Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond
Evaluation Summary
Sustainalytics is of the opinion that the Daiwa Securities Group Inc. Green Bond
Framework is credible and impactful, and aligns with the four core components of theGreen Bond Principles 2018. This assessment is based on the following:
The eligible categories for the use of proceeds, 1)
Renewable Energy and 2) Green Buildings, are aligned with thoserecognized by the Green Bond Principles 2018. Sustainalytics
considers that the eligible projects will contribute toward increasing
renewable energy production and climate targets, and advancing the
UN Sustainable Development Goals 7 and 11.
The eligible projects will beselected by several teams at Daiwa Securities Group including
Treasury Department, Corporate Planning Department composed of
the Group Management Section and SDGs Office, and for the case of
projects carried out by its affiliates, Daiwa Energy & Infrastructure Co.
Ltd. and Daiwa Property Co., Ltd. The final decision will be made by
the Chief Financial Officer. Sustainalytics views the C-suite
involvement as in line with market best practice.
Daiwa Securities Group’s process for
management of proceeds is in line with market standard, consideringthat it tracks the amount of allocated and unallocated proceeds byusing a separate ledger.
Daiwa Securities Group has committed to allocation
reporting and impact reporting on an annual basis via its Integrated
Report or corporate website. The allocation reporting will include
description of projects, amounts of allocated and unallocatedproceeds, and expected timeline for allocation. In addition, for impact
reporting, Daiwa Securities Group intends to report quantitative andqualitative indicators, such as, the amount of power generated andCO2 emissions reduced for renewable energy projects, and CO2
emission, waste and Energy consumption, recycle rate, in addition to
the level of certification for green building projects. This is in line withmarket practice.

Alignment with Japan’s Green Bond Guidelines 2017
Sustainalytics is of the opinion that the Daiwa Securities Group Green Bond Framework
is in line with Japan’s Green Bond Guidelines, which communicate processes andrecommendations for credible green bond issuance.

© Sustainalytics 2018

Evaluation date

25 October 2018

Issuer Location

Tokyo, Japan

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

For inquires, contact the Sustainable
Finance Solutions project team:
Wakako Mizuta (Tokyo)
Project Manager
wakako.mizuta@sustainalytics.com(+81) 3 4510 7979
Victor Prunar (Timisoara)
Project Support
victor.prunar@sustainalytics.com(+4) 035 608 9978

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Introduction
Daiwa Securities Group Inc. (Daiwa Securities Group) has developed the Daiwa Securities Group Green Bond
Framework (the “framework”) under which it is considering to issue multiple green bonds and use theproceeds to finance/refinance expenditures related to renewable energy and green buildings.
Daiwa Securities Group engaged Sustainalytics to review the Daiwa Securities Group Green Bond and provide
a second-party opinion on the alignment of the green bond framework’s environmental credentials with theGreen Bond Principles 2018 (the “GBP”), as administered by the International Capital Market Association (the“ICMA”),1 in addition to alignment with Japan’s Green Bond Guidelines 2017, established by the Japanese
Ministry of Environment.
As part of this engagement, Sustainalytics held conversations with various members of Daiwa Securities
Group’s Treasury Department, Corporate Planning Department and SDGs Promotion Office to understand thesustainability impact of their business processes and planned use of proceeds, as well as management ofproceeds and reporting aspects of Daiwa Securities Group’s green bond. Sustainalytics also reviewed relevantpublic documents and non-public information.
This document contains two sections: Framework Overview – summary of the Daiwa Securities Group Green
Bond; and Sustainalytics’ Opinion – an opinion on the framework.

Overview of Issuer
Headquartered in Tokyo, Daiwa Securities Group, founded in 1902, is one of the leading, comprehensive
financial service firms in Asia. The group operates across Japan, America, Europe and Asia, with four
primary areas of focus including Retail, Global Markets, Global Investment Banking, Asset Management, andInvestment. At the group level, it provides a broad range of services to various clients including individual
investors, corporate and institutional investors.
Daiwa Securities Group states that its mission is to contribute to the development of society and theeconomy through daily operations, including wealth management for investors and public institutions, anddeepening the bond with its stakeholders, including customers, shareholders, employees, and society, isessential to sustainable growth together with society. 2 In accordance with its mission, the group has set out
Corporate Principles to achieve sustainable society, and laid out the following two areas of key CSR focus: 3
1.
2.

Leveraging Financial capabilities to contribute to a sustainable society
Developing sound financial and capital markets for the next generation

Based on these key issues, the group has identified 15 areas of CSR materiality which includes
environmental initiatives such as reduction of environmental load and responses to environmental
changes.4 Additionally, as part of its management policy, the group has established ‘Passion for SDGs
2018’5 to demonstrate a commitment to and contribute to the achievement of SDGs. Daiwa Securities Groupis a signatory of United Nations Global Compact.
In order to incorporate its mission and environmental initiatives into its sustainability practices, the group isplanning to issue green bonds as a public offering in the domestic market from 2018, to finance/refinancesome of its expenditures related renewable energy and green buildings.

1

ICMA’s Green Bond Principles 2018: https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/

2 Daiwa Securities Group, Daiwa Securities Group Corporation Principles and Key Issues: http://www.daiwa-grp.jp/english/csr/materiality/index.html

3

Daiwa Securities Group, Daiwa Securities Group Corporation Principles and Key Issues: http://www.daiwa-grp.jp/english/csr/materiality/index.html
Daiwa Securities Group, CSR Report 2017: http://www.daiwa-grp.jp/english/pdf/2017_Sustainability_Report/daiwa_csr_2017_e.pdf
5Daiwa Securities Group, Passion for SDGs 2018: http://www.daiwa-grp.jp/corporate/corporate_04_02.html (Japanese)
42

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Framework Overview
For the purpose of issuing multiple green bonds, Daiwa Securities Group has developed the following
framework which addresses the four core components of the Green Bond Principles (GBP): use of proceeds,
project evaluation and selection process, management of proceeds, and reporting as well as Japan’s Green
Bond Guideline 2017. The framework belongs to Daiwa Securities Group, and a summary overview has been
provided below.

Use of Proceeds
The proceeds of the green bond will be allocated towards financing and/or refinancing projects that meet one
or more of the following categories of eligibility as recognized in the Green Bond Principles 2018 by theInternational Capital Market Association (ICMA) and Japan’s Green Bond Guidelines 2017.
Eligibility Criteria
1.

RENEWABLE ENERGY

Investment and lending through Daiwa Energy & Infrastructure Co. Ltd. (DEI) 6 for renewable energy
generation projects that meet the following criteria:••

Expenditures are associated with the development, construction and operation of renewable energy
generation projects (including those carried out by its affiliates). The eligible projects include solar
photovoltaic power, wind-power, geothermal power, hydroelectric power (excluding large hydro withmore than 20 MW capacity), biomass power (limited to projects with waste sources).
For refinanced projects, the projects must be funded within the 24 months prior to the date of green
bond issuance.

Context:
Special purpose vehicles (SPV) will be established for each renewable energy generation project and DEI will
invest or lend to each SPV, restricting the use of proceeds only for renewable energy related expenditure
outlined above.
2.

GREEN BUILDINGS

Expenditures related to the construction of green buildings as well as refurbishment to convert existingbuildings into green buildings by Daiwa Securities Group and/or Daiwa Property Co.,Ltd. 7. The green
buildings should meet the following criteria:•

Buildings that have received top three evaluations by credible third-party certifications within the 24months preceding the date of a green bond issuance and/or buildings that are expected to receive
the certification post issuance:-

3,4 or 5 Stars under the DBJ Green Building Certification
B+, A or S Rank under CASBEE

Project Evaluation and Selection Process
Application of Eligibility and Exclusionary Criteria in Project Selection
The selection of the green projects will be determined through the following procedures;

6 Daiwa Energy & Infrastructure Co. Ltd. is wholly owned by Daiwa Capital Holdings Co., Ltd, which is wholly owned by Daiwa Securities Group Inc.:
http://www.daiwa-grp.jp/data/attach/2541_98_en20180730a.pdf
7 Daiwa Property Co.,Ltd is wholly owned by Daiwa Securities Group Inc.: http://www.daiwa-property.co.jp/ (Japanese)3

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

1)
2)

3)

Daiwa Securities Group’s Treasury Department will evaluate and select project candidates inaccordance with eligibility criteria,
Daiwa Securities Group’s Corporate Planning Department which consists of the GroupManagement Section that manages and plans for the group’s subsidiaries and SDGs Promotion
Office that plans and promotes Daiwa's SDGs and CSR activities, will check and confirm that
selected candidates for green projects are appropriate and eligible considering the above defined
criteria. For the case of projects carried out by its affiliates, the projects will be also assessed toverify eligibility by Daiwa Energy & Infrastructure Co. Ltd. and Daiwa Property Co.,Ltd. respectively
for renewable energy generation projects and green buildings projects.
The final confirmation will be made by the Chief Financial Officer based on the selected eligible
projects.

Environmental Objectives
Daiwa Securities Group has set out Environmental Principles and Basic Environmental Policies as its action
guideline while stating that the group pledges to solving environmental issues through its business as afinancial service company. 8 Additionally, the group launched the SDGs Promotion Committee chaired by
Seiji Nakata, President and CEO of Daiwa Securities Group Inc., in February 2018 with the commitment
toward achieving SDGs especially in the theme of “Finance”, “Technology”, “Local Community”, and “Life”. 9
Furthermore, in addition to the traditional securities business, Daiwa Securities Group, as “Integrated
Securities Group with Hybrid Business Model”, is committed to promoting new businesses contributing to
the sustainable environment. As part of the commitments, the group has established “Daiwa Energy &Infrastructure Co. Ltd.” in July 2018 in order to reduce CO2 emissions and promote sustainable energy
through investment in renewable energies. 10 In line with its commitments, Daiwa Securities Group views thefinancing of renewable energy and green buildings projects as helping to advance its environmental
initiatives.

Process to Mitigate Environmental and Social Risks
For renewable energy projects, based on its Environmental Policies, Daiwa Securities Group has an internal
due diligence process to assess financial and non-financial risks, including environmental and social risks,
and to confirm the validity of projects. The group conducts due diligence on the environmental and social
risks, and based on the assessment, the investment committee of Daiwa Energy & Infrastructure Co. Ltd. will
make a final decision on the investment. Evaluation of the projects, risk recognition and prevention
measures are discussed by and representatives from risk management, compliance, and legal section
teams. As part of the process, Daiwa Securities Group, by the contract, checks and ensures that 1) investees(power producers) have undertaken the environmental impact assessments on the facility to be funded, in
accordance with laws and regulations such as the Japan's Feed-in Tariff (FIT) System for Renewable
Energy11 and guidelines to formulate business plans for each renewable energy projects established by
Agency for Natural Resources and Energy of METI, and 2) investees comply with laws and regulations inaccordance with FIT System and such as Japan’s Forest Act in case of domestic projects, and with otherrelevant local laws and regulations in case of international projects. Additionally, DEI’s risk management
team will monitor each project during the investment period. DEI holds meetings concerning risk
management including environmental and social matters once a month and, if there are large projects or
problematic projects, scrutinize such projects in order to identify and mitigate problems and establish
counter measures. For green buildings project, Daiwa Securities Group selects all eligible green buildings
based on a clear set of external third-party green building certifications (CABSEE and DBJ Green Building
Certification etc.) in which environmental and social risks have been already contemplated.

8 Daiwa Securities Group, CSR Report 2017: http://www.daiwa-grp.jp/english/pdf/2017_Sustainability_Report/daiwa_csr_2017_e.pdf

9Daiwa Securities Group, FY2018 Management Strategy: http://www.daiwa-grp.jp/data/attach/2497_2018-E-Management_Strategy_Meeting.pdf
Daiwa Securities Group, Establishment of Daiwa Energy & Infrastructure Co. Ltd. (DEI): http://www.daiwagrp.jp/data/attach/2541_98_en20180730a.pdf
11Agency for Natural Resources and Energy, Japan's Feed-in Tariff (FIT) System for Renewable Energy:
http://www.enecho.meti.go.jp/category/saving_and_new/saiene/kaitori/surcharge.html
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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green BondManagement of Proceeds
The management and allocation of proceeds will be executed by the Treasury Department. The Treasury
Department will use a separate ledger and track budgets and actual spending for eligible green projects
through reporting from subsidiaries or departments which are allocated as proceeds on a quarterly basis.
Unallocated proceeds will be credited to a subaccount that is financially separate from other generalaccounts to be tracked appropriately and actual spend for eligible green projects will be monitored by using
a separate ledger. Pending allocation to finance eligible green projects, the amount equal to the balance ofthe proceeds will be temporally invested in cash and/or cash equivalents.

Reporting
Allocation and Impact Reporting
Throughout the term of the green bond, Daiwa Securities Group will report annually on allocation ofproceeds in its Integrated Report or corporate website, until the proceeds are fully allocated to eligible green
projects. The group will also update the report in case where material changes.
Allocation reporting will include the following information on an individual project basis:••••

Description of projects
Amount allocated (in case of expected use of proceeds, expected allocation amount)
Whether each project is being refinanced or financed
Amount of unallocated proceeds, expected timing to disburse, and intended types of temporary
placement

Impact reporting will include the following indicators on an individual project basis, and Daiwa Securities
Group plans to disclose calculation for the indicators where possible:•
Renewable Energy•

CO2 emissions reduced by the eligible
green projects (theoretical value)
Amount of power generated by the eligible
green projects (theoretical value based on
output standard)•

During construction, application progress
on Real Estate Certification•

After construction, the following
environmental impact metrics:
Energy consumption (J/kl)
Energy consumption by use (%)
CO2 emission (t)Water consumption (㎥)Waste generated (kg)
Recycle rate (%)
Level of certifications

Green Buildings

5

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Sustainalytics’ Opinion
Section 1: Sustainalytics’ Opinion on the Daiwa Securities Inc Green Bond
Framework
Summary
Sustainalytics is of the opinion that the Daiwa Securities Group Green Bond Framework is credible andimpactful, and it aligns with the four core components of the Green Bond Principles 2018 and with Japan’sGreen Bond Guidelines 2017. Sustainalytics highlights the following elements of Daiwa Securities Group’s
Green Bond Framework:
Use of Proceeds
o The eligible use of proceeds categories, 1) Renewable Energy and 2) Green Buildings, are recognizedby the Green Bond Principles as project categories having positive environmental benefits.
o Under the renewable energy category, Daiwa Securities intends to allocate the proceeds intodevelopment, construction and operation of renewable energy generation projects. Sustainalytics
recognizes that CAPEX such as development and construction is generally preferred by investors forfunding the projects, however, it also believes that, given the nature to the eligible projects, OPEX will
be important to maintain renewable energy projects and to sustain positive environmental impacts.
o Daiwa Securities Group is committed to financing hydroelectric power limited to the projects withlower than 20MW and biomass power limited to projects with waste sources. Sustainalytics
considers this is in line with market standard.
o The eligibility criterion of Daiwa Securities Group’s certified buildings is based on regional standards
such as DBJ Green Building Certification and CASBEE. Sustainalytics views the buildings meetingsuch certification standards as having a positive impact (see Appendix 1 for additional details on thecertification schemes). Sustainalytics also considers that financing buildings which meet the top twolevels of certification may be preferred by investors and is market best practice while the inclusion ofa third level of certification still creates positive environmental positive impact.
Project Evaluation and Selection:o The selection of eligible projects will be completed by several teams at Daiwa Securities Group
including the Treasury Department, and Corporate Planning Department composed of the GroupManagement Section and SDGs Office. For the case of projects carried out by its affiliates, theprojects will be also assessed to verify compliance with the eligibility criteria by the group’s wholly
owned subsidiaries, Daiwa Energy & Infrastructure Co. Ltd for renewable energy projects and Daiwa
Property Co., Ltd for green buildings projects. This is in line with market standard.
o The final selection will be made by the group’s Chief Financial Officer. Sustainalytics views the C-suit
involvement as in line with market best practice.
Management of Proceeds:o Daiwa Securities Group’s process for management of proceeds is in line with market standard,considering that it tracks the amount of allocated and unallocated proceeds by using a separate
ledger.
Reporting:o Daiwa Securities Group has committed to allocation reporting and impact reporting on an annual
basis, disclosed via its Integrated Report or corporate website, which is in line with market standard.
o The allocation reporting will include description of projects, amounts of allocated and unallocatedproceeds, and expected timing for allocation. In addition, for impact reporting, Daiwa Securities Groupintends to report quantitative and qualitative indicators, such as the amount of power generated andCO2 emissions reduced for renewable energy projects, and CO2 emissions, waste and energy
consumption, recycle rate, in addition to the level of certification for green building projects.
Sustainalytics considers reporting on this information and KPIs as market practice.

Alignment with Green Bond Principles 20186

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Sustainalytics has determined that the Daiwa Securities Group Green Bond Framework aligns with the four
core components of the ICMA Green Bond Principles 2018. For detailed information please refer to Appendix
2: Green Bond/Green Bond Programme External Review Form.
Alignment with Japan’s Green Bond Guidelines 2017
Sustainalytics has also assessed and determined the alignment between the Daiwa Securities Group Green
Bond Framework and Japan’s Green Bond Guidelines, which communicate processes and recommendations
for credible green bond issuance.

ICMA Green Bond Principles 2018 andJapan’s Green Bond Guidelines, 201712

Alignment with
GBP and withJapan’s Green
Bond Guidelines?

1. Use of Proceeds

Yes

Daiwa Securities Group’ eligibility criteria,
renewable energy and green (energy
efficient) buildings, are recognized as
projects with clear environmental
benefits in the Japanese green bondguidelines. Additionally, the informationon the green bond proceeds, green
project categories as well as the process
to mitigate negative impacts are all
described in the framework for investors.

2. Process for Project Evaluation and
Selection

Yes

Daiwa Securities Group outlines
Environmental Principles and Basic
Environmental Policies as its action
guidelines for solving environmental
issues that it can take as a financial
institution. Furthermore, Daiwa
Securities Group ensures that projects
are aligned with the criteria for eligible
green projects by evaluating andselecting them by the Corporate
Planning Department and Treasury
Department. Additionally, Eligible
Projects will be selected based on
eligibility criteria aligned with theabovementioned DBJ Green Building
Certification and CASBEE levels (forgreen building projects) and relevant
local laws and regulations, such as theJapan's Feed-in Tariff (FIT) System for
Renewable Energy, guidelines toformulate business plans for eachrenewable energy projects establishedby Agency for Natural Resources andEnergy of METI, Japan’s Forest Act,
coupled with environmental impact
assessments (for renewable energy
projects).

3. Management of Proceeds

Yes

Daiwa Securities Group’ framework
clearly explains that the use of proceeds
will be tracked and managed by the

Sustainalytics’ comments on alignment
with Japan’s Green Bond Guidelines

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

7Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Treasury Department using a separate
ledger and that unallocated proceeds willbe credited to a financially separate
subaccount. Additionally, it explains thatthe amount of unallocated proceeds will
be temporally invested in cash and/or
cash equivalents.
4. Reporting

Yes

Daiwa Securities will report relevant
information annually via its Integrated
Report or corporate website andincludes, among others, a description ofprojects, amount of allocated andunallocated proceeds, information on
unallocated proceeds, as well as KPIs on
the environmental impact of the
projects.

Section 2: Sustainability Strategy of the Issuer
Contribution of framework to issuer’s sustainability strategy and past performance
In line with one of its CSR key pillars of “protecting the precious global environment and preserving it for future
generations by leveraging financial capabilities”, Daiwa Securities Group outlines the following fiveenvironmental policies: (i) to make positive environmental contributions through our core business activities,(ii) implement an environmental management system, (iii) take steps to save natural resources, reduce energy
consumption, and promote a biodiversity system, (iv) promote environmental communication, and (v) strictly
observe environmental regulations. 13 In addition, in February 2018, Daiwa launched the SDG Promotion
Committee, with the President and CEO of the group, as the chairperson, demonstrating Daiwa’s commitment
towards supporting the SDGs.14 Daiwa Securities Group also established a subsidiary called Daiwa Energy &Infrastructure Co. Ltd. under its “integrated securities group with hybrid business model” to reduce CO 2
emissions and provide sustainable energy by investing in renewable energy. 15 , which is indicative of thepriority the company assigns to achieving results.
After reviewing Daiwa’s CSR and environmental policies, as well as environmental initiatives, Sustainalytics
considers Daiwa Securities Group’s issuance of green bonds to be aligned with the company’s sustainability
commitments.
Well positioned to address common environmental and social risks associated with the projects
Based on the use of proceeds, the main ESG risks related to the projects financed are mainly related tolargescale renewable energy infrastructure projects, as well as occupational health and safety for construction
work. Sustainalytics is of the opinion that Daiwa Securities Group is well positioned to mitigate environmental
and social risks related to the use of proceeds as follows:•

Daiwa Securities Group has recognized (i) reduction of environmental load and responses toenvironmental changes, (ii) initiatives to address social concerns and contribute to future
development of society, and financial and capital markets, (iii) contribution to local communities and(iv) appropriate risk controls as material issues in its CSR Report. Its company-wide risk management
is under the supervision of the Group Risk Management Committee, which reports directly to the

13 Daiwa CSR Report 2017 available at: http://www.daiwa-grp.jp/english/pdf/2017_Sustainability_Report/daiwa_csr_2017_e.pdf
14 Daiwa FY2018 Management Strategy: http://www.daiwa-grp.jp/data/attach/2497_2018-E-Management_Strategy_Meeting.pdf
15

Establishment of Daiwa Energy & Infrastructure Co. Ltd. (DEI) press release: http://www.daiwa-grp.jp/data/attach/2541_98_en20180730a.pdf
8

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Executive Management Committee and follows the Tokyo Stock Exchange’s Corporate Governance•••

Code and the Core Labor Standards of the International Labor Organization .16
Daiwa Securities also commits to respecting the UN Global Compact principles, being a member
since 2010, 17 and is part of other international initiatives, such as the United Nations Guiding
Principles on Business and Human Rights, ISO26000, and The Charter of Corporate Behavior of the
Nippon Keidanren,18 which provide clear guidelines on environmental and social issues.
For renewable energy projects, Daiwa Securities Group’s investees (power producers) arecontractually obliged to confirm that they conduct environmental impact assessments whererequired by the laws and regulations, and relevant local laws and regulations.
For green buildings projects, Daiwa Securities Group will select the eligible projects based on thethird-party programs such as DBJ green building certification and CASBEE (Please see Appendix 1
for details).

Section 3: Impact of Use of Proceeds
Importance of renewable energy generation and green buildings in Japan
Around 30% of Japan’s total electricity generation was being produced from nuclear energy plants before the
Fukushima-Daiichi nuclear disaster from 2011. 19 However, as a consequence of the nuclear accident, theJapanese government has issued a nation-wide shutdown of its nuclear power plants, opening less than aquarter of its total operable reactors since then. Following the closure of nuclear energy generating facilities,
Japan enacted its Fourth Strategic Energy Plan in 2014, 20 which identified safety as a main objective of its
energy policy, alongside other elements such as energy efficiency, energy security, environmental protection
and promoting the spread of renewable energy production. This strategy was later confirmed in Japan’s Fifth
Strategic Energy Plan in 2018, 21 highlighting renewable energy generation as the main method of reaching its
climate-related goals, such as reducing its GHG emissions by 26% by 2030 and by 80% by 2050. 22 Thus, Japanplans to increase its share of renewable energy production from 10% in 2010 to 22-24% by 2030, 23 along with
reducing the nuclear power usage from 28% to 20-22%. 24 Sustainalytics holds a positive view of Daiwa
Securities’ financing of renewable projects given its alignment with Japan’s strategy of supporting clean
energy production and its climate targets.
Regarding energy efficiency, as Japan’s building sector accounts for around a third of the country’s energy
consumption, 25 the Building Energy Efficiency Act from 2015 stipulates the importance of measure that
reduce the energy consumption of buildings. 26 Moreover, the Japanese Central Environment Council
estimated that in order to promote low-carbon investments such as energy efficient buildings, an additional
JPY 135 to JPY 163 trillion is required. 27 Sustainalytics has a positive opinion of Daiwa Securities Group’financial investments in certified green buildings with average and above-average ratings, which contributes
to Japan’s low-carbon efforts and goals.
Alignment with/contribution to SDGs
16 Daiwa Securities CSR Report 2017; http://www.daiwa-grp.jp/english/pdf/2017_Sustainability_Report/daiwa_csr_2017_e.pdf
17 UN Global Compact; https://www.unglobalcompact.org/what-is-gc/participants/10978
18 Daiwa Securities CSR Report 2017; http://www.daiwa-grp.jp/english/pdf/2017_Sustainability_Report/daiwa_csr_2017_e.pdf
19 Nuclear Power in Japan, World Nuclear Association; http://www.world-nuclear.org/information-library/country-profiles/countries-g-n/japan-nuclearpower.aspx
20 Japan’s Fourth Strategic Energy Plan issued in April 2014 available at:
http://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/4th_strategic_energy_plan.pdf
21 Japan’s Fifth Strategic Energy Plan available at: http://www.meti.go.jp/english/press/2018/pdf/0703_002c.pdf
22 Long-term Low-carbon Vision available at: http://www.env.go.jp/earth/report/h30-01/ref02.pdf
23
Japan’s Energy, Ministry of Economy, Trade and Industry Agency for Natural Resources and Energy:
http://www.enecho.meti.go.jp/en/category/brochures/pdf/japan_energy_2016.pdf
24 Long-term Energy Supply and Demand Outlook, Ministry of Economy, Trade and Industry:
http://www.meti.go.jp/english/press/2015/pdf/0716_01a.pdf
25 Excerpt from the study Energy Consumption and Mitigation Technologies of the Building Sector in Japan available at:
http://www.inive.org/members_area/medias/pdf/Inive%5CIAQVEC2007%5CMurakami_2.pdf
26 The act provides regulatory measures to ensure compliance with energy efficiency standards for large-scale non-residential buildings, and encourages
the use of green building certification systems, such as CASBEE. Overview of the Act on the improvement of Energy Consumption Performance of
Buildings (Building Energy Efficiency Act), Ministry of Land
27 Summary of Environmental Finance Programs in Japan available at: https://www.env.go.jp/en/policy/economy/efp/summary_EFP.pdf
9

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green BondThe Sustainable Development Goals (SDGs) were set in September 2015 and form an agenda for achieving
sustainable development by the year 2030. This green bond advances the following SDG goals and targets:
Use of Proceeds
Category
Renewable Energy
Green Buildings

SDG

SDG target

7. Affordable and Clean
Energy11. Sustainable Cities
and Communities

7.2 By 2030, increase substantially the share of
renewable energy in the global energy mix
11.6 By 2030, reduce the adverse per capita
environmental impact of cities, including by paying
special attention to air quality and municipal andother waste management

Conclusion
Daiwa Securities Group has developed its green bond framework though which it intends to issue green
bonds to finance and refinance renewable energy such as solar photovoltaic power, wind-power, geothermal
power, hydroelectric power and biomass power, and green buildings.
In Sustainalytics’ opinion, the environmental impact facilitated by Daiwa Securities Group ’s investment andlending to renewable energy and green buildings will contribute to advancing its environmental initiatives aswell as Japanese government’s CO2 emission reduction strategy and Sustainable Development Goals in thecontext of Japan.
Sustainalytics also views the Daiwa Securities Group’s green bond has a transparent project selection,
management of proceeds, and reporting process.
Overall, Sustainalytics is of the opinion that Daiwa Securities Group ’s Green Bond Framework aligns with the
ICMA’s Green Bond Principles 2018 and Japan’s Green Bond Guidelines 2017. The framework is consideredrobust, credible and transparent, and Daiwa Securities Group is considered well positioned to issue green
bonds.

10

Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Appendices
Appendix 1: Overview and Comparison of Green Building Certification Schemes

Background

Certification levels

DBJ Green Building Certification
Program28 29
DBJ Green Building Certification
Programme was launched by
Development Bank of Japan in 2011
and is operated together with Japan
Real Estate Institute (JREI). The
programme is recognized as one ofregional standards.31 The certification
is available for office buildings,
logistics, residential & retail facilities.

1 Star (Properties with satisfactory
environmental & social awareness)
2 Stars (Properties with highenvironmental & social awareness)

CASBEE Certification Rank30
CASBEE (Comprehensive
Assessment System for Built
Environment Efficiency) represents
a green building management
system from Japan, evaluating andrating the environmental
performance of buildings and thebuilt environment. CASBEE isformed of four assessment tools
tailored to different scales: housing,building, district and city.
C (Poor)B- (Slightly Poor)
B+ (Good)A (Very Good)S (Excellent)

3 Stars (Properties with excellent
environmental and social awareness)
4 Stars (Properties with exceptionallyhigh environmental & social awareness)

Areas of Assessment:
Environmental ProjectManagement

Areas of Assessment:
Environmental
Performance of the
Building

5 Stars (Properties with the best classenvironmental & social awareness)
Evaluation of DBJ Green Building
Certification includes construction
specifications, environmental features
as well as the following factors:- Disaster-prevention and anticrime
measures;- Tenants’ comfort and convenience;- Harmony with the surrounding
environment; - Collaboration withstakeholders (including tenants andinvestors); and - Environmental Investor
Relations activities.
Assessment include three areas withsome examples of following
subcategories:

CASBEE assesses two main factors:
inside and outside the building site,which translate into Q (Built
Environment Quality) and,
respectively, L (Built Environment
Load).

• Energy Efficiency• Resource efficiency• Local environment• Indoor environment

Ecology• Energy conservation• Water resources conservation• 3R (Reduce, Reuse and Recycle)

28 Certification Overview, Development Bank of Japan; http://www.dbj.jp/en/service/finance/g_building/outline.html
29 DBJ Green Building Certification (Japanese), Development Bank of Japan; http://www.dbj.jp/service/finance/g_building/outline.html
30 CASBEE, BASBEE; http://www.ibec.or.jp/CASBEE/english/
31 Japan sharpens its green building focus, Read Views; https://www.jllrealviews.com/places/japan-sharpens-its-green-building-focus/

11Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

• Use of renewable energy
Risk management & amenities/diversity• Security & Safety of tenant users• Convenience of tenant users
Community & partnership• Landscape• Biodiversity • Relation with the local
community • Owner & stakeholder
relationship
Requirements

Score-based performance level
Assessment structure composed of thefollowing three pillars:
1. Areas of assessment The featuresand characteristics of the green
building will be classified into threemain categories: ecology, risk
management & amenities/diversity, andcommunity & partnership. Each mainarea consists of five subcategories andhas a full score of 100 points. The
entire assessment consists of 58
questions.
2. Comprehensive assessment Amongthe conventional assessment points,
some particular importance is attachedto the owner operation of the property,
such as, in the risk management part,
disaster prevention & anticrime
measures, and in the community &partnership part, local environmentawareness initiatives.

Score-based performance level
CASBEE uses the BEE (Built
Environment Efficiency) as its
assessment indicator, which is
calculated from Q (Built
Environment Quality) as thenumerator and L (Built Environment
Load) as the denominator. Q and L
are obtained through theclassification and rearrangement of
the four areas of assessment.
Buildings may receive ranks ranging
from C (poor) to S (excellent), in
order of increasing BEE value.
For authorization, a building mustreceive a report from the CASBEE
Certification system, which isafterwards assessed by the local
government.

3. Innovation point system anadditional point system is adopted toreflect exceptionally innovative
initiatives in each subcategory. Suchinitiatives need not fit in the scope ofthe respective questions.
JREI will conduct on the ground review
of building performance on theindicators above, and a committee set
in JREI will decide the result ofcertification rank.32
Performance Display

33
34

32 Process of certification (Japanese), DBJ Green Buildings; http://igb.jp/flow.html
33 DBJ Green Building, Development Bank of Japan; http://www.dbj.jp/en/pdf/service/finance/g_building/gb_presentation.pdf
34

Built Environment Efficiency, CASBEE; http://www.ibec.or.jp/CASBEE/english/beeE.htm
12Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Qualitative
considerations

In addition to LEED and CASBEE, DBJ
Green Buildings Certification
Programme is considered as one of thegreen building standards in Japan. 35
According to its website, as of Feb
2018, 499 properties in Japan are
certified by the programme.

In Japan, many local governments
have made CASBEE assessment
results mandatory for building
permits compared to similar tools
available.

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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Appendix 2: Green Bond / Green Bond Programme - External Review Form
Section 1. Basic Information
Issuer name:Green Bond ISIN or Issuer Green Bond Framework
Name, if applicable: [specify as appropriate]
Review provider’s name:Daiwa Securities Group Inc.
Daiwa Securities Group Green Bond

Sustainalytics

Completion date of this form:

25 October 2018

Publication date of review publication: [where

29 October 2018

appropriate, specify if it is an update and add
reference to earlier relevant review]

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

Use of Proceeds☒

Process for Project Evaluation and
Selection☒

Management of Proceeds☒

Reporting

ROLE(S) OF REVIEW PROVIDER☒

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification☐

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

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)
Please refer to Green Bond Framework Overview and Second Party Opinion document above.

Section 3. Detailed review
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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Reviewers are encouraged to provide the information below to the extent possible and use the comment
section to explain the scope of their review.
1. USE OF PROCEEDS
Overall comment on section (if applicable):
The eligible categories for the use of proceeds, renewable energy generation and green buildings with third
party certification, are aligned with those recognized by the Green Bond Principles. Sustainalytics considers
that clean energy projects will create positive environmental impacts and advance the UN Sustainable
Development Goals.

Use of proceeds categories as per GBP:☒

Renewable energy☐

Energy efficiency☐

Pollution prevention and control☐

Environmentally sustainable management ofliving natural resources and land use☐

Terrestrial and aquatic biodiversity
conservation☐

Clean transportation☐

Sustainable water and wastewater
management☐

Climate change adaptation☐

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

Green buildings☐

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

Other (please specify):

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

2. PROCESS FOR PROJECT EVALUATION AND SELECTION
Overall comment on section (if applicable):
The selection of the green projects will be determined through the following procedures;
1) Daiwa Securities Group’s Treasury Department will evaluate and select project candidates in accordancewith eligibility criteria,
2) Daiwa Securities Group’s Corporate Planning Department which consists of the Group Management
Section that manages and plans for the group’s subsidiaries and SDGs Promotion Office that plans andpromotes Daiwa's SDGs and CSR activities, will check and confirm that selected candidates for green
projects are appropriate and eligible considering the above defined criteria. For the case of projects carriedout by its affiliates, the projects will be also assessed to verify eligibility by Daiwa Energy & Infrastructure Co.
Ltd. and Daiwa Property Co.,Ltd. respectively for renewable energy generation projects and green buildings
projects.
3) The final confirmation will be made by Chief Financial Officer based on the selected eligible projects.
Sustainalytics views c-suit involvement in the process for project evaluation and selection as in line withmarket best practice.
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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

Evaluation and selection☒

Credentials on the issuer’s environmental
sustainability objectives☒

Documented process to determine thatprojects fit within defined categories☒

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

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

Summary criteria for project evaluation andselection publicly available☐

Other (please specify):☐

In-house assessment

Information on Responsibilities and Accountability☐

Evaluation / Selection criteria subject toexternal advice or verification☐

Other (please specify):

3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable):
The management and allocation of proceeds will be executed by the Treasury Department. The Treasury
Department will use a separate ledger and track budgets and actual spending for eligible green projects
through reporting from subsidiaries or departments on a quarterly basis. Unallocated proceeds will becredited to a subaccount that is financially separate from other general accounts to be tracked appropriately
and actual spending for eligible green projects will be monitored by using a separate ledger. Pending
allocation to finance eligible green projects, the amount equal to the balance of the proceeds will betemporally invested in cash and/or cash equivalents. Sustainalytics considers this to be in line with market
practice.

Tracking of proceeds:☒

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

Other (please specify):

Additional disclosure:☐

Allocations to future investments only☒

Allocations to both existing and future
investments
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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond☐

Allocation to individual disbursements☐

Allocation to a portfolio of
disbursements☒

Disclosure of portfolio balance of
unallocated proceeds☒

Other (please specify): Allocation to
disbursements on a project basis.

4. REPORTING
Overall comment on section (if applicable):
Daiwa Securities Group has committed to allocation reporting and impact reporting on an annual basis,
disclosed via its Integrated Report or corporate website. Additionally, the allocation reporting will include
description of projects, amounts of allocated and unallocated proceeds, and expected timeline forallocation. In addition, for impact reporting, Daiwa Securities Group intends to report quantitative andqualitative indicators, such as, the amount of power generated and CO2 emissions reduced for renewableenergy projects, and CO2 emission, waste and energy consumption, recycle rate, in addition to the level ofcertification for green building projects. Sustainalytics considers reporting on this information and KPIs asaligned with market practice.

Use of proceeds reporting:☒

Project-by-project☐

On a project portfolio basis☐

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

Information reported:☒

Allocated amounts☐

Other (please specify):☐

Green Bond financed share of total
investment☐

Semi-annual

Frequency:☒

Annual☐Other (please specify):

Impact reporting:☒

Project-by-project☐

On a project portfolio basis☐

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

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Information reported (expected or ex-post):
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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond☒GHG Emissions / Savings☐

Energy Savings☐

Decrease in water use☒

Other ESG indicators (please
specify): For renewableenergy projects, the amountof power generated. For
green buildings, CO2
emission, waste and energy
consumption, recycle rate, in
addition to the level of thirdparty certification

Means of Disclosure☐☐☐

Information published in financial report☐

Information published in sustainability
reportInformation published in ad hoc☒ Other (please specify): Integrated
report or company website
documents
Reporting reviewed (if yes, please specify which parts of the reporting are subject toexternal review):

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

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

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

Consultancy (incl. 2nd opinion)☐

Certification☐

Verification / Audit☐

Rating☐Other (please specify):

Review provider(s):Date of publication:

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

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

ii.

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

Daiwa Securities Group Green Bondiii.

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

iv.

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

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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

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

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Framework Overview and Second-Party Opinion

Daiwa Securities Group Green Bond

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

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