Toward realizing Our Hopes
for the Future

Contents

Environment

Society

Third-Party Assessment /Data Section

Governance

Daiwa House Group
Sustainability Report 2023

■ Mitigating and adapting to climate change

Response to the Task Force on Climate-related Financial Disclosures (TCFD)

The impact of climate change is becoming more severe
every year, and the frequent occurrence of extreme weather,meteorological disasters, and other events, for which climatechange is thought to be a cause, threatens the safety and securityof homes and living, which form the foundation for the value thatthe Daiwa House Group offers. Meanwhile, since the adoptionof the Paris Agreement, nations and governments around theworld have taken a sharp turn toward “decarbonization,” andexpectations of the role that the private sector should play arechanging significantly.
Nevertheless, because the changes in the external
environment accompanying climate change are highly
uncertain, it is important to hypothesize multiple scenarios
and respond to the risks appropriately while recognizing thebusiness opportunities at the same time.
Therefore, in addition to utilizing the “Governance,”“Strategy,” “Risk Management,” and “Metrics and Targets”
framework recommended for disclosures by TCFD as a tool forverifying the rationality of our initiatives on climate change, theDaiwa House Group intends to actively disclose information inline with the TCFD recommendations, leading to constructive
dialogue with investors and others.
In keeping with this idea, the Daiwa House Groupannounced its support for the TCFD recommendations in
September 2018 and joined the TCFD Consortium which was
founded in May 2019.
In fiscal 2022, we held small ESG meetings for institutional
investors in December, which we launched in fiscal 2018,
and also engaged in individual dialogues with 8 institutional
investors. Opinions we received at these interviews are fed backto relevant division and personnel and are taken into account in
improving our reports.
P030

Eco Communication

GovernanceFor governance, please refer to the Environmental management
section.
P023

Environmental management

Transition plan to achieve carbon neutrality
In particular, GHG emissions in our business activities(scope 1 and 2), in which we are directly involved, must be
reduced by 70% from the FY2015 level by 2030. This should be
attained by achieving RE100 (renewable energy utilization rateof 100%) at the earliest possible time with renewable energy
generated in-house. Among the three scopes, the largest
portion of GHG emissions is attributable to the use of housing
sold (scope 3 category 11). Aiming to reduce emissions fromthis area by 63% compared to FY2015 by 2030, we decided tomake all new buildings into ZEH and ZEB in all businesses as arule, and install solar power generation systems on all buildings.

The Daiwa House Group has positioned mitigating and adapting
to climate change as one of its key management issues and has
continued efforts toward achieving carbon neutrality by 2050
as declared in the Long-Term Environmental Vision. Under thetheme of “Realize carbon neutrality by making all buildings
carbon-free” (hereinafter, “carbon neutral strategy”) under the
7th Medium-Term Management Plan that started in fiscal 2022,
we set as a milestone a 40% reduction in GHG emissions by
2030 compared to FY2015 throughout our value chain (scope
1, 2 and 3). Toward this target, we accelerate our initiatives in all
aspects of the entire business.

■ Migration plan for reducing GHG emissions (by scope) on the road to carbon neutrality

Key actions for achieving 2030 targets
Scopes 1 and 2● Upgrading to energy-saving equipment inour existing facilities● Achieve RE100 through renewable energy
generated by us (FY2025)● Building all new owned facilities to be ZEB-readyand equipping them all with solar panels● Electric vehicles and heavy machinery
Scope 3 (Use of sold buildings)● All buildings to be made ZEH/ZEB● All buildings to have solar panels installed
Scope 3 (procurement)● Setting SBT-level GHG reduction targets
for major suppliers● Helping suppliers reduce GHG emissions
by offering customers ideas for saving andgenerating energy
Scope 3 (other)

Target for GHG emissions across the entire value chain (SBT certified)(million t-CO2)

15.98
0.55

9.68

70%
emissions
reduction*1

40%emissions
reduction
9.52

63%
emissions
reduction*1

Carbonneutrality*2

0.17

3.60

3.14

3.14

2.61

2.61

Emissions

2015

2030

Amountremoved*3＝

Supporting the TCFD Recommendations andenhancing disclosure

2050 (FY)*1 SBT certified (1.5°C level) *2 SBT certified (net-zero)*3 As reducing emissions to absolute zero is impracticable, we will achieve net zero

emissions by removing the commensurate amounts of GHGs whose emissions areinevitable.

041

Contents

Toward realizing Our Hopes
for the Future

Environment

Society

Third-Party Assessment /Data Section

Governance

Daiwa House Group
Sustainability Report 2023

■ Mitigating and adapting to climate change

Response to the Task Force on Climate-related Financial Disclosures (TCFD)
Degree of financial impact: Small: less than ¥10 billion; Medium: over ¥10 billion but less than ¥100 billion; Large: over ¥100 billion

STEP 5 Disclose information

Reputation

Transitions
Opportunities

STEP 3 Evaluate the impacts on business· Identify financial items that may be affectedby risks and opportunities· Consider calculation formulas and estimate
financial impact

Physicalchanges
Products andservices

STEP 2 Identify scenarios

Transitions

Physical changes

STEP 1 Assess the priorities of climate change risks· List risk items· Describe the impacts on business· Assess the priority of risks

Acute

Chronic■ 5 steps for strategy development

STEP 4 Consider countermeasures and reflect
them in policy and strategy· Grasp our response to risks and opportunities· Consider measures to respond to risks and toseize opportunities· Reflect them in policy and strategy

Details

Policy, laws and regulations

Type

Products and services

The risks and opportunities associated with climate change
can be considered as those caused by “transitions,” such as
the strengthening of regulations, advances in technology, andchanges in the market that will occur with the move toward
a decarbonized economy, and those caused by “physicalchange,” such as acute extreme weather and chronic
temperature increases that will result from global warming. In
addition, the impact could manifest not only in the short term,
but also over the medium-to-long term.
Therefore, we have classified the factors involved in thevarious changes in the external environment associated withclimate change into “transitions” and “physical changes,”
estimated the period that will be impacted, and assessed thefinancial impact at three levels—large, medium, and small—toidentify the significant risks and opportunities.

■ Main Risks and Opportunities Related to Climate Change Affected period: Short: less than 1 year; Medium: over 1 year but less than 5 years; Long: over 5 years

Risks

Strategy

Period Level ofoffinancial
impact impact• Cost price increase due to change in specifications owing to tougher regulations of the Building Energy Efficiency Act
Reducing GHG emissions in the household and business sectors is an urgent issue in Japan. The Building Energy Efficiency Act wasenacted in 2016, requiring compliance with energy conservation standards from 2017 for non-residential buildings with a floor area of 2,000
Short
Mediumm² or more. This was expanded to buildings with a floor area of 300 m² or more from 2021. In 2025, it will become mandatory for all newly
term
constructed houses and buildings to comply with energy conservation standards. If the energy conservation standards are also raised
higher, they may lead to higher cost prices for the houses and buildings we provide.
• Increase in operational costs due to expansion of carbon tax and emissions trading system
As various countries step up their efforts for decarbonization to achieve the Paris Agreement, Japan has announced a policy of achievingcarbon neutrality by 2050, giving rise to the possibility of new regulations and schemes such as a carbon tax and emissions trading system
MediumSmallbeing adopted in Japan. Already a green tax was adopted in Japan, but internationally the tax rate is said to be low. Therefore, there is atermhigh likelihood of it being raised in the future as carbon tax. If the carbon tax rate increases substantially or the emissions trading system
expands, we may face higher operational costs.
• Accrual of costs to decarbonize a coal-fired power plant
The Company acquired the right to manage Hibikinada Thermal Power Station, a power producer engaged in co-firing of coal and biomass
Mediumfuel (wood pellet), and made it into a Group company in January 2023. As the business entails a large amount of GHG emissions, we
Mediumterm
may need costs to decarbonize the plant early to avoid reputational risk posed by institutional investors, financial institutions and otherstakeholders.
• Increase in risk of heat stroke at construction sites due to rise in summer maximum temperatures
In Japan, it has been pointed out that the number of heat stroke patients increases significantly when the wet bulb globe temperature(WBGT) is over 28°C (extreme caution), and it is possible that the risk of heat stroke for workers at the construction sites of the Group,
Short
Small
which focuses on the Japan market, will increase further in the future. Therefore, should summer maximum temperatures rise, it is possible
termthat the risk of heat stroke will increase for workers at construction sites where outdoor work is unavoidable, which could lead to longer
construction periods and lower productivity for onsite work.
• Damage to our facilities due to meteorological disasters and increase in insurance premiums
When meteorological disasters like storms and floods occur as climate change becomes increasingly severe, there is a high possibility thatShort
various company facilities, including offices, factories, and commercial buildings owned by the Group, will be damaged. Much of this damage
Small
term
can be covered by non-life insurance, however, going forward, if the frequency and intensity of meteorological disasters increase, it could
lead to an increase in indirect costs associated with higher insurance premiums or decreased sales due to suspension of service businesses.
• Impact of material procurement difficulty and construction delay in supply chain due to meteorological disasters
Should the manufacturing sites of suppliers be damaged by meteorological disasters such as localized heavy rain, heavy snow, and
Short
Small
typhoons due to extreme weather, and their operations suspended and transportation routes impacted by events such as road closures, it
term
could result in hindrances in material procurement and construction periods.
• Increase in demand for houses and building with low GHG emissions
The core businesses of the Group are contracting and subdivision of houses and buildings in Japan, which comprise the majority of its
Short
consolidated net sales. The Japanese government has indicated a policy target to achieve net-zero energy for new houses (ZEHs) andMediumterm
buildings (ZEBs) by 2030, and should incentives to support achievement of this target be continued and expanded, it is possible thatdemand for ZEHs and ZEBs, which have high unit prices per building, will increase.
• Expansion of environmental energy business due to rising demand for renewable energy
Japan’s Sixth Strategic Energy Plan, announced in October 2021 is aimed at achieving the targets under the Paris Agreement. The plan
Short
indicates that the rate of renewable energy will be raised to 36 – 38% of power sources in the target energy mix for 2030, and various policy
Mediumterm
packages are being implemented to expand the renewable energy market. Over the past few years, the number of organizations participating
in RE100 has increased both in and outside Japan, aiming to achieve 100% renewable energy utilization rate, and it is possible that demand forrenewable energy will rise and the environmental energy business involved in the development and supply of these will expand going forward.
• Rising demand for houses and buildings equipped for meteorological disasters
The IPCC’s Sixth Assessment Report pointed out the possibility of an increase in the intensity of tropical cyclones, such as typhoons,
as global warming progresses. Storms and heavy rain also cause significant damage in Japan, and it takes a long time for life to return
MediumMediumto normal afterwards. Therefore, it is possible that demand will rise for comfortable housing free of power outage and other interruptions
term
to daily life even in case of a meteorological disaster, for buildings with energy self-sufficiency that ensures business continuity, and forcommunities that are resilient.

042

Contents

Toward realizing Our Hopes
for the Future

Environment

Society

Governance

Third-Party Assessment /Data Section

Daiwa House Group
Sustainability Report 2023

■ Mitigating and adapting to climate change

Response to the Task Force on Climate-related Financial Disclosures (TCFD)
Result of scenario analysis

1.5°C scenario

4°C scenario

A scenario with maximum GHG emissions under fossil
fuel-dependent development with no climate policies
implemented.

In order to formulate a business strategy that can adapt
flexibly to future changes in the external environment basedon identified risks and opportunities, the Daiwa House Groupevaluates the impact on business using several scenarios. In
conducting the scenario analysis, we referred to the 1.5°C
scenario as the scenario for “transitions,” and to the 4°C
scenario as the scenario for extreme “physical change” toverify the rationality of our business strategies. In the recently
conducted simplified scenario analysis, demand for the netzero energy houses and buildings provided by our Group as
well as its environmental energy business are expected to
expand under any scenario as of 2030, and we confirmed thatthe revenue growth is likely to exceed any negative financial
impact, reaffirming the rationality of our response to risk andthe importance of recognizing business opportunities moreproactively. The scope of the simple analysis was limited to thesignificant risks and opportunities for the single-family housing,rental housing business and condominium businesses, and theenvironmental energy business, which are the Group’s corebusinesses. Going forward, we will strive to further expand
the businesses included in the scope of analysis as well as toincrease the comprehensiveness of the risks and opportunities
and refine the scenario analysis.

Reflectionin policies
andstrategies■ Changes in global average temperature

Main approach

Main approach(°C)
5

We provide sales and design staff with education and seminars
on ZEH and ZEB to improve their knowledge and marketing
capabilities. To customers, we developed tools to convey theadvantages and costs of environmentally conscious buildings inan easy-to-understand way, as well as energy calculation tools,
thereby expanding our initiatives in the area. The targets set atthe beginning of each year are reviewed quarterly to confirm
progress. The achievement level of targets is reflected in theperformance evaluation.

We deployed environmental sensor at our construction sites
in an effort to act promptly to prevent heatstroke or prepare
for strong winds. We also formulated a business continuity
plan for our supply chain, based on which we promoted
measures, such as procuring materials from multiple suppliers
and manufacturing sites. In the single-family housing business,
we released the “Anti-Disaster House” equipped with the AllWeather Three Battery Linking System which can secure power,
heating, and hot-water for some ten days in case of power
outages even when it is raining. We have sold a total of 500 or
more such houses by the end of fiscal 2022. In fiscal 2022, 90%of single-family homes had solar power generation systems and
56% had storage batteries.

4

A scenario under fossil fuel-dependent
development with a significant temperaturerise with no climate policies implemented.
Equivalent to the 4°C scenario.

SSP5-8.5

3
2
1
0
–1
1950

SSP1-1.9
A scenario under sustainable development,
anticipating net zero CO2 in the mid-21st
century with climate policies to limit global
warming to 1.5°C above pre-industrial
levels. Equivalent to the 1.5°C scenario .

2000 2015 2030

Source: IPCC AR6 WG I SPM Fig. SPM.8(a)2050

2100 (year)

A scenario under sustainable development to limit
global warming to 1.5°C above pre-industrial levels.
Reason for
selection
Result ofanalysis

The scenario is aligned with Net Zero by 2050 (1.5°Cgoal) declared by Japan, in which we mainly operate, andinvolves relatively high transition risks.
An increase in operational costs due to strengthening of
regulations is expected, which can be covered by revenue
growth due to increased sales of ZEHs, ZEH-Ms, ZEBs,
and the environmental energy business.
With “Realize carbon neutrality by making all buildings
carbon-free” positioned as one the focal themes under the
7th Medium-Term Management Plan, we have decided
on policies of making all new buildings into ZEH and ZEB
as a rule, and installing solar power generations systems
on all buildings. We monitor progress using the rates of
ZEH, ZEH-M and ZEB as key management metrics andreflect the results in our business strategies.
P021
P136

P034

Reflectionin policies
andstrategies

Environmental Action Plan (Endless Green
Program 2026)
Results and self-assessment of theEnvironmental Action Plan (Endless Green
Program 2026)

Single-family housing: Further increasing the number of
ZEHs

		 Rental housing and condominiums: Promoting ZEH-M
P035

Reason for
selection
Result ofanalysis

Commercial and Office buildings: Hold ZEB seminars, put
ZEB into practice and improve technological capabilities

The scenario with the biggest physical impact was
selected to hypothesize the most extreme situation.
Additional costs could arise due to supply chain
disruptions and asset impairment due to damage to
our facilities caused by heavy rain and heavy snow,
and construction delay damages as extremely hot days
will increase, which can be covered by sales growth of
products to mitigate and adapt to climate change.
We have decided on policies of thoroughgoing measuresagainst heatstroke at construction sites and development
and popularization of products with low GHG emissions andproducts adapted to physical changes. We monitor progressusing the number of heatstroke cases and installation rates
of solar power generation systems and storage batteries atbuildings we provide, etc. as key management metrics andreflect the results in our business strategies.
P032
P136

Mitigating and adapting to climate change
Results and self-assessment of theEnvironmental Action Plan (Endless Green
Program 2026)

P040

Adapting to climate change —How to prevent heatstrokeon construction sites

P120

Risk management and establishment of corporate ethics

043

Toward realizing Our Hopes
for the Future

Contents

Environment

Society

Governance

Third-Party Assessment /Data Section

Daiwa House Group
Sustainability Report 2023

■ Mitigating and adapting to climate change

Response to the Task Force on Climate-related Financial Disclosures (TCFD)
Risk Management

Metrics and Targets

Major issues for the Group and its responses

We recognize that climate change risk is one of the risks witha significant impact in the medium- and long-term, and wehave integrated this risk into the Group-wide risk management
process. We identify and assess risks and opportunities inorder to conduct a careful analysis roughly every three- five
years in conjunction with the formulation of a Medium-Term
Management Plan and Environmental Action Plan, which weapply to the identification of priority issues for the Plan, withthese issues reflected in the major policies and targets of thePlan.
More specifically, the Environment Department identifies“changes in the external environment” accompanying thetransition to a decarbonized economy and “physical changes”
associated with global warming. We assess important risks andopportunities based on their likelihood and potential financial
impact. Each department considers concrete measures toaddress the important risks and opportunities thus identified,
and we establish key management metrics and targets for theGroup, each department, and each worksite in the Environmental
Action Plan and take necessary action. We also manage
progress through the biannual Group Environmental Promotion
Committee at the Group-wide level, the biannual departmental
environmental committee for each department and a biannual
ECO diagnosis/training session for each worksite.

Aiming to minimize the risks and maximize the opportunities
associated with climate change, we have established short-,
medium-, and long-term targets for the promotion of initiatives.
We have established these targets as a set of metrics for the
Medium-Term Management Plan. We have also establishedmore detailed management metrics and targets in our EndlessGreen Program, the Environmental Action Plan formulated toalign with the period covered by the Plan, in order to accelerate
our initiatives with the aim of striking a balance between earnings
and environmental sustainability.

Below are the issues and our responses as we work towardachieving carbon neutrality throughout our value chain by 2050.
Reduction in the GHG emissions directly attributable to thecompany (scope 1 and 2) necessitates electrification of heavymachinery at construction sites and trucks used in logistics,
so as to encourage the use of renewables-derived electricity.
To decrease the GHG emissions in supply chains (scope 3
category 1), we promote the adoption of materials with low
GHG emissions in the design phase with the use of LCCO2
Calculation Tool connected to Building Information Modeling(BIM)*.
We also expect that manufacturers of materials with large
emissions, such as iron and steel, cement, and aluminum,
will develop innovative manufacturing technologies and makethemselves renewables powered. As to the GHG emissions
from downstream leased assets (scope 3 category 13), we will
work to promote energy efficiency in cooperation with tenantcompanies, while at the same time increasing the supply of
renewables-derived electricity to the areas exclusively ownedby them.
To explore future business opportunities, we commenced
studies toward marketing energy-efficient houses and buildingsin the U.S. and elsewhere.
In the area of information disclosure, we see response tointernational requirements as a pressing issue, such as a set of
new sustainability-related disclosure standards published by theInternational Sustainability Standards Board (ISSB), disclosureof potential financial impacts as recommended by TCFD, andthe Taskforce on Nature-related Financial Disclosures (TNFD).
To that end, we maintain a firm grasp on trends at home andabroad and prepare for such disclosure based on dialogues
with institutional investors and experts.
* Digital three-dimensional models that incorporate building information. Enables

P023

Environmental Management

P120

Risk management and establishment of corporate ethics

P142

Environmental Data GHG emissions derived from use of
products

P143

Environmental Data ZEH rate, ZEH-M rate, ZEB rate

P149

Environmental Data Energy consumption and energy
efficiency (EP100)

P150

Environmental Data Electricity consumption and renewableenergy utilization rate (RE100)

P155

Environmental Data Reducing GHG emissions in the value
chain

Promoting decarbonization inbusiness activities from theperspective of social
responsibility and risk reduction
GHG emissions(Total)GHG
reduction 2030: −70%

GHG emissions(Total)GHG
reduction 2030: −63%

(vs FY2015)(vs FY2015)

2050: Net Zero

2050: Net Zero

Energy efficiency

Energy(=sales/energy
conservation consumption)(EP100)

Promoting the community
development with 100% renewableenergy, using know-how accumulated
through company facilities

ZEH rate(Single-family houses,
Energyconservation Apartments, Condominiums)(ZEH)
Outcomes from2030: 100% as a rulebusiness activities raise
the competitivenessof products andRenewable energy
services
EnergyRenewable utilization rate
ZEB rate (for all usages)
conservation 2030: 100% as a ruleenergy 2022: 100% (non-consolidated)*1(ZEB)(RE100)2025: 100% (Consolidated)

2030: up 2.0 times(vs FY2015)*1 Purchased electricity only

Electric

Introduction rate ofclean energy cars
2030: 100%*2*2 Company vehicles only

Installation rates ofRenewable solar power
energy generation systems(PV)2030: 100% as a ruleconsistent use of information throughout the life cycle of a building, from design
to construction, and maintenance.

044