein the results of sustainability
initiatives are reflected in the form of economic value, namely
the bonds’ interest rate

The CDP Climate Change Program assesses thelevel of companies’ and cities’ efforts to combat
climate change. The CDP scores applicants’
responses to a questionnaire based on quantitativeand qualitative criteria and provides its final
assessment in the form of one of nine grades (A, A-,
B, B-, C, C-, D, D-, F).

For DHR to issue these Sustainability-Linked
Bonds, it undergoes verifications by the Japan
Credit Rating Agency, Ltd. (JCR) of its
conformity to “Green Loan and Sustainability
Linked Loan Guidelines (2020 Version)” by
Japan’s Ministry of the Environment,“Sustainability-Linked Bond Principles (2020
Version)” by the International Capital Market
Association (ICMA), and the like.

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Sustainability Report 2023

ForwardSpecial Feature 2: Human Capital
Policy and Basic Approach
The Daiwa House Group Company Philosophy (Corporate Creed) states that “acompany’s progress depends directly on ensuring a good working environment
for its employees.” We believe that ensuring safe, healthy workplaces for our
employees is essential for creating environments that encourage the growth ofeach employee and leverage their capabilities.
Given the lack of workers due to the declining birthrate and aging population,
people leaving the workplace to care for aging parents, and other problems, thehuman resources situation in Japan has become quite serious.
The Asset Manager will continue to advance work-style reforms, introduce new
systems responding to changing social conditions and its own situation, andtransform internal organizations and management with the aim of achieving
maximized work performance and a safe and healthy work environment both
physically and mentally for all employees.

5 Pillars of Human Capital Initiatives
Human resource
development
Announce that humanresource development
is being promoted• Establish a workplace thatis conducive to learning• Carry out training andpromote the acquisition of
professional qualifications
after clarifying the skills
required based on rank
and department

Improvement in corporate value••

Maximization of humancapital value

Work styles•

Health and productivity
management

Promote various work
styles that are not tiedto specific times orplaces for work-lifebalance

Diversity,
Equity &Inclusion

Invest in the health of
employees to revitalize
the organization,
including invigorating
employees andincreasing productivity

Qualification

New Employee Training Program

The Asset Manager has introduced and implemented a target management andperformance evaluation program semiannually to (1) foster communication between
superiors and subordinates, (2) strengthen human resource development,(3) increase motivation with respect to roles and results (performance), and (4) clarify
evaluation criteria and gain better understanding of evaluations. Employee
performance evaluations are determined by evaluation of performance benchmarked
against individualized targets, evaluation of skills/conduct and a complianceevaluation. The issues for improvement are shared through the performance review
and follow-up interviews. Additionally, “ESG initiatives in response to societal
demands” was added as a performance evaluation criterion from the second half offiscal year ended March 2019.

The Asset Manager provides training to help new employees acquire operational
knowledge as quickly as possible.

Enhance theengagement of theorganization bystrengthening therelationship of mutual
trust between the
Company and its
employees as well as
the employees
themselves

Self-Assessment Interview Program
Support for Operational Skills Development and Training

Interviews about target management and performance evaluations conducted by the
Asset Manager tend to focus on short-term challenges, such as how targets will beachieved for the current period. Therefore, DHR has introduced and implemented aself-assessment interview program for all employees (excluding executive officers,
compliance officers, general managers, and fixed-term employees) once a year forthe purpose of creating opportunities as a company to understand the long-term
career vision toward the future or the hope and intentions of each employee about
particular work that they want to experience, which can then be reflected in thetreatment, assignments and development of the employee as well as workplace
improvements and other human resource policies.
These interviews focus on topics other than work targets, such as career visions,health, stress, and any concerns an employee might have. It also confirms theintentions for the future of each employee, such as future work that they would liketo experience and where they would like to be in that future.

The Asset Manager has established a system for providing funding for theregistration and renewal of professional qualifications and a system for providing
congratulatory payments for acquiring professional qualifications to encourage theacquisition of knowledge, qualifications, and licenses. The purpose is to increase themotivation of all employees (including fixed-term employees, temporary employees,
and part-time employees) with respect to self-development, improve their abilities
and talents, continuously and steadily secure human resources with the specializedskills necessary to contribute to the achievement of business objectives, and assess
the environmental friendliness of DHR’s properties.
Relevant Data (2 of 2)

Training System and Schedule
First Quarter4
Training for young employees• Learning operational
knowledge
For new employees• Understanding andlearning aboutsustainability
Training for new employees

Level-based training

Fiscal year ended
March 2023

Target for fiscal year
ending March 2031

90.1%

100%

46.4%

50%

OJT trainers(assistantmanagers)

Training for all employees• Human rights,
harassment,
information security,etc.

5Second Quarter
6

7

Third Quarter

8

9

10

11

Fourth Quarter
12

1

2

3

Internal training (Understanding and learning operational knowledge, for assistant managers and associates)
12 sessions (8 sessions (ESG, account settlement, Public Offering, Private funds, etc.) + 4 sessions (directors as instructors))
For new employees
Sustainability

OJT trainers(assistantmanagers)

Middlemanagement
personnel(managers)

ComplianceManagement
personnel(senior managers
and above)Young
employees(associates)

Compliance

Compliance

Compliance

Information security
Sustainability

Information security
Sustainability

Market report for all assets(Fiscal Year Ended March 2023)
31.5 hours/person/year¥91,039/person/year

The Asset Manager enlists the help of outside experts to provide training to officers
and employees (including fixed-term employees, temporary employees and part-time
employees).
Relevant Data (2 of 2)

Training Hours and Expenses for Officers and Employees
Training hours
Training expense

Training on Operational ExpertiseEngagement•

KPIs and Main Initiatives
Real Estate Transaction Agent
ARES (Association for Real Estate
Securitization) Certified Master

Target Management and Performance Evaluation Program

Logistics seminar
Training for PM
companies

10

Human rights andharassment

Sustainability
Sustainability

Market report for all assets

Logistics market
reportOther

Sustainability

Logistics market
reportMessage from the Management

Sustainability

Special Features

Environment

SocialGovernance

FinanceRelevant Data

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Special Feature 2: Human Capital (Health Management)
Policy and Basic Approach
The Asset Manager formulates the Sustainability Policy, underwhich it will establish an internal framework for promoting
sustainability, take steps to develop human resources byconducting regular education and training for employees, and aim
to create workplaces where people can work safely and healthily,
and workplaces where diverse employees can work flexibly.
Based on this philosophy and policy, initiatives to promote
employee health will improve their vitality and productivity andotherwise invigorate the entire organization, leading to improved
business performance and greater value for the organization.

Health Declaration (September 2022)• Promote work-life balance• Improve health literacy• Promote regular health checkups (especially secondary
checkups for individuals who have not gotten them)• Prevent the spread of disease thoroughly

KPIs and Main Initiatives
The Asset Manager aims to fulfill a Health Declaration bystrengthening the health management system and throughmeasures to enable each and every employee to work with ahigh level of health awareness so that they can stay healthy andactive over the long term.
Item

Fiscal year ended Target for fiscal year
March 2023
ending March 2031

Percentage of personnel who had health checkups

100%

100%

Percentage of personnel who received
metabolic syndrome-specific health guidance

100%

100%

Percentage of personnel who had secondary
examinations

100%

100%

Percentage of personnel who had stress checks

100%

100%

Health Management Promotion System

Improving Health Literacy

The Sustainability Committee is an official body with the President andCEO as the Committee Head and the General Manager of the
Sustainability Promotion Department as the operating officer. The
committee meets at least once a month and deliberates and resolves
on policy, strategy development, and operations related tosustainability, which includes health management. The committee also
reports on these matters to the Board of Directors as necessary.

Every month, the industrial physician of the Health Committee disseminates“Notes on Health Tips” throughout the company. The notes include columns
and health information tailored to the season. The aim is to provide safety andhealth education to employees and improve their health literacy.
Additionally, the radio calisthenics program broadcast at the same time every
morning has improved employee health and vitality.

Establishment of Health Committee
The Asset Manager has established a Health Committee that meets monthly
to exchange opinions on the workplace environment and learn about healthwith the industrial physician in order to prevent health problems among
officers and employees and maintain and promote their health.

Promoting Regular Health Checkups (Especially Secondary
Checkups for Individuals Who Have Not Gotten Them)
The Asset Manager aims to have 100% of employees get regular
health checkups, and is committed to thorough follow-up in the formof working with health insurance associations and workplaces topromote secondary examinations, checking the status of treatment
and whether employees have received health guidance, and more.
Due to these efforts, 100% of employees got examinations andreceived metabolic syndrome-specific health guide for the fiscal year
ended March 2023.

Collaborative Efforts with Health Insurance
Associations to Improve on Health-related Issues
The Daiwa House Group worked with health insurance associations to
introduce a Health Analysis System in a proactive effort to promote
employee health. The system analyzes employee health in organizational
units and based on attributes, and the results are used to identify
organizational issues (areas of improvement in employees’ lifestyles).
Specifically, 11 items from health checkup results (including BMI, waist
measurement, blood pressure (systolic and diastolic), triglycerides, etc.)
and 10 items from interviews during the checkups (smoking habits,
exercise habits, breakfast habits, frequency and volume of alcohol
consumption, sleep habits, etc.) are assigned point values, which allow
the averages to be compared within companies and the Group to give
people an easy way to see what needs to be improved.

11

Relevant Data (2 of 2)

Mental Health Care Initiatives
The Asset Manager conducts stress checks once a year for the
purpose of preventing mental disorders. The stress check screening
rate was 100% in the fiscal year ended March 2023.

“2023 Health & Productivity Management Outstanding
Organization (SME Category)” and “Bright 500”
The Asset Manager was named a “2023 Health & Productivity
Management Outstanding Organization (SME category)” in recognitionof its efforts pertaining to health management in terms of management
philosophies and policy, organizational systems, employee healthpromotion measures, legal and regulatory compliance, risk
management, and more. Furthermore, to commend its publication ofhealth management efforts to the community and high number ofconforming health management evaluation items, the Asset Manager
was named one of the “Bright 500,” an honor reserved for the top
500 of the roughly 14,000 Health & Productivity Management
Outstanding Organizations in the SME category in 2023.

Initiatives for Health Management

ForwardEnvironment

Climate Change 

13Information Disclosure Based on TCFD Recommendations (Strategy) 

14Information Disclosure Based on TCFD Recommendations (Risk Management) 

16Information Disclosure Based on TCFD Recommendations (Metrics and Targets) 

16

Environmental Certifications 

19

Biodiversity 

20Environmental Conservation 

21

Waste Management/Pollution Prevention 

21

Message from the Management

Sustainability

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Forward

Climate Change
Information Disclosure Based on TCFD Recommendations
Policy and Basic Approach• The Asset Manager supports TCFD recommendations and promotes risk management and initiatives related to climate change.
• Information disclosure is based on the amended TCFD recommendations and new guidance in October 2021.

Item

Strategy

Base year

Targetyear

GHG emissions(Scope 1 and 2)

All
properties

2020

2030

GHG emissions(Scope 3)

Properties
with data
available

2020

GHG emissions(value chain)Allproperties

2020

2030

SBT (February 2022)

Calculate and reduce
total emissions

2050

2050

Net zero

SBT• The Board of Directors receives and monitors reports from the Sustainability Committee on considerations for climate-related and other global
environmental issues and risk management for natural disasters, etc.
•A
 s the Chief Executive related to climate-related issues at the Board of Directors and the Chief Executive of the Sustainability Committee, the President and CEOof the Asset Manager provides final approval of various climate-related goals and measures, evaluates the status of efforts, and gives instructions for review.

Page 6• The Sustainability Committee, which was established in May 2017, was raised to a formal committee in April 2022 and must be held at least oncea month. An outside expert advisor who has a high level of insight and expertise in sustainability was also appointed.

• Understanding the risks and opportunities for DHR in the future due to unusual weather caused by climate change and increasing social demands
for climate change measures, the Asset Manager verified and analyzed the effectiveness of the current climate change measures.
• In accordance with the TCFD recommendations, the Asset Manager conducted analysis based on multiple scenarios of below 2°C scenario and
4°C scenario and formulated a roadmap for achieving the targets certified by SBTi.

Pages
14 and 15• While recognizing climate change risk as one of the risks that could pose a significant impact on business in the medium to long term, the AssetManager sees such risk as areas of potential and manages the risk by incorporating it in our overall risk management process. The Asset Manager
has established the “Risk Management Regulations” and “Risk Management Implementation Guidelines” as internal regulations in order toaccurately identify risks and opportunities inherent in business, develop a system for appropriately managing potential losses and profits when theidentified risks and opportunities are realized, ensure the soundness of management and operate business in a fair manner.
• The Board of Directors shall oversee the development of an appropriate risk management system based on the “Risk Management Policy” after
considering where and what the risk is based on the strategic goals set separately by the Board of Directors.

Page 16• The President and CEO shall be responsible for all risks in accordance with the provisions of the “Daiwa House Group Risk Management
Regulations,” develop an appropriate risk management system and be responsible for promoting and implementing risk management.
• The Compliance Officer, who is responsible for risk management, shall establish methods including measurement, monitoring and management based on
the type of risk along with the risk management policy and shall develop internal regulations to ensure the effectiveness of these methods.

SBT (August 2022)

Metrics and Targets

Long-term target
Net zero

2030

Reduce total emissions by 42%

SBT (February 2022)

Intermediate target -42%

2020
(Base year)

TargetRisk Management

CoveragePages• The Sustainability Committee deliberates and resolves on sustainability-related policy and strategy development such as addressing climate-related
issues and execution of sustainability-related operations.

KPIs and Main Initiatives
Item

Contents• The Asset Manager established the “Regulations Concerning the System for Promoting Sustainability” and rules on topics such as internalframework, collaboration with stakeholders and information disclosure policy to secure an appropriate system for promoting sustainability.

GovernanceIn recent years, climatic disasters, thought to be caused by climate change,
are occurring globally and in all regions of Japan. To mitigate the effects ofthese events, the parties of the UNFCCC adopted the Paris Agreement—aninternational treaty aiming to achieve net zero GHG emissions—at the 21st
UN Climate Change Conference (COP21) in 2015. In October 2020, theJapanese government declared that Japan would realize carbon neutrality
by 2050, and in October 2021, revised its target for the fiscal year 2030 toan ambitious 46% reduction in GHG emissions compared to the fiscal year
2013. Companies and other organizations now face the crucial task ofactively shifting to renewable energy sources.
At COP27 held in Egypt in November 2022, the parties of the UNFCCC
voiced the world’s unwavering commitment to reducing GHG emissions toachieve the 1.5°C target.
Supporting these trends, DHR has set targets for achieving net zero GHG
emissions by the fiscal year ending March 2051, becoming the first J-REIT toreceive certification from the Science Based Targets initiative (SBTi) thatthese targets are consistent with the levels required by the Paris Agreement
and are based on scientific evidence.

• DHR set targets of reducing total GHG emissions by 42% in the fiscal year ending March 2031 compared to the fiscal year ended March 2021 and became
the first J-REIT certified by SBTi for its SBT 1.5°C targets. In addition, DHR set long-term targets of net zero emissions in the fiscal year ending March 2051.
• Internal carbon price is set at ¥20,000 / t-CO2 and used as an incentive for low-carbon promotion works, guidelines for investment decision making
and a reference index to identify risks of rising costs.
• We are promoting the acquisition of third-party external certifications and evaluations to increase the objectivity and reliability of our sustainability
initiatives at portfolio properties and improve the asset value over the medium to long term. Our policy is to increase the percentage of properties
with environmental certification (based on gross floor area) to 70% or more by the fiscal year ending March 2031.

13

Pages
16 to 18

Message from the Management

Sustainability

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Information Disclosure Based on TCFD Recommendations (Strategy)
Scenario Analysis• We evaluate impact on business under several scenarios and conduct scenario analysis according to the following steps to assess strategic resilience to climate-related risks and opportunities.
Step 1

Identify material climate-related risks and opportunities and set parameters

Information Disclosure Based on TCFD Recommendations

We have identified the risks and opportunities for DHR in the future due to unusual weather caused by climate change and increasing social demands for climate change measures.
Step 2

Set climate-related scenarios
The scenarios on climate change referenced to formulate our own climate-related scenarios are outlined below.
Category

Below 2°C scenario

Summary of scenario

The scenario that assumes policies and regulations to realize a carbon-free society are implemented andthe global warming from preindustrial levels will stay below 2°C. While the transition risk is high, the physicalrisk is low compared to the 4°C scenario.

The scenario that assumes announced goals such as national goals under the Paris Agreement will beachieved. No new policies or regulations will be introduced, and global energy-derived CO2 emissions willcontinue to increase. While the transition risk is low, the physical risk is high.

• IEA Sustainable Development Scenario (SDS)• IEA Net Zero Emissions by 2050 Scenario (NZE)• IPCC RCP2.6• IEA Stated Policy Scenario (STEPS)• IPCC RCP8.5

Main reference
scenarios

Step 3

Evaluate impact on business in each scenario

Step 44°C scenario

Evaluate strategic resilience to climate-related risks and opportunities and consider additional measures

Assuming 2030, we analyzed the impact of climate-related risks and opportunities on the business of DHR and formulated countermeasures and resilience.
Category

Summary of scenario analysis results

Impact on business (Note)
Below 2°C scenario

Response / Resilience of DHR

4°C scenario

Indirect costs increase related to GHG emissions in business activities due tointroduction of a carbon tax¥35 million¥29 million• Increase renewable energy (including green power procurement) ratio• Introduce energy-saving equipment and energy management system
 et energy consumption / GHG emissions targets (SBT) for portfolio properties• S romote GHG emissions reduction by introducing internal carbon pricing• P

Service purchase costs indirectly increase related to GHG emissions in repairs andrenovation work due to introduction of a carbon tax¥94 million¥42 million

Same as above

Technology

Installation and maintenance costs increase due to installation of solar power
generation equipment¥798 million¥798 million• Implement planned renovation work cquire new properties with new technology introduced• A

MarketRent income decreases if the acquisition of environmental certification does notproceed as planned¥914 million¥914 million

 btain green building certification for portfolio properties• O• D isclose information on environmental performance

Investment unit prices fall and funding costs increase due to delays in ESG
compliance¥48 million¥48 million• Improve ESG ratings• Implement sustainable finance

Building repair costs increase due to increased natural disasters such as floods¥427 million¥854 million• T ake appropriate measures such as insurance coverage based on risk assessment
 erform waterproofing, exterior wall and sealing work ahead of schedule• P• Own or replace properties with high resilience by using the check system for climate change, etc.
• Install sandbags, water stop plates and tide plates

Policy andregulation
Transition risk

Reputation

Acute
Physical risk

¥42 million to ¥1,000 million¥84 million to ¥2,000 million

Same as above

Non-life insurance premiums increase due to increased risk of water damage¥22 million¥45 million

Same as above

Water charges and power charges for tenants increase due to rising averagetemperature(1) Increase in water charges¥42 million(2) Increase in power charges¥271 million(1) Increase in water charges¥45 million(2) Increase in power charges¥272 million

Rent income decreases due to increased risk of flooding of buildings

Chronic• Introduce energy-saving equipment and energy management system• Introduce irrigation equipment and water-saving equipment• Choose native plants for planting• Promote energy conservation activities in collaboration with tenants• Promote green leases(Note) The figures shown are the annual amount of impact estimated by the Asset Manager based on the past results and other factors with reference to the parameters general disclosed; therefore, accuracy of the figures are not guaranteed.

14

ForwardMessage from the Management

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Information Disclosure Based on TCFD Recommendations (Strategy)

Roadmap for Reduction of Emissions and Achievement of Targets Certified by SBTi
• DHR has set long-term targets of reducing total GHG emissions by 42% in the fiscal year ending March 2031 compared to the fiscal year ended March 2021 and net zero in the fiscal year ending March 2051 and formulateda roadmap that includes reduction rates by measure to achieve the goals.

2020 (Base year)

2030

2040

Graph legend

2050

Emissions reduction target / measure mix

GHG emissions in case ofno countermeasures (1) Reduction of power consumption
 (2) Switch to energy derived from renewable energy (3) Introduction of renewable energy equipment andutilization of non-fossil certificates (4) Scope 1, 2 and 3 emissions(1)

Asset size
expansion
Increasedemissions

Substantiallyzeroemissions(2)Intermediate target-42%

Long-term target

(3)

(4)

Target GHG
emissions

Increased emissions by asset size expansion

+33%

+67%

Emissions reduction rate (vs Fiscal year ended March 2021)

-42%

-100%

Reduction rate by measure(1) Reduction of power consumption

-11%



-38%





Switch to LED lighting equipment
Update to high-efficiency air conditioning equipment-50%

GHG reduction by better energy mix
Switch to a power company with a low emission factor (t-CO2/kWh)-65%(2) Switch to energy derived from renewable energy(3) Introduction of renewable energy equipment and utilization of non-fossil certificates

-26%



Utilization of green power certificates and non-fossil certificates Investment in solar power generation equipment / switching existing equipment to own use
 Switch from fossil fuels to alternative energy

15

-52%

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Sustainability Report 2023

ForwardInformation Disclosure Based on TCFD Recommendations (Risk Management)
Risk Management System

Risk Management• While recognizing climate change risk as one of the risks that could pose a significant impact in the medium to long term, the Asset Manager sees such risk as areas of potential and manages the risk by incorporating it in ouroverall risk management process. The Asset Manager has established the “Risk Management Regulations” and “Risk Management Implementation Guidelines” as internal regulations in order to accurately identify risks andopportunities inherent in business, develop a system for appropriately managing potential losses and profits when the identified risks and opportunities are realized, ensure the soundness of management and operate businessin a fair manner.
• The Board of Directors shall oversee the development of an appropriate risk management system based on the “Risk Management Policy” after considering where and what the risk is in accordance with the strategic goals
set separately by the Board of Directors. The President and CEO shall be fully responsible for all risks in accordance with the provisions of the “Daiwa House Group Risk Management Regulations,” develop an appropriate risk
management system and be responsible for promoting and implementing risk management. In addition, the Compliance Officer, who is responsible for risk management, shall establish methods including measurement,
monitoring and management based on the type of risk along with the risk management policy and shall develop internal regulations to ensure the effectiveness of these methods.

Information Disclosure Based on TCFD Recommendations (Metrics and Targets)
GHG Emissions of Portfolio Properties (Scope 1, 2, and 3)
Item

Fiscal year ended
March 2021

Fiscal year ended
March 2022

Fiscal year ended
March 2023

Number ofproperties

201

211

215

=Scope 1 and 2 (t-CO2)
=Scope 3 (t-CO2)

Scope 1
and 2
(t-CO2)

97,133

224

99,175216

GHG Emissions and Energy-related Targets

Physical Risk (Risk of Flooding)• DHR set targets of reducing total GHG emissions by 42% in the fiscal year
ending March 2031 compared to the fiscal year ended March 2021 andachieving net zero emissions by the fiscal year ending March 2051, andbecame the first J-REIT to obtain SBTi certification for its SBT 1.5°C targets.

• Responding to risks by implementing construction countermeasuresand adding fire insurance coverage to avoid economic damage.

104,506

Target

SBT

-42%

7,208
Long-term target

Net zero2020(Base year)

89,924

Scope 3(t-CO2)* Market-based

98,951

2030

2050

104,290
Item

Coverage

Base year

Target year

TargetEnergyconsumption

Properties withdata available

2017

2027

Reduce consumption
intensity by 10%

Water
consumption

Properties withdata available

2017

2027

Reduce intensity to
below the level ofbase FY

Waste
management

Properties withdata available

2017

2027

Improve recycling rate

Flood depth

Number ofproperties

Acquisition price(millions of yen)

Ratio(based on acquisition price) HighOver 20 m

0

0

0.0%

10 m to 20 m

0

0

0.0%

5 m to 10 m

478,7508.8%

3 m to 5 m

1381,4979.1%

0.5 m to 3 m

14

253,85028.4%

0.5 m or less

14

56,510

6.3%

0

108

424,546

47.4%

Total

230

895,153

100.0%

16

Low(Note) Method: Based on the estimated flood prone areas (estimated maximum size)(source: Ministry of Land, Infrastructure, Transport and Tourism), compiled by the
Asset Manager from April to May 2022.

• For Royal Parks SEASIR (residential facility), we installed
waterproof panels and waterproof doors at the entrance, electricalroom, elevators, and management office to reduce the impact ofwater damage from torrential rains and large-scale typhoons.

Waterproofing panels
Waterproofing doors

Relevant Data (2 of 2)

Risk offlooding

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Sustainability Report 2023

Information Disclosure Based on TCFD Recommendations (Metrics and Targets)

Implementation of Sustainable FinanceConcept and Definition of ZEB• DHR has implemented sustainable finance of ¥33.5 billion as of the
fiscal period ended February 28, 2023 through green bonds, green
loans, sustainability bonds, and sustainability-linked bonds.

Buildings with reduced primary energy consumption of 100% or more fromthe benchmark primary energy consumption including renewable energy inaddition to meeting the requirements of ZEB Ready

NearlyZEB

Buildings with reduced primary energy consumption of 75% or more but
less than 100% from the benchmark primary energy consumption including
renewable energy in addition to meeting the requirements of ZEB Ready

ZEB
Ready

Buildings with reduced primary energy consumption of 50% ormore from the benchmark primary energy consumption
excluding renewable energy

8.2%

ZEB
Oriented

Buildings with gross area of 10,000 m2 or more and reduced primary energy
consumption excluding renewable energy compared to the benchmark
specified for each use in addition to introduction of unevaluated technology

8.2%

7.2%

4.0%
2.9%

2.9%

1.7%

6,000
Feb.
2020

29,50011,00011,000

Aug.
2020

Feb.
2021

33,50033,50015,000
Aug.
2021

Feb.
2022

Aug.
2022

SavingenergyGeneratingenergySave

Generate

Feb.
2023

1
Net
savingof100%

Climate-related Opportunities (Targets for Obtaining
Environmental Certifications of Portfolio Properties)• We are promoting the acquisition of third-party external
certifications and evaluations to increase the objectivity andreliability of our sustainability initiatives at portfolio properties andimprove the asset value over the medium to long term.

Save energy as muchas possible

2

Generate energy
for use• We will reduce GHG emissions by investing in solar power
generation equipment and switching existing equipment to own
use.

Energy demandof ordinary
buildings

Energy used
at ZEB

Achieve net Zero Energy

Auction andexecution of
non-fossil certificates

Energy generated
at ZEB

Environmental Certification of Portfolio Properties)

SavingenergySave

Save Generate
Savingof 50%or more• The ratio of properties with environmental certification has improved
to 68.8% (based on gross floor area). (As of March 31, 2023)

GeneratingenergySavingenergyGeneratingenergySave Generate

Net savingof 75% or
more

Net savingof 100%or moreSavingenergySavingenergyIntroducing
unevaluatedtechnology

Introducing
unevaluatedtechnology

Intermediary agent for
procurement of nonfossil certificates

Savingof 40%or moreSavingof 30%or moreUse

Hotel,
hospital,
department
store,
restaurant,meeting
place

Use

Office,school,factory

Relevant Data (1 of 2)Standard
energy-savingbuilding

ZEB
Ready

NearlyZEB

Purchase requestof non-fossil
certificatesJapan ElectricPower Exchange

Energy saving of at least 50% or more
SavingenergyDHR participated in the renewable energy value trading market,
which allows consumers and intermediaries to purchase FIT nonfossil certificates, and in the fiscal year ended March 2023 procured
22.5 million kWh FIT non-fossil certificates through an intermediary(Whole Energy, Inc.) (hereinafter referred to as the “Procurement”).
Expected reduction effect of CO2 emissions by the Procurement wasapprox. 12,868 tons (t-CO2 equivalent), and all of the DHR’selectricity-derived GHG emissions (Scope 2) for the fiscal year ended
March 2023 were offset alongside the introduction of 100% net zerorenewable energy at the properties owned by DHR.

Mechanism for procuring FIT non-fossil certificates by
auction in the renewable energy value trading market

saving of 100%

Climate-related Opportunities (Status of

Obtainment of Green Building Certifications

1

Building by net energy2• Our policy is to increase the percentage of properties withenvironmental certification (based on gross floor area) to 70% ormore by the fiscal year ending March 2031.

Environmental Certifications• We will reduce GHG emissions (Scope 2) by procuring FIT nonfossil certificates, etc. by participating in auctions in the renewableenergy trading market.

Purchase of Non-fossil Certificates

Outstanding balance and ratio of sustainable finance=Outstanding sustainable finance (millions of yen)
=Ratio of sustainable finance to interest-bearing debt

and Investment in Solar Power Generation Equipment)“ZEB”• The ratio of sustainable finance to interest-bearing debt has also
increased by continuously implementing sustainable finance.

Capital Deployment (Purchase of Non-fossil Certificates“ZEB”

ZEB Oriented(Buildings with gross area of 10,000 m2 or more)

Source: Daiwa House Industry Co., Ltd. based on the website of ZEB by the Ministry of the Environment

17

Sale of non-fossil
certificates withtracking features

ForwardMessage from the Management

Sustainability

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Sustainability Report 2023

ForwardInformation Disclosure Based on TCFD Recommendations (Metrics and Targets)Internal Carbon Pricing
Revising the internal carbon price
DHR had been operating with the internal carbon price set at¥10,000/t-CO2, but revised the price to ¥20,000/t-CO2 to incentivize
low-carbon investment in light of long-term climate change risks. We
will continue to use the revised internal carbon price as an incentive
for low-carbon promotion works, guidelines for investment decision
making and a reference index to identify risks of rising costs.

Utilizing the internal carbon price(1) Incentives for low-carbon promotion works
If GHG emissions are expected to be reduced by LED lighting and air
conditioning renewal, we apply the internal carbon price and use thedata as a reference to decide whether to perform construction work.

(2) Guidelines for investment decision making
After calculating the profit and loss by applying the internal carbon priceto the GHG emissions of the target property, we use the data as areference for investment decisions (when emissions can be calculated).

(3) Identifying risks of rising costs in the future
By selecting suppliers with low emissions, we aim to reduce the risk ofincreased procurement costs when a carbon tax is introduced in the future.

ExampleThe investment decision on installation of solar power generationequipment at DPL Nagareyama III borne by DHR was made bybalancing the cost and the revenue from power generation with the
reduced GHG emissions multiplied by the internal carbon price.

Remuneration for Executive Director of DHR
and Directors of the Asset Manager
In November 2021, DHR introduced a provision to fluctuate the amount ofasset management fees to the Asset Manager in conjunction with thesustainability indices as the first initiative in J-REITs for the purpose ofincreasing unitholder value by encouraging the reduction of GHG emissions of
DHR properties and enhancing the external evaluations of its sustainability
initiatives.
This is to increase or decrease the amount of asset management fees basedon the sum of indexed GHG emissions reduction ratio, GRESB Rating and
CDP Score multiplied by the total assets of DHR, and is aimed at strengthening
the commitment to solving ESG issues and improving governance.

Furthermore, remuneration for Executive Director of DHR and remuneration for
directors of the Asset Manager are now linked to sustainability indices including
GHG emissions reduction ratio, GRESB Rating and CDP Score.

Promotion of LED Lighting•D HR is promoting conversion to LED lighting at its properties, in aneffort to reduce energy consumption.
DHR Directors: Status and Remuneration

Status of conversion to LED lighting

Asset Management Fee Structure
Asset Management Fee Structure

Remuneration
We have not set a target for the amount of remuneration for the
executive officer of DHR and directors of the Asset Manager that is
linked to climate-change indicators, but will review the remuneration
structure as appropriate.

Physical Risk

Logistics
Residential
Retail
Hotel
Other
Total

Number of portfolio Number of properties Percentage of properties
properties (Note 2) with LED lighting (Note 3)with LED lighting
66
62
93.9%
129
122
94.6%
16
15
93.8%
6
6
100.0%
6
4
66.7%
223
209
93.7%

(Note 1) The number of properties is as of March 31, 2023.
(Note 2) Excludes land properties.
(Note 3) The number of properties in which LED lighting has been installed in at least half thearea of common areas (in properties with common areas) or at least half the area ofthe entire property (in properties leased as an entire building with no common areas).

Example of conversion to LED lighting

We will take risk reduction measures and reduce the percentage ofproperties owned that are exposed to acute and chronic physical risks.

Solar Power Generation

Example:Completed in February 2023

Estimated CO2
reduction (Note)

Conversion to LED
lighting at D Project
Kawagoe III-472.9 tons/year(-53.1%)

Estimated running cost
reduction-¥20,372
thousand/year(-53.1%)Introduction of solar power generation equipment• Solar panels have been installed on the rooftops of logistics andretail properties owned by DHR, and DHR utilizes the renewableenergy they generate.

Solar power generationequipment installations

Number of properties

Power generated in fiscal
year ended March 2023

19

19,805 MWh(Note) Calculated using an emission factor of 0.000441 t-CO2/kWh

Energy Consumption (reduction rate of intensity (MWh/m ))2* Amount of power generated is calculated only for properties with solar power generationequipment for which the requisite data are available.

Main properties with solar power generation equipment installed

0%
-5%
-10%

Target level

-15%
-20%
-25%
-30%
-35%

D Project Kawagoe III

D Project Tatebayashi

18

DPL Misato

FY ended Mar.
2018 (Base)

FY endedMar. 2020

FY endedMar. 2021

FY endedMar. 2022

FY endedMar. 2023

FY ending Mar.
2028 (Target)

Message from the Management

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ForwardEnvironmental Certifications
Status of Environmental Certifications
Policy and Basic Approach
To increase the objectivity and reliability of DHR’s initiatives in
reducing the environmental burden of properties, DHR intends toincrease medium- to long-term asset value and pursue theacquisition of third-party external certifications and evaluations.
Through initiatives such as conversion to LED lighting and theintroduction of energy-saving air conditioning and water saving
equipment even on DHR’s properties without any environmental
certifications, DHR works to reduce its environmental impact bypromoting energy savings and proper sorting and disposal ofwaste.

KPIs and Main Initiatives
DHR plans to increase the percentage of properties withenvironmental certification (gross floor area basis) to 70% ormore by the fiscal year ending March 2031.
DHR is proactively working to obtain environmental certifications
for its many ongoing efforts to realize a sustainable society inaddition to improving environmental performance, for example
through converting to LED lighting at its properties.
Additionally, because the Asset Manager has asked its sponsor
to consider acquiring BELS Certification, CASBEE Certificationfor Buildings, and other environmental certifications while theirproperties are in the development stage, more properties are
already certified by the time DHR acquires them.

Percentage of properties that have obtained
environmental certifications in the entire portfolio

Target68.8%(gross floor area basis)

Number of portfolio
properties*2

Percentage of certified
properties (based on
number of properties)

Certified area
(gross floor area*3)

Area in whole portfolio*2(gross floor area*3)

Percentage of certified
properties(gross floor area basis)

Total of properties that have obtained
environmental certifications

64

223

28.7%

2,476,422.09 m2

3,599,804.12 m2

68.8%

DBJ Green Building
Certification

20

223

9.0%

1,163,571.12 m2

3,599,804.12 m2

32.3%

CASBEE for Real Estate
Certification

29

223

13.0%

1,417,036.32 m2

3,599,804.12 m2

39.4%

BELS Certification

55

223

24.7%

2,137,705.98 m2

3,599,804.12 m2

59.4%(ZEB Certification portion)

8

223

3.6%

558,451.29 m2

3,599,804.12 m2

15.5%

LEED Certification

1

223

0.4%

120,229.08 m2

3,599,804.12 m2

3.3%

JHEP Certification

1

223

0.4%

26,997.13 m2

3,599,804.12 m2

0.7%

ABINC Certification

1

223

0.4%

24,604.09 m2

3,599,804.12 m2

0.7%*1 The number of certifications is as of March 31, 2023.
*2 Excludes land properties.
*3 Gross floor area is based on the floor area provided on the inspection certificate of each property.
*4 The percentage of properties that have obtained environmental certifications is rounded to the first decimal place.

DBJ Green Building
Certification

CASBEE for Real
Estate Certification

20 properties

29 properties

5 stars : 7 properties
4 stars : 6 properties
3 stars : 7 properties

S : 17 properties
A : 12 properties

BELS
Certification

ZEB
Certification

55 properties

8 properties

Relevant Data (1 of 2)

LEED
Certification

JHEP
Certification

ABINC
Certification

70%(Fiscal year ending March
2031)

ActualNumber ofcertifiedproperties

68.8%(As of March 31, 2023)

19êêêêê : 14 properties “ZEB”: 1 propertyêêêê: 9 properties ZEB Ready : 7 propertiesêêê: 9 propertiesêê: 16 propertiesê: 7 properties

1 property

1 property

1 property

Certified : 1 property

A : 1 property* There is noevaluation rating
for thiscertification.

Message from the Management

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Biodiversity
Policy and Basic Approach
Our lives and economic activity are underpinned by the gifts ofnature, which we receive through the ecosystem—the foundationof biodiversity. The earth’s biodiversity is under threat by modern
human activities which are accelerating extinction of species at
an alarming and unprecedented speed.
Addressing climate change, reducing overconsumption,
engaging in sustainable production, investing in biodiversity, andpromoting other initiatives in the context of the business activities

ZERO Deforestation* Policy

Joining the Japan Business Initiative for Biodiversity (JBIB)The Daiwa House Group will:• procure timber from suppliers advocating a policy of zero deforestation;•p urchase from suppliers who handle timber with respect for human rights
and safety of indigenous people and workers in the country of origin;• purchase timber whose traceability can be verified; and• e xpand the use of timber subject to the zero deforestation policy to plywood
formwork panels, main equipment, fittings and wallpaper in addition to
structural materials, base materials, batten cleats and flooring materials.

The Japan Business Initiative for
Biodiversity (hereinafter referred toas “JBIB,” established in April2008) is a group of Japanese
corporations actively working toconserve biodiversity, and through the following five activities aims tocontribute to the conservation of biodiversity in Japan and abroad bypromoting joint research among various corporations to produce
results that cannot be achieved by a single corporation.

* ZERO Deforestation refers to: (1) timber not harming biodiversity due to clear cutting of naturalforests, (2) timber planted using methods that do not damage high carbon stock (HCS) lands,
and (3) 100% recycled timberof DHR and the Asset Manager should contribute to the pursuitof nature positivity and increase our competitiveness.

KPIs and Main Initiatives
Number of properties with biodiversity-related environmental certifications
Target 5 properties(fiscal year ending
March 2031)

Actual 2 properties(As of March 31, 2023)

Obtaining Biodiversity-related
Environmental Certifications
DHR property Royal Parks Toyosu was certified under the Japan
Habitat Evaluation and Certification Program (hereinafter referred toas “JHEP”), and Royal Parks Hanakoganei became the first DHR
property to receive certification from the Association for Business
Innovation in harmony with Nature and Community (hereinafterreferred to as “ABINC” and “ABINC certification”).

Introduction of Biodiversity Protection Program
Risks, Opportunities, and Responses
Any development business comes with the potential risks of losing business
opportunities or incurring costs to revitalize that ecosystem if any loss of theecosystem occurs in the region. In the long term, there are concerns that, if
demand for timber, one of the materials handled by the Daiwa House Group,
grows with a focus on legality and sustainability, there will be difficulties in the
procurement of such timber. Therefore, based on the environmental andsocial standards outlined in the “Biodiversity Guidelines” [Timber Procurement]
which is part of the Daiwa House Group’s “Supply Chain Sustainability
Guidelines” for goods (construction materials, etc.) procured and delivered to
DHR by suppliers, the Asset Manager works to promote the property
management companies to use timber that includes (1) certified timber: timber
certified by various agencies, (2) recycled timber: timber recycled from scarp
construction materials, and (3) timber recommended by Daiwa House Industry
Co., Ltd.: timber determined to be above a certain level in 11 check items(three items on legality and eight items on sustainability) other than (1) and (2).

DHR is reducing the use of plastics by switching the location ofprovision of hair and tooth brushes from rooms to an amenities
counter near the front desk at some of its hotels.
“QiZ GATE URAWA” is reducing plastic waste by using recycledtrash bags made from used stretch films, which would be normallydisposed of as trash, for the trash bags in common areas.

Monitoring System for Biodiversity
The Board of Directors of DHR and the Board of Directors of theAsset Manager have a system in place to receive reports on items
related to biodiversity from the Sustainability Committee and monitor
the situation.

5 Objectives of JBIB
1. To explore links between business and biodiversity and to usethat knowledge in our business practices
2. To promote dialogues and collaborations with stakeholders
3. To share good practices within Japan and abroad
4. To advocate and undertake educational efforts for thepromotion of biodiversity conservation
5. To conduct projects to fulfill the aforementioned objectives
The Asset Manager agrees with the significance of the activities of
JBIB, and in January 2023 became the first asset manager of a
J-REIT to join the initiative.

Joining the 30 by 30 Alliance for Biodiversity
30 by 30 is an initiative to halt theloss of biodiversity and put it on arecovery track (nature positive) by
2030. The goal is to effectively
conserve at least 30% of land and sea as healthy ecosystems by
2030. In April 2022, a coalition of volunteers formed to promote
efforts to achieve this goal. The coalition is known as the 30 by 30
Alliance for Biodiversity (hereinafter referred to as the “Alliance”).
As a specific action to achieve 30 by 30, the Asset Manager will
provide assistance in managing protected areas and areas registered(or expected to be registered) in the global database of OECMs.*
The Asset Manager agrees with the significance of the activities of
the Alliance, and in December 2022 became the first asset manager
of a J-REIT to join.
* Other Effective area-based Conservation Measures (OECMs): Areas outside of national parksand other protected areas in which biodiversity can be conserved effectively and over the longterm. Increasing OECMs is expected to capture and fix CO2 in addition to restoring nature,
which contributes to disaster risk reduction.

20

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ForwardEnvironmental Conservation
Effective Use of Rainwater, Groundwater,and Greywater

Policy and Basic Approach
The water supply is expected to become unstable as a result ofclimate change; around the world, it is becoming more important
to conserve aquatic environments. As water risks are highly
influenced by local factors, DHR evaluates water stress at its
properties and uses hazard maps to assess the risk of water
damage. DHR also promotes efforts to reduce water
consumption at its properties to ensure that water resources areavailable for continued use.

Target Reduce consumption rate to the consumption intensityof fiscal year ended March 2018 (base year) or less(10-year period from 2018 to 2027)

Actual

0.3352 m /m
3

Fiscal year ended
March 2023 actual

2

Fiscal year ended March 2018(base year) actual

0.8205 m /m
3

2

DHR reduces tap water use and the environmental impact of its
owned properties by effectively using rainwater, groundwater, andgreywater (used tap water recycled for flushing toilets, watering, andother purposes before being discharged into sewer systems).
At “DPL Nagareyama I” and “DPL Misato,” irrigation systems that use
rainwater and automatic irrigation timers to conserve water andimprove landscape management are installed.
The grounds around the “ACROSSMALL Shinkamagaya” is stablewith plenty of good quality water. DHR implemented construction toswitch from tap water to groundwater, which suppressed the tap
water consumption by supplying water to the sports club with a pooland other such facilities.
DHR uses gray water at “Naha Shin-Toshin Center Building (Daiwa
Roynet Hotel Naha-Omoromachi).”

Adoption of Water Conservation Equipment
DHR is furthering the adoption of water conservation equipment at
the time of renewal of facilities or equipment at its properties in aneffort to reduce water consumption.

Water Stress
DHR does not own any properties in regions where the water stressis “high” or “extremely high.”

Water Consumption(reduction rate of intensity (m3/m2))
0%
-10%
-20%
-30%
-40%
-50%
-60%

Relevant Data (1 of 2)

Target level

FY ended Mar.
2018 (Base)

FY endedMar. 2020

FY endedMar. 2021

FY endedMar. 2022

FY endedMar. 2023

FY ending Mar.
2028 (Target)

Waste Management/Pollution Prevention
Policy and Basic Approach
The increasing world population and other factors are triggering asubstantial rise in consumption of global natural resources; resource
depletion and the negative impacts of waste on the environment arebecoming more severe. The “2030 Agenda for Sustainable Development”
adopted at the United Nations Summit in 2015 calls for a “vast reduction in
waste by 2030.” Interest is mounting in the “circular economy,” in Japanand abroad, in which products and other items of value are continuously
recycled and reused. DHR is taking steps to reduce waste and increase
recycling rates at portfolio properties.

Target Improve recycling rate to the rate of fiscal year ended
March 2018 (base year) or higher(10-year period from 2018 to 2027)

Actual

71.9%
Fiscal year ended
March 2023 actual

Fiscal year ended March 2018(base year) actual

Pollution Prevention

Soil Contamination Countermeasures

Before acquiring any property, DHR shall conduct detailed
environmental due diligence on the matters listed below. During thedue diligence process, DHR comprehensively assesses theproperty’s investment value, weighing its impact on DHR’s overall
portfolio, contribution to expected increase in value and otherrelevant considerations while consulting a fair real-estate appraisal bya third party with sufficient skill and experience in due diligencestudies.

“FOLEO Ome Imai” was built on the land of a former electronic
component production plant. Even though the soil contamination had
been verified, construction work was conducted by properly
excavating and removing the soil. DHR acquired the property after
confirming that the topsoil survey for all specific hazardous chemicals
after the construction work showed none of the substances weredetected and all were in compliance with regulatory standards.

a. Soil and ground conditions, buried objects, soil contamination, etc.

(recycling rate)b. Status with respect to hazardous substances (asbestos, PCBs, etc.)
Furthermore, DHR maintains the proper processing and proceduresin accordance with laws and regulations for any chemical substancespresent on its properties to strictly handle all chemical substances in
the most thorough manner to ensure no leaks or emissions.

54.2%
21

Waste Management
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Relevant Data (1 of 2)

Target level

FY ended Mar.
2018 (Base)

FY endedMar. 2020

FY endedMar. 2021

FY endedMar. 2022

FY endedMar. 2023

FY ending Mar.
2028 (Target)

SocialDiversity, Equity, and Inclusion 

23

Human Rights and Labor Standards 

24

Initiatives for Local Community 

25

Initiatives for Tenants and Supply Chain 

26

Investor Relations Initiatives 27

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Diversity, Equity, and Inclusion
Policy and Basic Approach
For the Daiwa House Group to grow into a corporate capable ofcontributing to the world, it is important to respond flexibly todiverse values and ongoing changes in society, and to create
new value to allow us to discover potential markets. Toward that
end, we must foster a workplace climate that makes it possible
to capitalize on the perspectives and creativity stemming from
employees’ diverse values, gender, age, ethnicity, language,
culture, disabilities, lifestyles, and other attributes in order to form
organizations that generate new ideas without being held backby outdated notions and preconceptions.
We are making efforts to promote active participation by womenand otherwise strengthen diversity-based management so that a
broader range of people can flourish in the future.

KPIs and Main Initiatives
Item

Fiscal year ended
March 2023

Target for fiscal year
ending March 2031

Diversity, equity, and inclusion
Percentage of female managers(senior manager and above)
Percentage of female line managers(group leader and above)

20.7%

39%

0%

20%

Sustainability Survey for Employees

Benefits and Welfare

The Asset Manager recognizes human resources as its greatest
asset and participates in the Sustainability Survey (formerly CSR
Awareness Survey) conducted by the Daiwa House Group* every
year to verify how well the Principles of Corporate Ethics and Code of
Conduct are being practiced in the workplace and the employment
satisfaction level (100% response rate).

The Daiwa House Group recognizes the importance of promoting good health among its
workforce and thereby improving labor productivity through consistent measures toeliminate excessively long working hours and help employees manage their health. Basedon such recognition, the Asset Manager has introduced employee leave/vacation programs
such as the ones below, in addition to celebratory event leave, bereavement leave,maternity/paternity leave, parental leave*, child caregiving leave and elder caregiving leave*
for all employees.

* Surveys and analyses are outsourced to third-party institutions.

eNPS Surveys and Satisfaction Evaluations
The Asset Manager conducts eNPS* surveys and satisfaction
evaluations through third-party organizations for officers andemployees, including fixed-term, temporary, and part-time
employees. The Asset Manager explains the survey results to officers
and employees (including fixed-term, temporary, and part-time
employees), gives feedback, and encourages them to build a better
workplace environment.
* The Employee Net Promoter Score is an index for visualizing the loyalty of employees. This
index evaluates eleven levels of employee loyalty through the survey question asking, “Howlikely are you to recommend our organization to your family, friends, or other acquaintances
who want to find or change jobs in the same industry as your company? Please answer byassuming that you have friends or other acquaintances who want to find or change jobs in theindustry that you are working in.”

66.7%

100%

Percentage of paid leave taken

72.4%

85%
Image from a diversity
training event at the AssetManagerEngagement
Turnover

1.4%

0%

5.6 years

10 years

Promotion of Employment of Seniors
Average tenure of employees

eNPS score

-13

-8

Item

Overview

Special paidvacation

Up to five days per year separately from annual paid vacation topromote employees’ health, etc.

Accumulated
paid vacation

Unused annual paid vacation days accumulate up to 20 days per year to a
maximum of 100 days. Employees may use their accumulated paidvacation days as personal injury/sick leave, maternity/paternity leave, family
caregiving leave or community co-creation leave

Familycaregiving leave

Five days per year to care for ill family members (paid leave)

Community
co-creation
leave

Five days per year to participate in activities that contribute tosociety, training for such activities, etc. (paid leave)

Establishment of Consultation Desk for
Sexual Minorities (LGBT)Work styles (work-life balance)
Percentage of male employees taking
childcare leave* Contract workers can also take advantage of these programs.

The Asset Manager promotes a system of re-hiring employees 60
years of age and older and is working toward the succession ofexpertise and the development of future generations by employing
persons with expert knowledge for the long term.

23

In order to create social value though its businesses, the Daiwa
House Group operates based on “respect for human rights” of all
stakeholders, including its employees, customers and business
partners, with the goal of sustainable management that cancontinually realize diversity and inclusion.
To create an environment where diversified talented people candemonstrate their abilities by drawing on their individuality, we haveestablished an external contact point to which all the officers andemployees of the Daiwa House Group, including fixed-term
employees, contract workers, and part-time employees, can contact
for a consultation to relieve their anxieties caused by issues of LGBT.
•P ersonal information is protected even at the external consultation desk.
Furthermore, we will never disclose any information inside or outside of thecompany without the consent of the person contacting the consultation desk.
• If an internal response is necessary, it will be handled in accordance with the Daiwa
House Group Whistleblowing Regulations upon consent of the person consulted.

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Human Rights and Labor Standards
Policy and Basic Approach
The Daiwa House Group Principles of Corporate Ethics stipulate“We respect basic human rights and the dignity of all people, anddo not discriminate against anyone on the grounds of race,
nationality, ethnicity, gender, sexual orientation, sexual identity,
disability, age, creed, or social status.” In January 2018, thegroup established the Human Rights Policy of Daiwa HouseGroup with an understanding of the corporate responsibility ofrespecting human rights as set forth in the UN Guiding Principles
on Business and Human Rights. After receiving advice fromoutside experts, this policy was established by resolution of the
Daiwa House Board of Directors in December 2017.
Human Rights Policy of Daiwa House GroupKPIs and Main Initiatives
Relevant training (fiscal year ended March 2023)
Times held(days)

Total hours/
personTraining on human rights and diversity

1

4.0

Training on bullying and harassment

1

0.75

Number of cases in which the Asset Manager received reports and took corrective action
Fiscal year ended
March 2021

Fiscal year ended
March 2022

Fiscal year ended
March 2023

0

0

0

Number of reports about labor-related issues, discrimination, harassment, etc.
Fiscal year ended
March 2021

Fiscal year ended
March 2022

Fiscal year ended
March 2023

0

0

0

Labor-related Violations and Accidents
The Asset Manager had no significant labor-related violations or
accidents that would influence stakeholders. (Fiscal year ended
March 2023)

HotlineLabor/Management Relations

Since 2004, the Daiwa House Group has been operating a hotline for in-house
whistleblowing and consultation, while implementing regulations to protect whistleblowers(current Daiwa House Group Internal Reporting Regulations). The hotline is available and theregulations are applicable to all group employees regardless of their type of employment. In
2020, the service was renamed the “Corporate Ethics and Human Rights Hotline.” Thehotline accepts not only reports of suspected or confirmed cases of breach but also reportsof, and request for help and advice on, a variety of workplace- or human rights-related
problems, thereby contributing to early detection and resolution of such problems. In theprocess of working toward resolution, whistleblowing is accepted under anonymity. In thefactual confirmation and investigation, privacy of not only the consulter but also employee(s)in question and third parties who cooperate in the investigation is respected. Along with suchactions, hearings are held with the parties involved under strict confidentiality, and appropriate
measures are taken to prevent recurrence. Once the problem has been resolved, a follow-up
investigation is carried out to ensure, in some cases, that the reporter will not be subject toretaliatory treatment or that improvements have been made, thus always protecting hotline
users. As measures for recurrence prevention, information is shared among related worksites
and departments via the persons in charge of the hotline at worksites to raise generalawareness of the risks. Training programs are also organized to draw attention to such
issues. In addition, points of contact for consultation for group employees have been put inplace at the Sustainability Planning, Legal, and Human Resources Departments of Daiwa
House, facilitating the detection of legal irregularities, violations of human rights, workplace
problems, and the like. Several contact points are available within the company to lower thepsychological barrier that employees may feel about reporting or seeking advice, thus easing
the way for them to reach out at an early stage. In addition, as with the Corporate Ethics andHuman Rights Hotline, we accept issues relating to human rights via the Partners Hotline,
which is a whistleblowing system for reports from business partners concerning therelationship between Daiwa House Group employees and business partners.

The Asset Manager has not yet organized a labor union but does
recognize the constitutional right of every employee to have “freedomof association.” DHR has also signed and made a commitment toadhering to the United Nations Global Compact, one of whose
principles is “the freedom of association and the effective recognitionof the right to collective bargaining.”
Labor-management relations at the Asset Manager have been
harmonious, and there have been no large-scale mergers,
acquisitions, or layoffs in the past three years.
In addition, the Asset Manager has entered into a labor-managementagreement on overtime work (36 Agreement) with its employees, andstriven to maintain the health of its employees by appropriately
managing working hours.

Response to Human Rights
The Asset Manager further solidified this commitment by signing on to the United
Nations Global Compact, which states “the elimination of all forms of forced andcompulsory labour,” “the effective abolition of child labour” and “the elimination of
discrimination in respect of employment and occupation” as part of its principles.
The Asset Manager also conducts regular training on human rights with the aim
to realize a workplace and society free of discrimination where diverse humanresources can play an active role by gaining a better understanding of minority
issues, such as those related to sexual minorities (LGBT), persons withdisabilities, foreign labor, and the Buraku issue.
Relevant Data (2 of 2)

24

Overwork
The Asset Manager conducts mandatory health examinations
through industrial physicians for anyone who works more than 80
hours of overtime per month.

Payment of Wages Above Minimum Wageand Equal Pay for Equal Work
The Asset Manager pays wages above the minimum wage provided
for in laws and regulations and a wage that contributes to improving
the standard of living by taking into account the commodity prices.
Our compensation system also maintains equal pay for equal workand ensures no wage gap between genders. The Asset Manager has
established an evaluation-linked monetary compensation system bypost classification and conducted appropriate assessments ofperformance. Bonuses are paid twice a year in the summer and thewinter, and the amount is determined according to work
performance. In the fiscal year ended March 2023, the averageannual salary paid by the Asset Manager was ¥9,802 thousand*.
* Average for full-time employees not including officers, fixed-term employees or employees on
external assignment

ForwardMessage from the Management

Sustainability

Special Features

Environment

SocialGovernance

FinanceRelevant Data

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Initiatives for Local Community
Castalia Meguro Kamurozaka

Policy and Basic Approach
DHR and the Asset Manager provide safe, comfortable spaces
at portfolio properties in an effort to enhance our competitivenessand improve our value. We also focus on business continuity
plans (BCPs) and promote efforts with disaster resilience in mind
in addition to promoting job creation to revitalize local
communities.
We intend to continue working with the members of local
communities to solve social issues with the ultimate aim of
becoming a company worthy of their trust.

Support for Community Activities
Some retail properties owned by DHR host events as one form of support forcommunity activities.
The Asset Manager supports community co-creation activities; partly through“Community Co-Creation Leave Program,” it has established to facilitate
employees’ participation in activities that contribute to society, training for suchactivities and other such endeavors. Community co-creation activities supportedby the Asset Manager include (1) preservation of the natural environment (litter
pickup activities, recycling movements), (2) education and youth development(school visits, experiential learning programs, athletic coaching), (3) social welfare(elder/juvenile/disabled welfare), (4) international cooperation (overseas
volunteering, foreign language interpreting, etc.), (5) volunteer training and required
credentialing programs (classes in invalid care skills, sign language), (6)community outreach (neighborhood association events), and (7) disaster relief
activities. Specific activities include litter cleanup activities in response to calls frompublic park and facility management offices, participation in a book donation
project, and volunteering for daily conversational practice for elderly Chinese
returnees to learn Japanese conversation and interact with others in Japanese.

To make effective use of the space (about 65 m2) renovated from a meeting room to a
party room, the Asset Manager consulted with Shinagawa Ward Council of Social Welfare
and started providing the place to hold a children’s cafeteria in December 2022. The
children’s cafeteria is a social welfare activity that provides a
warm social gathering place for the children and residents of thecommunity, as well as inexpensive and nutritious meals.
DHR and the Asset Manager support local activities by acting
as a bridge between local residents, children, and organizers of
the children’s cafeteria.

Information on foster
parent recruitment

Mama Marché (event formothers and kids)

DPL Nagareyama I
DHR has entered into an “Agreement on Use as Temporary Evacuation Facility in
Event of Disaster” with Nagareyama City, Chiba. This agreement allows the city
to use DHR property DPL Nagareyama I as a temporary evacuation facility fornearby residents and others in the event of large-scale flooding or other disaster.
The purpose of this agreement is to ensure safety in the event that the Edogawa
River, which runs through the city, overflows due to torrential rains, etc., bytemporarily taking in nearby residents and employees of companies in the

GRANODE Hiroshima
Hiroshima City collects entries from citizens for buildings, signs, activities, andmore that make the city attractive and presents the most outstanding ones with
the Urban Design Award Hiroshima. “Ekikitare,” a roughly 20-meter-wide and100-meter-long space in the event square at “GRANODE Hiroshima,” a complex
of office, retail and hotel facilities, received the 17th Urban Design Award
Hiroshima in the Streetscape category in 2020.
<Reasons for selection>(1) Located near Hiroshima Station, the land gateway toHiroshima, the facility is a valuable space that can beutilized as an event square and creates new lively
attractions, thereby contributing to the community.
(2) It is highly convenient with the necessary infrastructure
for events even though normally it is a quiet space with
comfortable breezes. It is built in such a way that event
organizers sense the spirit of hospitality.

Nagareyama Industrial Park until an evacuation center can be opened.
The latest BCP measures have been implemented at DPL Nagareyama I,
including a seismic isolation structure and back-up power supply. The on-siteparking lot, vehicle passageways on each floor (total floor area of 3,000 m2 perfloor), the cafeteria, and daycare center can serve as temporary shelters for up to
1,200 people in the event of a disaster, and it also keeps emergency supplies for
500 people.
In addition, there are ramps for accessing the vehicle passageways on eachfloor, and these can be used by evacuees arriving by car to get to the top floors
while remaining in their cars. This allows quick evacuation, and with evacuees
remaining in their cars, it can prevent the spread of COVID-19.

Business Continuity Plan (BCP)
DHR has promoted an enhancement of BCP response from a wide range of perspectives so thattenants, users, and people in the local community can use these safe and comfortable facilities.

D Project Machida, D Project Kuki III, DPL Misato,
and DPL Nagareyama I

Local Job Creation
At some retail properties owned by DHR, local residents are given priority
when applying for jobs.

Seismic isolation structures* have been put in place not only to minimize load and facility damage inthe event of a disaster but also to maintain building functions. These seismic isolation structures
reduce vibrations to suppress shaking on upper floors and allow operations to restart in a short time.

Disaster Relief/Resilience*T he seismic isolation structure reduces the transmission of seismic forces to the building byinstalling rubber laminations or other seismic isolators between the ground and the building.

ACROSSMALL Shinkamagaya

Orchestral stage

Countermeasures Against Large-scale Flooding

The city of Kamagaya, Chiba, where “ACROSSMALL Shinkamagaya” is located, registers
as “emergency communal wells” the wells that can provide well water to local residents
when tap water supply is cut off in the event of amajor earthquake or other disasters. In
agreement with the intent of this program, DHR
has registered the groundwater used at theproperty as an emergency communal well.

25

GRANODE Hiroshima
In addition to the installation of a seismic structure*, GRANDOE Hiroshima
has emergency power generators that can supply 72 hours of power as well
as a generator space for tenants.
* The seismic isolation structure reduces shaking by installing dampers, etc., to absorb theshaking within the building.

ForwardMessage from the Management

Sustainability

Special Features

Environment

SocialGovernance

FinanceRelevant Data

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Initiatives for Tenants and Supply Chain
Tenant Engagement Programs
DHR and the Asset Manager promote sustainability initiatives incooperation with tenants of its properties. By distributing a sustainability
guide that summarizes information such as the Sustainability Policy of theAsset Manager and environmental certifications to tenants and posting itat the properties, we share thesocial issues with the tenants andpromote initiatives.
At some properties for which agreen lease agreement has beenconcluded, DHR regularly confers
with tenants in the aim of sharing
environmental information andreduction targets.
Sustainability Guide
Sustainability Policy

Initiatives to Increase Tenant Satisfaction
DHR regularly conducts surveys to grasp tenants’ needs and satisfactionin the belief that increasing tenant satisfaction leads to stable andimproved property-operating performance. In a questionnaire given to theresidents of 119 residential properties (8,386 units) through a third-party
organization in February 2022, around 71% of tenants gave their property
a “7” or higher out of an evaluation scale up to 11 overall, and around
62% of tenants gave their property a “7” or higher as to whether theywould recommend the property to others.
The questionnaire results are shared with property managementcompanies and used to improve building and facility specifications andservices.

Supply Chain Management
Daiwa House Group conducts business with the belief that its suppliers
are important business partners. Daiwa House Group believes that wecan provide quality that satisfies our customers by forming an
extensive supply chain that includes manufacturers of material andequipment, construction, and after-sale services.
The requirements of institutional investors and NGOs for companies toengage in environmental and social initiatives have expanded toinclude not only the company and corporate group but also supply

chain management. Even in international rules and stock exchange
guidelines, the requirements for group CSR procurement initiatives andinformational disclosure are becoming even stricter. The era the worldis entering demands satisfying both social factors such as humanrights considerations and expectations for quality and price to becompetitive.
The Daiwa House Group strives to realize a sustainable society throughthe promotion of CSR procurement together with its suppliers.

Supply Chain Sustainability Guidelines
Our Supply Chain Sustainability Guidelines set forth seven social and environmental
principles via a “Business Partner Code of Conduct.” And, based on this code of conduct,
our “Corporate Activity Guidelines” elucidate 42 specific social and environmental items.
The “business activities based on high ethical standards” requirement in the “Business
Partner Code of Conduct” stipulates that business partners are expected to act ethicallyand in full compliance with laws and regulations.
Where the code of conduct requires “considerations for occupational safety and health,”business partners are expected to concern themselves about health and safety, by
preventing industrial accidents, assiduously managing sanitation and hygiene, and being
prepared for unforeseeable events like natural disasters. Our section on “fair businessactivities” requires our business partners to take anti-corruption measures in order tokeep business free of graft and corruption. And, the section on “respecting human rights”
outright disavows forced labor, child labor, harassment and infringements of human rights
by way of discrimination, etc.
The Asset Manager requires its property management companies to implement theSupply Chain Sustainability Guidelines, which is reflected in the annual assessment ofproperty management companies.

Content of the property management company assessment(1) Financial results and conditions as well as other management information(2) Organizational structure (3) Facility operation management and technical management
capabilities (4) Tenant leasing skills (5) Reasonable compensation standards for theproperty management operations (6) Performance of application and area management(7) Sustainability

Sustainability survey for property managementcompanies from the Asset Manager(1) Introduction of an environmental management system or equivalentinitiatives (2) Promotion of green procurement for subcontractors(3) Occupational health and safety (4) Health and comfort (5) Respect forhuman rights and diversity (6) Corporate ethics (7) Community involvement(8) Environmental and health-conscious products (9) Cooperation with oursustainable procurement (including re-consigned subcontractors)

Introduction of Green Leases
Aiming to improve the environmental performance of properties through a collaborative
effort with tenants, DHR is promoting the introduction of green leases. In a green leaseagreement, the building owner and the tenants jointly cooperate by proactively entering into
agreements and memorandums of understanding regarding the reduction of theenvironmental burden of the property, such as through energy savings, and improvement of
the workplace environment, and by putting the details of these undertakings into practice.

Green lease agreements

96.3%

Supply Chain Sustainability Guidelines

Cooperation with Property Management Companies
The Asset Manager conducts evaluations of property management companies
once a year to determine whether the ongoing outsourcing of operations to thecurrent property management companies is appropriate based on the internal
operations manual, including automatic contract renewals. We provide feedbackon the results of these property management company assessments to themand guide corrective actions for any items requiring improvement. These property
management companies submit reports on the corrective actions for any items
presenting a major problem.
Additionally, DHR determines whether to change property managementcompanies if a property management company continues to have a low
evaluation on the assessments and no corrective actions can be expected.

26

215 properties(As of March 31, 2023)

Supplier-related Violations and Accidents
There were neither significant supplier-related violations nor accidents
at DHR’s properties that would affect stakeholders. (Fiscal year
ended March 2023)

ForwardMessage from the Management

Sustainability

Special Features

Environment

SocialGovernance

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Investor Relations Initiatives
Disclosure Policy
Policy and Basic Approach

Information disclosure system

DHR endeavors to ensure transparency in its asset management operations
and disclose information that is easy to understand in a fair, timely, andaccurate manner so that investors can make investment decisions in accord
with the principle of self-responsibility. DHR discloses information incompliance with the Financial Instruments and Exchange Act, the Act on
Investment Trusts and Investment Corporations (hereinafter referred to as
the “Investment Trusts Act”) and disclosure rules prescribed by the Tokyo
Stock Exchange, Investment Trusts Association, Japan, etc. It alsoendeavors to proactively disclose even information not legally or otherwise
required for disclosure if the information is deemed likely to influence
investors’ investment decisions.

KPIs and Main Initiatives

Method of timely disclosure
Timely disclosures are carried out by posting the information on the Timely Disclosure network (TDnet). Disclosure materials are also posted on
DHR’s website on the same day.

Feedback on opinions received through IR activities

Completed IR activities (including online meetings andtelephone/web conferences)

As for DHR’s timely disclosures, the Fund Management Department of the Daiwa House REIT Division of the Asset Manager is the department
responsible for disclosing information, and the General Manager of the department is responsible for handling information. Additionally, in order tomonitor the appropriateness of timely disclosure operations, the Compliance Department verifies the disclosure materials along with the time, date,and method of disclosure, and other relevant items immediately following timely disclosure. The result is then reported to the DHR Board of
Directors.

(April 2022–March 2023)

Results briefings for domestic institutional
investors and analysts

2 times

Opinions and requests pertaining to sustainability received through dialogue with unitholders and investors are reported to the Board of Directors of
the Asset Manager and the DHR Board of Directors twice annually, and management personnel provide timely and appropriate feedback in an effort
to further increase our corporate value.

IR activities
The following is DHR’s IR schedule.

IR meetings for domestic institutional investors
and analysts

188 times• Closing: February, August• Announcement of financial results: April, October• Results briefings: April, OctoberIR meetings for overseas institutional investors

56 times• Asset Management Report sent out: May, November
Disclosure materials

27

ForwardGovernance

Governance 29Compliance 

32

Risk Management 33

Message from the Management

Sustainability

Special Features

Environment

SocialGovernance

FinanceRelevant Data

Back

Sustainability Report 2023

ForwardGovernanceManagement Structure
Policy and Basic Approach
The Asset Manager has established the following governancerelated guidelines in its internal Compliance Manual.

Compliance
Committee

Members
Function and role

1. The Asset Manager is committed to thorough compliance as afundamental management principle based on the realizationthat trust is its greatest asset and a keen awareness thatcompliance deficiencies can impair trust and, in turn, evenundermine its management foundation.
2. Recognizing the importance of its societal mission andresponsibilities in the national economy as an asset manager
that manages investment corporations’ assets, the AssetManager will ensure compliance proactively and unremittingly.

Daiwa House REIT
Investment
Management
Committee

Members

Function and role

Sustainability Committee

Chair: Compliance Officer
Members: Full-time Directors, officers and employees designated by the President approved by the Chair, outside experts
Deliberating and resolving on compliance in the context of operational and internal management
Chair: Head of Daiwa House REIT Division
Members: Full-time Directors (except those in charge of the Private Fund Division), General Manager of the Investment
Department, General Managers of the Fund Management Department and Asset Management Department of
the Daiwa House REIT Division, officers and employees designated by the President approved by the Chair
Observer: Compliance Officer
Deliberating and resolving on the validity and other attributes of DHR’s asset management operations

Outside Expert Advisor of the Sustainability Committee
The Asset Manager has appointed an outside expert advisor

3. By putting compliance into practice, the Asset Manager will

who has extensive knowledge and experience incontribute to the sound development of the economy andsustainability to the Sustainability Committee.

society, thereby elevating our reputation among investors and

Name

Emi
Matsukawa

GenderFemalebroadly gaining societal trust.

Main concurrent positions
Representative Director, General Incorporated Association
Collective Action
Outside Advisor, PRONEXUS Inc.
Senior Manager, General Incorporated Association CDP
Worldwide-Japan

Handling of Conflict-of-interest Transactions
DHR Directors (As of March 31, 2023)

Policy and management structure for addressing
conflict-of-interest transactions
The Daiwa House Group could significantly influence thedecision-making of the Asset Manager and DHR. It is a close

Female director
ratio

Average tenure

partner with the deepest understanding of the basic

33%

3.7 years

concepts of DHR. DHR recognizes that proper coordination

Flow of decision-making with respect to acquiring assets
from interested parties

Attendancewith these companies is a means to carry out our asset

Rejection

Discarded

Decision on acquisition

Discarded

Approval

29

Rejection

Attendance

DHR Board of Directors

RemandDisagreement

Specialresolution

the following control system.

Disagreement

Board of Directors

operations, DHR and the Asset Manager have established

Unanimous
approvalof the top compliance priorities in the asset management

Unanimous
approval

the Daiwa House Group and other interested parties is one

Presentationof investment
value analysis
results

interest. Recognizing that preventing conflicts of interest with

Compliance Committee

are in fact conducive to acts that potentially pose conflicts ofReport on
results ofdeliberation

Attendance Attendance

Daiwa House REIT
Investment Management Committee

On the other hand, close relationships among companies

Daiwa House REIT Division
Investment Department

management operations more effectively.

Compliance Officer

RemandMessage from the Management

Sustainability

Special Features

Environment

SocialGovernance

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Governance

DHR Directors: Status and Remuneration
The maximum monthly compensation for an Executive Director shall be ¥800,000, and that for a Supervisory Director shall be ¥350,000. The Board of Directors will determine the compensation amounts deemed reasonable inlight of trends in general commodity prices, wages, and the like.
The criteria for payment of compensation of Executive Directors and Supervisory Directors are stipulated in the regulations, and any changes must be approved at a Unitholders’ Meeting.
Independent
Genderofficer

Title and
post

Name

Executive
Director

Toshiharu
Asada

Male

Supervisory
Director

HiroshiIshikawa

MaleSupervisory
Director

Junko
Kogayu(Note 1)

Female

Experience & expertise (Note 2)
Corporate
Management

Real
EstateAttendance at Board
Main
of Directors
Director remuneration inqualifications meetings in the 33rd the 33rd & 34th periods& 34th periods

Reason for election

Legal &
Risk
Finance &Sustainability
Compliance Management Accounting







Toshiharu Asada has a wealth of operational experience and knowledge not
only in general finance but also in real estate. We have elected him as
Executive Director based on his appropriate judgment pertaining to executionof business operations as well as his character and knowledge.

–100%(15/15)¥4,920 thousand(including ¥120 thousandin sustainability indexlinked fees)







Hiroshi Ishikawa is familiar with laws and regulations as an attorney-at-law. In addition, he has experience as an
outside director at a listed company. We have elected him as Supervisory Director because we determined thathe possesses the good character and knowledge necessary to supervise the execution of duties by Executive
Director as a Supervisory Director and to perform his duties as a member of the DHR Board of Directors.

Attorney100%(15/15)¥4,200 thousandJunko Kogayu is familiar with accounting and tax matters as a certified public accountant and tax accountant. In addition,
she has experience as an outside director at a listed company. We have elected her as Supervisory Director because wedetermined that she possesses the good character and knowledge necessary to supervise the execution of duties by
Executive Director as a Supervisory Director and to perform her duties as a member of the DHR Board of Directors.

Certifiedpublicaccountant,tax
accountant

100%(15/15)¥4,200 thousand(Note 1) The Supervisory Directors of DHR are “independent officers” who are not in conflict with the criteria for independence from Executive Officers and the Asset Manager as stipulated in the Investment Trusts Act.
(Note 2) The table shows the leading skills at which each Director excels compared to others, not necessarily all of their knowledge and experience.
(Note 3) The Executive Director and Supervisory Directors do not hold investment units of DHR under their own or another person’s name.
(Note 4) In regard to the liability set forth in Article 115-6, Paragraph 1 of the Investment Trusts Act, if a Director has acted in good faith and has not been grossly negligent in performing their duties, and it is deemed necessary considering the underlying facts, the status of the Director’s performance of theirduties, and other such circumstances, DHR may exempt them from liability to the extent allowed by law by resolution of the Board of Directors.

Compensation of the Audit Firm

Compensation of the Asset Manager

The amount of compensation for the Independent Auditor shall be determined by the Board of Directors,
and the maximum shall be ¥25,000 thousand per fiscal period subject to audit.

Amount of compensation
Name

Description of compensation

Amount of compensation
Name

Description of compensation

Fiscal period ended
August 31, 2022

Management fee 1(linked to assets)

Fiscal period ended
February 28, 2023

Ernst & Young ShinNihon Compensation based on auditing duties
LLC
Compensation based on non-auditing duties¥17,500 thousand¥17,500 thousand¥3,600 thousand (Note 3)¥2,000 thousand (Note 3)

Total¥21,100 thousand¥19,500 thousand

Management fee 2(linked to NOI)

Daiwa House AssetManagement Co., Ltd.

Management fee 3(linked to sustainability indices)

Acquisition/disposition fees

(Note 1) Dismissal or non-reappointment of the Independent Auditor shall be discussed at DHR’s Board of Directors pursuant to the provisions of the Investment
Trusts Act for dismissal, taking into full account all relevant factors for non-reappointment such as the quality of audits and compensation for audits.
(Note 2) The continuous auditing period is from June 2005 to the present.
(Note 3) Compensation is for preparation of comfort letters.

Total

30

Fiscal period ended
August 31, 2022

Fiscal period ended
February 28, 2023

¥823,177 thousand¥810,540 thousand¥1,028,106 thousand¥1,029,022 thousand¥70,390 thousand¥69,382 thousand––¥1,921,674 thousand¥1,908,944 thousand

ForwardMessage from the Management

Sustainability

Special Features

Environment

SocialGovernance

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ForwardGovernance

Sustainability Index-linked Fees
In November 2021, DHR introduced a provision to fluctuate the amount of asset management fees to the Asset Manager in conjunction with the sustainability indices as the first initiative in J-REITs for the purpose of increasing
unitholder value by encouraging the reduction of GHG emissions of DHR properties and enhancing the external evaluations of its sustainability initiatives.
This is to increase or decrease the amount of asset management fees based on the sum of indexed GHG emissions reduction ratio, GRESB Rating and CDP Score multiplied by the total assets of DHR, and is aimed atstrengthening the commitment to solving ESG issues and improving governance.
Furthermore, remuneration for Executive Director of DHR and remuneration for directors of the Asset Manager are now linked to sustainability indices including GHG emissions reduction ratio, GRESB Rating and CDP Score.

Asset Management Fee StructureManagement fee 1

Method of calculating sustainability index multiple

Total assets ×(linked to assets)

Management fee 2

NOI ×(linked to NOI)Management fee 3

4.5%

GHG

(Note 1)

1 - GHG Emissions
Reduction Ratio* GHG emissions reduction ratio: ((b) - (a)) / (a)(a): GHG emissions intensity in fiscal year ended March 2018 (April 2017 - March 2018)
0.0556 (t-CO2/m2)(b): GHG emissions intensity in the immediately preceding fiscal year (April - March) (t-CO2/m2)

GRESB Rating

ê

êê

êêê

êêêê

êêêêê

Multiple

0.8

0.9

1.0

1.1

1.2

* Multiple is determined based on the assessment in the immediately preceding fiscal period.

0.008%× Reduction in GHG emissions(Note 3)× GRESB Rating(2) Total assets × 0.002%(Note 4)
× CDP Score(3) Total assets × 0.002%(1) Total assets ×(linked to sustainability indices)

0.18%(Note 1)

(Note 2)

(Note 1) The upper limit is 0.4% for Management fee 1 and 5.0% for Management fee 2.

CDP Score

D-

D

C-

C

B-

B

A-

A

Multiple

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

* Multiple is determined based on the assessment in the immediately preceding fiscal period.

(Note 2) The upper limit is 0.012% for the index (1) of Management fee 3.
(Note 3) The upper limit is 0.004% for the index (2) of Management fee 3.
(Note 4) The upper limit is 0.004% for the index (3) of Management fee 3.

31

Message from the Management

Sustainability

Special Features

Environment

SocialGovernance

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Compliance
System for Promoting Compliance
The Asset Manager realizes compliance through the following system.
Organization/
Title and post

Main role

Board of Directors(1) Establish and revise compliance manuals and compliance programs as the decision-making body on fundamental matters related
to promoting compliance.
(2) Ask for reports on progress made on compliance from the Compliance Officer as necessary.

Compliance Committee

In principle, convened monthly and as necessary by the Compliance Officer for discussion of the agenda from the standpoint of compliance.

President and CEO(1) Supervise introduction of basic compliance policies and programs.
(2) Report to the Board of Directors on progress made on compliance at least every quarter and as necessary.

Compliance Officer(1) Conduct overall compliance planning, drafting and promotion as the head of compliance.
(2) Promptly report to the President and CEO and provide necessary suggestions or instructions to relevant departments wheneverproblems in the context of compliance arise or are likely to arise.
(3) Independently review from a compliance standpoint transactions and decisions pertaining to management of DHR’s assets, as an entity
independent of the Asset Manager’s other internal organizations, without being influenced by other internal organizations’ judgments.

Compliance Department

Engage in work related to compliance promotion, internal audits, verification of risk management, and more under the supervisionof the Compliance Officer

Establishment and Practical Implementationof Compliance Manual
The Asset Manager has established a Compliance Manual in the aimof increasing the soundness and reliability of its management andorganization as the manager of DHR’s assets and, in turn, earning
the trust of unitholders and society by prescribing not only
fundamental compliance-related principles by which its officers andemployees should abide but also specific practical matters.

Compliance Training
The Asset Manager works to enhance internal education and training so that
officers and employees are able to pursue the best interests of investors.
Specifically, when it comes to internal education, we utilize a group textbook thatprovides easy-to-understand explanations by means of various case studies inorder to ensure that Daiwa House Group employees are able to engage inproper decisions and actions according to “With our customers” and the otherelements of the Principles of Corporate Ethics and Code of Conduct in theirroutine operations. As for internal training, we carry out compliance training on acontinual basis to ensure that all officers and employees (including fixed-term
employees, temporary employees and part-time employees) are acutely awareof pursuing the best interests of investors. We also include an assessment of
whether employees are taking action on compliance with a continual awarenessof other social demands in their performance evaluations. In so doing, we seek
to raise awareness among our officers and employees.
Relevant Data (2 of 2)

Prevention of Corruption
The Daiwa House Group has established a system to strictly prohibit and prevent
corruption, such as bribery, money laundering, embezzlement, and other violations of
the law. This includes the establishment of Anti-Bribery Regulations and Identity
Verification Regulations. In addition, acts that encourage bribery or unfair trade or thatare ethically unsound are prohibited by various policies and rules, such as our
Principles of Corporate Ethics and Code of Conduct, even if they do not violate thelaw. In this way, we set forth rules for maintaining transparency in business operations
and fairness in transactions.
The Asset Manager has established a system for consultation and appropriate
handling of reports related to acts that are (or could potentially be) problematic in termsof compliance, including organizational or individual legal violations and ethicallyquestionable acts reported by whistleblowers based on the Whistleblower Protection
Act and the Cabinet Office Guidelines for Private Businesses Concerning the32

Whistleblower Protection Act. Both internal and external points of contact are in place.
The Asset Manager further solidified this commitment by signing on to the United
Nations Global Compact, which states, “businesses should work against corruption in
all its forms, including extortion and bribery” as one of its principles.
Additionally, the Asset Manager’s Compliance Manual stipulates the following
measures for all officers and employees to prevent bribery and corruption.
(1) Officers and employees must not directly or indirectly provide any entertainment,
gifts, favors, or other benefits (including providing, offering, or promising cash orother benefits) to any public servants or quasi-public servants (whether in Japan oroverseas, including private companies and the like prohibited by laws andregulations from engaging in bribery).
(2) Officers and employees must not provide or accept entertainment, gifts, favors, orother benefits beyond normal social etiquette under socially accepted ideas (i.e.,
engage in conduct that inhibits or could inhibit the Asset Manager’s promotion ofcompliance) to or from anyone, even if they are not a public servant or quasi-public
servant.
(3) Officers and employees must follow the rules for entertainment expenses whenproviding entertainment, food and beverages, recreation, or gifts to business
partners and others, when engaging in similar acts, and when the Asset Manager ison the receiving end of entertainment or food and beverages.
The Asset Manager raises awareness in each and every officer and employee about
these measures through compliance and other training and works to prevent, quickly
discover and rectify any issues through various efforts such as an internal
whistleblowing system and accordingly to the rules on protections for whistleblowers.
The Board of Directors of the Asset Manager shall receive risk reports about politicalcontributions through a risk assessment sheet supervised by the ComplianceDepartment and oversee the response to prevent bribery and corruption.
Furthermore, under its “Supply Chain Sustainability Guidelines,” the Daiwa HouseGroup prohibits, as part of the Business Partner Code of Conduct, any actions thatare or could be constructed as the bribery of members of Parliament, government andmunicipal officials, or local public organizations. When concluding agreements withnew business partners, we explain the purposes and outline of the “Supply Chain
Sustainability Guidelines” in implementing it and ask them to submit a letter of intent.
Supply Chain Sustainability Guidelines

Problems Related to Bribery and Corruption
There were no serious problems related to bribery or corruption at
the Asset Manager that would influence stakeholders. (Fiscal year
ended March 2023)

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Risk Management
Development Status of Risk Management System(3) Thorough compliance

The Asset Manager has prescribed Risk Management Regulations andRisk Management Implementation Guidelines regarding various risks thatarise in the course of managing DHR’s assets. It endeavors to manage risk
based on a fundamental policy of comprehensively and accurately
identifying risks, qualitatively and quantitatively measuring and appropriately
assessing the identified risks’ impacts on operations, formulating risk
prevention measures, monitoring risk management status on an ongoingbasis and formulating procedures for responding to risks when they
surface. Additionally, the Asset Manager conducts annual internal audits toverify the appropriateness and effectiveness of the foregoing risk
management system and implementation status of risk controls. The audit
results are reported to the President and CEO. The Asset Manager iscommitted to ensuring that operations are conducted appropriately andsoundly managed through such means as reporting to the Compliance
Committee and Board of Directors as the occasion demands.
The risk management, improvements and other relevant matters areincorporated into the annual plan of Compliance Programs and reported to
the Boards of Directors of both the Asset Manager and DHR.

Timely and appropriate information disclosure of the above must be theresult of the operations of DHR and the Asset Manager being incompliance (in other words, sincere and fair corporate activities that are
fully in line with social norms in addition to strict compliance with laws,
regulations, internal regulations, and market rules). DHR and the AssetManager have made the following preparations in relation to complianceas corporations that operate legally in accordance with the Investment
Trusts Act as well as the Financial Instruments and Exchange Act.
The DHR Board of Directors is comprised of one Executive Director andtwo Supervisory Directors and supervises the execution of business by
the Executive Director and the status of execution of services by the
Asset Manager.
The Asset Manager’s Board of Directors has established and implements
Compliance Regulations and other regulations that set forth the roles ofand other matters pertaining to the Board of Directors, the President andCEO, the Compliance Committee, the Compliance Officer, and theCompliance Department in order to ensure that operations are
conducted in accordance with compliance requirements. In addition,
various regulations are in place for systematic stipulation of the rules ofconduct for officers and employees to ensure thorough compliance.

Internal Audits

Risk Management System
DHR and the Asset Manager recognize the existence of the aboverisks and have established the risk management system below inorder to fully address such risks.

(1) Risk management system
The Asset Manager has prescribed Risk Management Regulations
and endeavors to manage risks based on a fundamental policy ofcomprehensively and accurately identifying risks, qualitatively andquantitatively measuring and appropriately assessing identified risks’impacts on operations, formulating risk prevention measures, andmonitoring risk management status on an ongoing basis.

(2) Timely and appropriate information disclosure
DHR endeavors to maintain a system that enables timely and appropriate disclosureof information to investors in compliance with the Investment Trusts Act and theregulations of the Tokyo Stock Exchange so that information necessary for investors
to make investment decisions in accord with the principle of self-responsibility canbe appropriately and timely disclosed. The Fund Management Department in Daiwa
House REIT Division of the Asset Manager is in charge of information disclosure.

BCP
The Asset Manager establishes the necessary items for its disasterprevention and crisis management in relation to risks specified
separately for natural disasters such as large-scale earthquakes,
accidents, crimes, and other material facts. It has established an“Emergency Response Manual” in order to prevent and avoid risk,
ensure people’s safety and reduce/mitigate damage in the event of adisaster, prevent secondary accidents, resume DHR’s asset
management operations at an early point, and fulfill its corporatesocial responsibility. Furthermore, to ensure continuity of payment
and disclosure operations from the standpoint of the business
continuity requirements to which financial instrument business
operators are subject, the Asset Manager plans to operate inaccordance with a BCP Execution Plan it has formulated.
The Asset Manager has stockpiled supplies, including three days of
emergency meals and drinking water for officers and employees andtwo storage batteries, at its office, warehouse for general affairs andelsewhere.

33

To ensure the effectiveness of the Asset Manager’s management
system, the Board of Directors has set out Rules for Internal Audits,and the Compliance Department conducts internal audits of theAsset Manager’s operations, audits of risk management, and the liketo verify compliance with laws, rules, and regulations; develops anunderstanding of problems and summarizes recommendations forcorrecting them; reports the results of these efforts to the President
and CEO as well as the Compliance Committee, the Board of
Directors, and the DHR Board of Directors as necessary; and follows
up on the status of improvements. Notably, in an effort to ensure theeffectiveness of internal audits, the Compliance Department
maintains close communication with departments to be audited,
notifying them prior to conducting the audits and holding post-audit
review sessions.

Managing Personal Information
DHR recognizes the importance of personal information (here andhereinafter including specific personal information as defined in the
Act on the Use of Numbers to Identify a Specific Individual in
Administrative Procedures (hereinafter referred to as the “NumbersAct”)), and in its handling of personal information complies with the
Act on the Protection of Personal Information, the Numbers Act, andother laws and regulations on protecting personal information in
addition to guidelines and other literature issued by the competentauthorities.
Additionally, DHR engages in the proper handling, protection, andmanagement of personal information based on the following policy(hereinafter referred to as the “Personal Information Protection
Policy”).
Personal Information Protection Policy

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Risk Management

Cutting Off Relationships with Anti-social
Forces and Preventing Money Laundering
To realize sound corporate management, the Daiwa House Groupestablished the Daiwa House Group Principles of Corporate Ethics
and Code of Conduct, and announced internally and externally that it
will cut off relationships with anti-social forces. Additionally, the AssetManager has established a basic policy and Rules for Dealing with
Anti-Social Forces, resolved to take action from top (President andCEO) to bottom throughout the organization, and establishedclose-knit collaboration with the police, the Anti-Organized Crime
Campaign Center of Tokyo, attorneys, and other outside specialist
organizations. The Asset Manager holds regular training sessions forall officers and employees—for example, internal training on methodsof dealing with anti-social forces—and takes other steps tothoroughly spread the word to all officers and employees.
The Daiwa House Group rallies the entire Group behind efforts suchas establishing a database of information about anti-social forces
available to all companies in the Group.
The Asset Manager’s Compliance Manual requires officers andemployees to categorically reject all requests, both public andprivate, from anti-social forces that threaten the order and safety ofcivil society, including those for money and goods, donations,contributions, and subscriptions to informational magazines. In
addition, officers and employees are to thoroughly verify the identityof customers, etc., keep transaction records, and report suspicioustransactions as stipulated by the Act on Prevention of Transfer of
Criminal Proceeds in order to prevent money laundering (hiding thesource of profits from illegal acts).

Safety Confirmation System
As part of corporate crisis management, the Asset Manager has
adopted an online safety confirmation system to ascertain its officers
and employees’ safety and post-disaster status at the time ofdisaster swiftly. The Asset Manager conducts safety confirmation
drills at least once annually. In the fiscal year ended March 2023, theparticipation rate was 100%.

Information Security

Information Security-related Problems

The Asset Manager recognizes the proper management of
information as an important management challenge and has
established an information security policy as a basic policy to ensure
information security. This policy implements the following items:

There were no serious problems related to information security at theAsset Manager that would influence stakeholders. (Fiscal year ended
March 2023)

1. Preparation of an information security management system
2. Appointment of an information security manager
3. Establishment of internal regulations
4. Information security education
5. Reinforcement of management systems of outsourcing companies
6. Implementation of ongoing improvements
Additionally, the Asset Manager has established IT management
regulations, which define specific procedures for handling information
devices to safely and smoothly manage information devices andsecure the confidentiality and completeness of data, with an aim to
fully protect the information handled by the Asset Manager.

Conducting drills to respond to targeted email attacks
The Asset Manager draws attention to suspicious emails throughinformation security training conducted each period. However, in aneffort to improve awareness among all officers and employees in amore practical way, the Asset Manager conducts drills for responding
to targeted email attacks. If an officer or employee opens the email
and then opens an attachment or clicks on an embedded link, they
are shown educational content about targeted emails in an effort toverify and improve their awareness of information security.

Receiving regular reports from outside contractors
on information device operation and management
The Asset Manager has established IT management regulations andInformation Device Operation and Management Guidelines, andwhen it contracts the operation and management of information
devices to an outside contractor, the person responsible for IT
control (General Manager of the Administration and Accounting
Department) receives quarterly reports on information device
operation from the contractor.

34

Information Security Declaration (Basic Policy)

ForwardFinance

Green Finance 

36

Sustainability Finance 37

Message from the Management

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Green Finance
The Daiwa House Group’s basic approach is “Creating Dreams, Building Hearts.” As a group that co-creates value for individuals, communities and people’s lifestyles, the group aims to build trust relationships withstakeholders and contribute to society through its businesses, and to realize a sustainable society by meeting the challenge of achieving “zero environmental impacts.”
DHR shares the basic stance of the Daiwa House Group and engages in Green and Sustainability Finance to further promote real estate investment management that considers ESG.

Green Finance Framework

ReportingThird-party evaluation

Reporting on status of green finance fund allocation
Balance (millions of yen)

DHR has obtained a rating of “Green 1 (F)” for our Green Finance
Framework. This is the highest rating offered in JCR Green FinanceGreen Finance

25,500

Framework Evaluations conducted by the third party, Japan Credit Rating

Green Bonds

15,000

Green Loans

10,500Agency, Ltd. (JCR).
For details on this evaluation, see the JCR website athttps://www.jcr.co.jp/en/greenfinance/* Balance as of February 28, 2023.

The following table provides information about DHR’s status of fund allocation regarding Green Finance.

Green Bonds

Eligibility criteria

NameFunds procured through Green Bonds or Green Loans are applied to theacquisition of eligible green assets that meet the eligibility criteria below,
refinancing of those funds or funding or refinancing renovation work.
Green finance eligibility criteria

Management of financing
The eligible green debt amount is calculated by multiplying the sum of thetotal acquisition price of eligible green assets and the total amount ofrenovation work that meets the eligibility criterion 2 (total amount of eligible
green assets) by the interest-bearing debt to total assets ratio (LTV) as ofthe end of the most recent fiscal period. This is the maximum amount forGreen Finance.
PeriodFiscal period ended February 28, 2023

Total amount of eligible green assets¥345,511 million

LTV

42.4%

Eligible green debt amount¥146,497 million

Outstanding issue(millions of yen)Interest rate

Issue date

Maturity

Unallocated amount(millions of yen)

Third-party evaluation

6,000

0.53%

November 25, 2019

November 22, 2029–

JCR Green Bond Evaluation “Green 1”

2,400

0.34%

May 27, 2020

May 27, 2025–

JCR Green Bond Evaluation “Green 1”

1,600

0.64%

May 27, 2020

May 27, 2030–

JCR Green Bond Evaluation “Green 1”

1,000

1.00%

May 27, 2020

May 25, 2040–

JCR Green Bond Evaluation “Green 1”

4,000

0.50%

April 15, 2021

April 15, 2031–

JCR Green Bond Evaluation “Green 1”

9th Unsecured Investment
Corporation Bonds
10th Unsecured Investment
Corporation Bonds
11th Unsecured Investment
Corporation Bonds
12th Unsecured Investment
Corporation Bonds
14th Unsecured Investment
Corporation Bonds

Green Loans
LenderSumitomo Mitsui Banking Corporation
MUFG Bank, Ltd.
The Development Bank of Japan Inc.
Shinsei Bank, Limited
Kansai Mirai Bank, Limited
The Bank of Kyoto, Ltd.

Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
The Yamanashi Chuo Bank, Ltd.
Shinkin Central BankThe Yamaguchi Bank, Ltd.

Loans executed andoutstanding (millions of yen)Interest rate

Borrowingdate

Repayment Unallocated amountdate(millions of yen)

10,5000.56419%

September
3, 2021

August 29,
2031–

Third-party evaluation

JCR Green Loan Evaluation“Green 1”

Impact reporting
DHR will annually disclose the following indicators on its website for as long as the funds procured through green finance are outstanding.
• Number and type of environmental
certifications of portfolio assets
Environmental Certifications

36• Water consumption• Electric power consumption (energy consumption)• CO2 emissions (GHG emissions)
Relevant Data (1 of 2)

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ForwardSustainability Finance
Sustainability Finance Framework

Reporting
Reporting on status of sustainability finance fund allocation

Third-party evaluation
DHR has obtained a rating of “SU1 (F)” for our Sustainability Finance
Framework. This is the highest rating offered in JCR Sustainability
Finance Framework Evaluations conducted by the third party, Japan
Credit Rating Agency, Ltd. (JCR).

Balance (millions of yen)
Sustainability Finance

4,000

Sustainability Bonds

4,000

Sustainability Loans–* Balance as of February 28, 2023.

The following table provides information about DHR’s status of fund allocation regarding Sustainability Finance.

For details on this evaluation, see the JCR website athttps://www.jcr.co.jp/en/greenfinance/

Sustainability Bonds
Name

Outstanding issue(millions of yen)Interest
rate

Issue date

Maturity

Unallocated amount(millions of yen)

Third-party evaluation

15th Unsecured Investment Corporation Bonds

3,000

0.40%

November 17, 2021

November 17, 2031–

JCR Sustainability Bond Evaluation “SU1”16th Unsecured Investment Corporation Bonds

1,000

0.66%

November 17, 2021

November 17, 2036–

JCR Sustainability Bond Evaluation “SU1”Eligibility criteria
Funds procured through Sustainability Bonds or Sustainability Loans
are applied to the acquisition of eligible sustainability assets that meetthe sustainable eligibility criteria below or refinancing of those funds.

Impact reporting
DHR will annually disclose the following indicators on its website for as long as the funds procured through sustainability finance are outstanding.

Sustainability finance eligibility criteria

1. Environment improvement effect• Number and type of environmental
certifications of acquired assets

Management of financing
The eligible sustainability debt amount is calculated by multiplying thesum of the total acquisition price of eligible sustainability assets by
the interest-bearing debt to total assets ratio (LTV) as of the end of
the most recent fiscal period. This is the maximum procurement
amount for Sustainability Finance.
PeriodFiscal period ended February 28, 2023

Total amount of sustainability
eligible assets¥120,990 million

LTV

42.4%

Eligible sustainability debt amount• Specific consumption• CO2 emissions (GHG emissions)— Water usage (water consumption)— Power usage (energy consumption)

Environmental Certifications

Relevant Data (1 of 2)

2. Social benefit(1) Output index(As of February 28, 2023)

Index

Total number of indices

Number of sustainability eligible assets

7(2) Outcome index(As of February 28, 2023)

Index¥51,300 million(i) L ocal disaster prevention
and resilience(ii) Care and medical services
for senior citizens andpeople with disabilities

Number of properties that have concluded disasterprevention agreements with local governments, etc.
Number of properties that provide anevacuation shelter in the event of a disaster
Number of other properties contributing
to local disaster prevention

Total
number ofindices3Index(iii) S upport for child rearing

Number of children acceptable atcertified childcare facilities(iv) J ob creation for projects
to help resolve local social
issuesEmployment status of local residents atapplicable facilities

3
3

Number of units available at facilities for senior citizens

156

Number of medical facility tenants

13

Total
number ofindices1791(3) Impact
Co-creation of value for individuals, communities and people’s lifestyles by revitalizing local environments and building safe and secure local communities

37

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Relevant Data (1 of 2)
GHG Emissions of DHR

Status of Environmental Certifications for the Portfolio(As of March 31, 2023)¢Logistics properties ¢Residential properties ¢Retail properties ¢Hotel properties ¢Other assets

Unit: t-CO2
Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
115
198
195
7,094
26
20
114,932
137,796
132,069
122,141
138,021132,285

Scope 1
Scope 2 (market-based)
Scope 3
Total GHG emissions

Property
number
LB-001
LB-002
LB-006
LB-008
LB-009
LB-011
LB-015
LB-019
LB-020
LB-021
LB-025
LB-026
LB-027
LB-028
LB-029LB-030
LB-031
LB-035
LB-037
LB-038
LB-043
LB-044
LB-049
LB-050
LB-051
LB-053
LB-054
LB-056
LB-057
LB-059LB-060
LB-062
LB-065
LB-066LM-001
LM-002
LM-003LM-004LM-005LM-006RE-021
RE-043RE-059RE-077
RE-081
RE-089
RE-094
RE-107
RE-109RE-110
RE-112
RE-138
RE-141
RE-142
RM-001
RM-008RM-009RM-012
RR-004HO-003HO-005
OT-003
OT-005
OT-006

GHG Emissions by Category (Scope 3)
Unit: t-CO2

Boundary: DHR, owned properties

Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
1. Purchased goods and services
202
160
50
54
2. Capital goods
14,906
18,31029,694
15,967
990
1,067
1,194
1,179
3. Fuel- and energy-related activities not included in Scope 1 or Scope 2
3
3
4
4
Upstream 4. Upstream Transportation and Distribution
5. Waste generated in operations
24
130
142
156
6. Business travel0000
7. Employee commuting
00
0
0
Downstream 13. Downstream leased assets
83,053
95,263
106,712
114,710GHG Emissions of Portfolio Properties

Unit: t-CO2

Fiscal year ended March 2018 (Base year) Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
Number of properties
143 properties
190 properties
201 properties
211 properties
215 properties
Scope 1
197
115
198
195
Scope 2 (location-based)
6,465
6,597
6,648
6,586
34,336
Scope 3 (only from fuel/electricity consumption
78,14789,924
98,951
104,290
associated with tenant-managed assets)
Scope 1+Scope 2 (location-based) + Scope 3
34,33684,80896,636
105,798
111,072
Scope 1+Scope 2 (location-based) +0.05560.04200.0397
0.03680.0361
Scope 3 Emission intensity (t-CO2/m2)
Reduction rate of intensity–-24.5%-28.6%-33.8%-35.1%

Energy consumption
Number of properties
Total amount (MWh)Consumption intensity (MWh/m2)
Reduction rate of intensity
Coverage

Fiscal year ended March 2018 (Base year) Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
143 properties
190 properties
201 properties
211 properties
215 properties
76,440190,299
209,212
256,078
280,3990.12530.09430.08580.08900.0912–-24.7%-31.5%-29.0%-27.2%
28.4%
67.0%
76.3%
80.0%
85.3%

Water consumption
Number of properties
Total amount (m3)Consumption intensity (m3/m2)
Reduction rate of intensity
Coverage

Fiscal year ended March 2018 (Base year) Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
142 properties
190 properties
200 properties
211 properties
215 properties
391,637
900,955
852,793927,080
1,011,485
0.82050.42960.35030.3307
0.3352–-47.6%-57.3%-59.7%-59.1%
22.2%
69.6%
76.2%
77.9%
83.8%

Waste management
Number of properties
Total amount (t)Recycling rate
Coverage

Fiscal year ended March 2018 (Base year) Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
6 properties
44 properties
55 properties
66 properties
75 properties
1,203
12,99014,445
20,91023,115
54.2%
77.0%
79.7%
78.7%
71.9%
6.9%
43.5%
55.0%
56.4%
65.1%

Environmental performance

Third-party verification report

38

Property name

D Project Machida
D Project Hachioji
D Project Urayasu II
D Project Noda
D Project Inuyama
D Project Neyagawa
D Project Tsuchiura
D Project Tosu
êêê
D Project Kuki IêêêêD Project Kuki II
D Project Fukuoka Hakozaki
D Project Kuki III
êêê
D Project Kuki IVêêêêD Project Kuki V
D Project Kuki VI
D Project Yashio
D Project Nishiyodogawa
D Project Kawagoe III
êêê
D Project Urayasu III
êêê
D Project Tomisato
D Project TatebayashiêêêD Project Kakegawa
D Project Chibakita
D Project Matsudo II
D Project Tomisato II
D Project Sendai Izumi II
D Project Kaminokawa
D Project Tosu III
D Project Kitahachioji I
D Project Kitahachioji III
D Project Itabashi Shingashi
D Project Kuki VIII
D Project Wako A
D Project Hiratsuka
êêêê
DPL Misatoêêê
DPL Fukuoka Kasuya
DPL Kitakyushu
êêêêê
DPL Nagareyama I
DPL Shin-Narashino
DPL Nagareyama III
Castalia Yoyogi UeharaêêêêêShibaura Island Bloom Tower
Castalia Tower Shinagawa Seaside
Castalia Monzennakacho IIêêêêêRoyal Parks Toyosu
Castalia Meguro Chojyamaru
Royal Parks SEASIRêêêêêRoyal Parks HanakoganeiêêêêêRoyal Parks WakabadaiêêêêêPacific Royal Court Minatomirai Urban Tower
Royal Parks Musashikosugi
Royal Parks Namba
Castalia Ningyocho III
Royal Parks Umejima
êêêê
ACROSSMALL Shinkamagaya
FOLEO Ome ImaiêêêêFOLEO Otsu Ichiriyamaêêêêêiias TsukubaSports Depo and GOLF5 Kokurahigashi IC Store
Daiwa Roynet Hotel Nagoya Shinkansenguchi
Candeo Hotels Nagasaki Shinchi ChinatownêêêNaha Shin-Toshin Center Building (Daiwa Roynet Hotel Naha-Omoromachi)
Nursery Room Berry Bear Omori Nishi Welcia Ota Omori Nishi StoreêêêêGRANODE Hiroshima
Total
20 properties

êêêê
êêêêê
êêêê
êêêêê
êêêê

êêêêê
ê
êê
êêêêê ZEB Ready
êê
êê
êêêê
ê

êêêê

êêêê
êê
êê
êêêê
êêêêê
êêêê
êêêêê ZEB Ready
êê
êê
êê
êêê
êêêê
êêêêê ZEB Ready
êêêêê
ê

êêêê
êêêêê
êêêêê

êêêêê
êêêêê
êêêêê

êêêê
êêêêê
êêêêê
êêêêê
êêêêê
êêêê
êêêêê

êêêê
êê
êêê
êêêê
êêê
êêê
êêêêê
êêê
êêêêê ZEB Readyêêêêêêêêêê ZEB Readyêêêêê ZEB Readyêêêêê ZEB Readyêêêêêêêê “ZEB”
êCertified

êê
êêêê
êêêê
êêêê

A

ê
êê
êê
ê

Certified

ê
êêêê
êê
êê
êêêê
êêêêê
êêêêê
êêêêê

êê
êêêêê
êêê
êêêê
êêê
êêêê

êêêêê
êêêêê
29 propertiesêêêêê
55 properties

1 property

1 property

1 property

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Relevant Data (2 of 2)
Personnel Data

Health Data

Item

Fiscal year ended March 2019 Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
61
60
59
64
70
43 / 70.5%
42 / 70.0%
40 / 67.8%
30 / 60.9%
45 / 64.3%
Female personnel / percentage of total
18 / 29.5%
18 / 30.0%
19 / 32.2%
25 / 39.1%
25 / 35.7%
21
22
27
28
29
Manager*1 *2
Male personnel / percentage of total
21 / 100.0%
21 / 95.5%
24 / 88.9%
23 / 82.1%
23 / 79.3%
Female personnel / percentage of total
0 / 0.0%
1 / 4.5%
3 / 11.1%
5 / 17.9%
6 / 20.7%
New hires
2
2
13*6
5*6
0
Male personnel / percentage of total
1 / 50 %2 / 100 %4 / 31 %5 / 100 %0/0%
Female personnel / percentage of total
1 / 50 %0/0%
9 / 69 %0/0%
0/0%
Job leavers
1
7
2
2
1
3
1.6%
11.7%
3.4%
3.1%
1.4%
Turnover*Monthly average overtime hours
12.0 hours
12.8 hours
13.6 hours
15.4 hours
16.5 hours
Average tenure
4.2 years
4.8 years
5.1 years
5.0 years
5.6 years
Male personnel
4.2 years
4.8 years
5.2 years
5.4 years
5.5 years
Female personnel
4.0 years
4.8 years
4.7 years
4.3 years
5.6 years
Percentage of personnel who had stress checks
100.0%
100.0%
100.0%
100.0%
100.0%
Number of employees who took parental leave / number of employees who returned to work
0/0
1/1
3/1
3/2
8/5
Male personnel
0/0
1/1
1/1
0/0
5/5
Female personnel
0/0
0/0
2/0
3/2
3/0
Return rate
0.0%
0.0%
33.3%
66.7%
62.5%
M&As
0
0
0
0
0
Employee lay offs
0
0
0
0
0
Number of employees who took elder caregiving leave
0
0
0
0
1
Number of employees aged 60 and older
0
0
1
1
2
Number of employees who are foreign nationals
0
0
0
0
0
Number of employees belonging to ethnic minorities*4
0
0
0
0
0
Number of employees with disabilities
0
0
0
0
0
Average days of annual paid vacation taken / paid vacation usage rate 12.7 days / 68.6% 12.5 days / 66.3% 13.1 days / 71.7% 13.1 days / 71.3% 13.6 days / 72.4%
Percentage of personnel who had health checkup
100.0%
100.0%
100.0%
100.0%
100.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Occupational accident frequency rate*5

Item

Total personnel*1

Male personnel / percentage of total

Item

100%

N/A

100%

Percentage of smokers

18%

10%

9%

Percentage of personnel who exercise regularly*2

29%

19%

20%

Percentage of personnel who drink alcohol responsibly*3

51%

62%

51%

Percentage of personnel who get sufficient sleep

76%

85%

77%

Item

Result (fiscal year ended March 2023)

Participation rate

Radio calisthenics

244 times

100%–

Distributing free passes to sports clubs

100 passes–¥330 thousand

Item

Fiscal year ended
March 2021
1 time0 times
0 times
0 times
0 times
0 times
5 times
5 times
18 times
10 times

Fiscal year ended
March 2022
1 time0 times
0 times
0 times
5 times
1 time4 times
4 times
1 time0 times

Item

Fiscal year ended March 2020

Fiscal year ended March 2021

Fiscal year ended March 2022

Fiscal year ended March 2023

¥3,498 million¥4,187 million¥4,500 million¥4,456 million

11.7%

3.4%

3.1%

1.4%

12.8 hours

13.6 hours

15.4 hours

16.5 hours

Sales
Turnover*1
Monthly average overtime hours*1 Turnover is the ratio of job leavers to total personnel using total personnel as of April 1 of each fiscal year.
Sales, turnover, and monthly average overtime hours were identified as data that would show the benefits of health management on corporate management. Althoughmonthly average overtime hours have gone up, sales have increased and turnover has decreased, demonstrating the benefits of the initiatives.

Data on Improvement on Health Issues
Item

Fiscal year ended
March 2020
1 time1 time1 time0 times
0 times
0 times
5 times
4 times
4 times
0 timesAmount invested

Data Showing the Benefits of Health Management on Corporate Management

Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023

Percentage of personnel withremarks on their health checkups

Fiscal year ended
March 2023
4 times
1 time4 times
6 times
7 times
2 times
4 times
2 times
9 times
9 times

63.7%

49.1%

53.4%

54.4%

The percentage of personnel with remarks on their health checkups was identified as data that would show improvement on health issues. The figure of 54.4% for the fiscal
year ending March 2023 represents a 9.3 percentage point improvement on the figure for the fiscal year ending March 2020, demonstrating the benefits of the initiatives.

Prevention of Corruption
Item

Fiscal year ended March 2019 Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023

Total political contributions (yen)

0

0

0

0

0

Number of incidents related to fraud or corruption

0

0

0

0

0

Number of dismissals or termination related to fraud or corruption

0

0

0

0

0

Costs of fines, penalties, and settlements related to fraud or corruption (yen)

0

0

0

0

0

Item

Number of the Asset Manager Employees with Qualifications (Total of 72 officers and employees as of March 31, 2023)
Number of people with qualifications*
Item
ARES (Association for Real Estate Securitization) Certified Master
33
Real Estate Transaction Agent
64
Real Estate Appraiser
2First-Class Architect
2
Certified Real Estate Consulting Master
8

100%

100%

Individual Health Management Measures

Training on Operational Expertise
Sustainability training
Training for general managers and above
Training for senior managers and group leaders
Middle-management employee training
OJT trainer training
Young employee training
Real estate market training
New employee training
Other training
Architectural training

100%

Percentage of personnel who received metabolic
syndrome-specific health guidance*1*1 Percentage of personnel who completed metabolic syndrome-specific health guidance based on the results of their regular health checkups*2 Percentage of personnel who exercise for at least 30 minutes at least twice a week for at least one year
*3 Percentage of personnel who drink less than 180 mL of alcoholic beverage (the appropriate amount) when they drink*1 Headcounts are as of April 1 of each fiscal year. *2 Senior manager and above. *3 Turnover is the ratio of job leavers to total personnel using total personnel as of April 1 of each fiscal
year. *4 Ethnic minorities, immigrants, refugees, etc. *5 Occupational accident frequency rate = (occupational injuries/fatalities ÷ total actual hours worked) × 1,000,000*6 This figure includes a new graduate hired as an employee.

Fiscal year ended
March 2019
1 time0 times
0 times
0 times
0 times
0 times
5 times
3 times
4 times
0 times

Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023

Percentage of personnel who had regular health checkups

Compliance training

Fiscal year ended March 2019 Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
8 times

9 times

12 times

12 times

12 times

Number of people with qualifications*

Office Building Manager

9

TOEIC score of 700+

9CASBEE Accredited Professional for Buildings

2

CASBEE Accredited Professional for Real Estate

4

Information Security* Includes personnel who
have passed thecredentialing exam but
are not yet credentialed.

Item
Information security training

39

Fiscal year ended March 2019 Fiscal year ended March 2020 Fiscal year ended March 2021 Fiscal year ended March 2022 Fiscal year ended March 2023
2 times

2 times

2 times

2 times

2 timeshttps://www.daiwahouse-reit.co.jp/en/

Disclaimer• This report is for informational purposes only and is not intended to solicit or endorse investment in any particular product or to serve asa recommendation to buy or sell.
• Inquire with a securities company to purchase DHR investment shares. Please be advised that any investment decisions ultimately must
be made based on your own decision and at your own responsibility.
• This report is not a disclosure document or investment report based on the Financial Instruments and Exchange Act, the Act on
Investment Trusts and Investment Corporations, or the listing rules of the Tokyo Stock Exchange.
• The data, analysis, and other information in this report are based on the results of a certain period in the past and do not guarantee
future operational results, fluctuations, etc. Furthermore, this report includes statements regarding future performance, but suchstatements do not guarantee future performance. Moreover, the value of real estate investment trusts may fall below the investment
principal due to fluctuations in the prices and profitability of the real estate under management.
• No guarantee is provided as to the accuracy or completeness of the information provided in this report. Note also that the information is
subject to change or deletion without prior notice.
• DHR and the Asset Manager accept no liability whatsoever for the results of investment actions taken based on this report.
• Copying, reproduction, etc. of the information published in this document without prior consent is prohibited.

Inquiries: Fund Management Department, Daiwa House REIT Division, Daiwa House Asset Management Co., Ltd. Tel: +81-3-3595-1265