Guidelines for Addressing Climate Change
Issue Date: August 19, 2021
Mitsui Fudosan Frontier REIT Management Inc.
1. Purpose and status of these guidelines
As one of our guidelines for implementing the individual items set out in our Sustainability Policy
issued on February 10, 2015, our Guidelines for Addressing Climate Change (hereinafter the“Guidelines”) set forth a policy for addressing climate change-related risks and opportunities as wellas initiatives concerning business and strategic resilience (both in the sense of toughness and abilityto recover) to climate-related issues. Climate change issues are a material challenge that will lead todramatic changes in the natural environment and social structure and have a significant impact on ourbusiness. Appreciating this, we will aim to carry out initiatives related to climate change based onthese Guidelines.
2. Our recognition of climate-related issues
We recognize the resilience of our business to climate change and climate-related issues as follows:• As shown in the Paris Agreement (2015), the IPCC Report (2018), and other documents, theprogression of climate change is a scientific fact. Climate change progression is expected to enlarge
climate disasters such as intensified typhoons and heavy rains, frequent heat waves and droughts,
and the progressive rise of global sea levels. In addition, as part of a concerted effort to mitigate
climate change, a global transition to socioeconomic decarbonization, such as setting a framework
for reducing greenhouse gas emissions and tightening emission regulations, is expected to continue.
In this way, the progression of climate change is a material challenge that will lead to dramaticchanges in the natural environment and social structure and have a significant impact on ourbusiness.
• Recognizing that climate change issues are a systemic risk in terms of finances, investors and otherstakeholders demand information disclosure on climate-related risks and opportunities. In particular,improving transparency through disclosure of climate-related risks in line with therecommendations of the Task Force on Climate-related Financial Disclosures (TCFD) is asignificant issue for us.
• Identifying, assessing, and managing the risks and opportunities posed by climate change andimproving business resilience are essential matters for Frontier Real Estate Investment Corporation(hereinafter “the Investment Corporation”) to secure stable profits over the medium to long term,1and to aim for stable distribution of dividends and maximization of unitholder value.
3. Basic policy and commitment concerning climate change
In light of the recognition described in the previous section, we establish the following matters as ourbasic policy and commitment concerning climate change.
(1) Basic policy• We support the international goals set out in the Paris Agreement and will work continuously to
reduce greenhouse gas emissions in order to contribute to the mitigation of climate change.
(2) Governance• We establish a governance system as follows to address climate-related risks and opportunities
associated with the Company and the Investment Corporation.
i.

The chief executive officer for climate-related issues shall be the Company’s Chief
Executive Officer (CEO) and Representative Director, who has final decision-making
authority on sustainability promotion.

ii.

The operating officer for climate-related issues shall be the Chief Investment Officer.

iii.

Based on the direction of the operating officer, the Sustainability Secretariat shall, in theSustainability Committee, report periodically to the chief executive officer for mattersrelated to climate change responses, such as identification and evaluation of the effects ofclimate change, management of risks and opportunities, progress in adaptation andmitigation initiatives, and setting of metrics and targets. After the participants in
Sustainability Committee meetings discuss and consider each agenda item, the targets shallbe decided by the CEO, who is the chief executive officer for climate-related issues, andspecific measures, etc. shall be decided through appropriate procedures according to thecontent. (See Attachment 1 for details.)(3) Strategy• We shall establish and appropriately operate processes for identifying, assessing, and managing theimpact of climate-related risks and opportunities on the Investment Corporation’s management
activities, strategies, and financial plans. In identifying and evaluating climate-related risks andopportunities, we will make use of scientific and academic insights and aim to proceedsystematically and objectively. (See Attachment 1 for details.)(4) Managing risks and opportunities• By managing identified climate-related risks and opportunities and carrying out initiatives to increase2

resilience, we will aim to reduce business risks and realize value-creation opportunities for theInvestment Corporation, secure stable earnings over the medium to long term, and to aim for stable
distribution of dividends and maximization of unitholder value. (See Attachment 1 for details.)(5) Metrics and targets• We set metrics and targets for managing climate-related risks and opportunities, and pay attention to
the compatibility of our operational strategy with overall risk management in terms of metrics. We
shall disclose the targets we have set and our achievements against those targets. (See Attachment
1 for details.)• We support the TCFD’s recommendations and disclose the Investment Corporation’s climate-related
information to investors and other stakeholders in accordance with the disclosure frameworksuggested in the recommendations. (See Attachment 2 for details.)
4. Review and revision• Approximately once a year, the Sustainability Committee reviews the content of these Guidelines,
and considers whether they are appropriate as an approach to our climate-related issues.
• These guidelines are established by the CEO’s approval, and the CEO’s approval is needed to revise
them. However, minor changes to the contents and changes to the attachments shall be made byapproval of the Chief Finance Officer.

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Attachment 1: Internal processes for identifying, assessing, and managing climate-related risks andopportunities
We establish the following processes for identifying, assessing, and managing the impact of climaterelated risks and opportunities on the Investment Corporation’s management activities, strategies, andfinancial planning:
1. Strategies: Process for identifying and assessing climate-related risks and opportunities(1) Approximately once a year, the operating officer for climate change responses shall, in theSustainability Committee, instruct the Sustainability Secretariat to identify and assess climaterelated risks pertaining to the Company and the Investment Corporation.
(2) The Sustainability Secretariat shall identify the existence of related risks and opportunities basedon the following framework:i.

Transition risks: Impact on business of transitioning society and the economy to low
carbon and carbon-freea)

Policy and regulatory risks: Risks such as regulatory tightening by promoting
decarbonization through policyb)

Technology risks: Risks from new low-carbon and decarbonization technologies andtheir mainstreamingc)

Market risks: Risks related to the market, such as fluctuations in energy prices andchanges in service demandd)

Reputational risks: Risks from negative changes in reputation from stakeholders suchas customers, the public, employees, and investorsii.

Physical risks: Impact on business caused by changes to traditional climate patterns andphenomena as climate change progressesa)

Acute physical risks: Risks caused by events, such as typhoons or floodsb)

Chronic physical risks: Risks stemming from long-term shifts in climate patterns,
such as prolonged high and low temperatures(3) In identifying these risks, we will consider what risks arise in each scenario, using the following
two scenarios.
i.

Transition to a decarbonized society scenario (2°C or lower than 2°C scenario / 1.5°Cscenario): Scenario in which social policies and emission regulations for decarbonization,technology investment, and other initiatives advance more than now toward the4achievement of the Paris Agreement’s goals. To more specifically consider this scenario,
we will refer to the following existing external scenarios:• CRREM 2°C and CRREM 1.5°C• International Energy Agency (IEA) Sustainable Development Scenario (SDS) andBeyond 2 Degrees Scenario (B2DS)
ii.

Physical climate change progression scenario (4°C scenario): Scenario in which thephysical risks from climate disasters increase significantly as GHG emissions continue toincrease because sufficient climate change mitigation measures are not taken. To more
specifically consider this scenario, we will refer to the following existing externalscenarios:• RCP8.5 scenario by the IPCC (average increase of 3.7°C)(4) In identifying risks, we will attempt to assess the time axis (timing and duration ofmanifestation), degree of confidence (possibility of risk manifestation), and impact (financialimpact on the business of the Company and the Investment Corporation) for each risk andscenario to the extent possible.
(5) In the process of identifying risks, if themes or elements that may be business opportunities for
the Company and the Investment Corporation are identified, they shall be recorded as climaterelated opportunities separately from risks, and the realization of such themes or elements will beexamined. If possible, we will also assess the financial impact, achievability, return on
investment, etc. of any opportunities in each of the above scenarios.
(6) The Sustainability Secretariat shall regularly report the progress and results of risk identification
to the Sustainability Committee.
(7) The Sustainability Committee shall take the climate-related risks identified by the Sustainability
Secretariate, discuss the climate-related risks to prioritize based on the results of theexaminations into their level of confidence and impact, and prioritize risk management
responses.
(8) If the Sustainability Secretariat also reports on climate-related opportunities, they shall also be
discussed and prioritized in business strategies.
2. Managing risks and opportunities: Process for managing climate-related risks and opportunities

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We will establish a management process as follows for the primary factors of important climate-relatedrisks and opportunities that we have decided to prioritize based on the process set forth in the preceding
section, and will work to reduce risks and realize opportunities.
(1) The chief executive officer for climate-related issues shall designate the department(s) orperson(s) to handle the climate-related risks and opportunities that are of high priority in businessand financial planning, as discussed by the Sustainability Committee, and shall direct theformulation of measure proposals.
(2) The proposed measures formulated by the designated department(s) or person(s) shall bedeliberated and implemented through appropriate procedures according to their content.
(3) The chief executive officer for climate-related issues shall instruct regarding consideration ofclimate-related risks that are important for business and financial planning within existing
company-wide risk management programs, and shall integrate the risk identification, assessment,and management processes.
3. Metrics and targets: Metrics and targets used in the process of managing risks and opportunities(1) In our efforts to reduce risks and realize opportunities, we shall define key performanceindicators (KPIs) where possible and conduct monitoring and set targets for their management.
(2) Since GHG emissions from the portfolio and emissions intensity are important metrics for thereal estate sector, Scope 1, 2, and 3 emissions shall be monitored in accordance with guidelines
for reducing CO2 emissions, etc., and efforts shall be made for their continuous reduction.
(3) The Sustainability Secretariat shall compile a report on the progress of each initiative and KPI atleast once a year and submit it to the Sustainability Committee.

6Attachment 2: Matters related to disclosure of climate-related information
In order to fulfill our accountability to unitholders and other stakeholders as an organization
supporting the TCFD recommendations and as the trust asset management company of a listed
investment corporation, the Company will disclose climate-related information pertaining to theInvestment Corporation through the following media, methods, etc.
・ Voluntary sustainability-related disclosure materials, such as the website of the Company andthe Investment Corporation and ESG reports
・ Disclosure materials related to the financial results of the investment fund, such as financial
results briefing materials and voluntary disclosure pages for asset management reports
・ Statutory disclosure materials such as securities reports and prospectuses
・ Reports on climate-related questions in GRESB assessments
In putting the above into practice, it is assumed that the content of disclosures will be tailored to thecharacteristics of each medium, but in principle, we will strive to report the information throughcontent consistent with the disclosure framework suggested in the TCFD recommendations.
The disclosure framework in the TCFD recommendations is as follows.
Governance

Strategy

Risk Management

Metrics and Targets

Disclose the organization’s
governance around climaterelated risks andopportunities.

Disclose the actual andpotential impacts of climaterelated risks andopportunities on theorganization’s business,strategy, and financial
planning where suchinformation is material.
Recommended Disclosuresa) Describe the climaterelated risks andopportunities theorganization has identified
over the short, medium, andlong term.
b) Describe the impact ofclimate-related risks andopportunities on theorganization’s business,strategy, and financialplanning.
c) Describe the resilience ofthe organization’s strategy,taking into considerationdifferent climate-related
scenarios, including a 2°C orlower scenario.

Disclose how theorganization identifies,
assesses, and manages
climate-related risks.

Disclose the metrics andtargets used to assess andmanage relevant climaterelated risks andopportunities where suchinformation is material.

Recommended Disclosuresa) Describe the organization’s
processes for identifying andassessing climate-relatedrisks.

Recommended Disclosuresa) Disclose the metrics usedby the organization to assessclimate-related risks andopportunities in line with its
strategy and risk
management process.
b) Discourse Scope 1, Scope2, and, if appropriate, Scope
3 greenhouse gas (GHG)
emissions, and related risks.

Recommended Disclosuresa) Describe the board’s
oversight of climate-relatedrisks and opportunities.

b) Describe management’s
role in assessing andmanaging climate-relatedrisks and opportunities.

b) Describe theorganization’s processes for
managing climate-relatedrisks.
c) Describe how processes
for identifying, assessing,and managing climate-relatedrisks are integrated into theorganization’s overall risk
management.

(Source: Final Report of the Task Force on Climate-related Financial Disclosures)

7c) Describe the targets usedby the organization tomanage climate-related risks
and opportunities andperformance against targets.