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Obayashi Corporation/ Obayashi Sustainability Bond

Sustainability bond eligibility pre-issue assessment report

DNV GL second party opinion

May. 2019

DNV GL Business Assurance Japan K.K.

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Contents
I Introduction (About issuer and sustainability bond)3

Ⅱ Scope and Objectives

7

Ⅲ Responsibilities of the Directors of Issuer (Obayashi) and the Assurance Providers, DNV GL

10

Ⅳ Basis of DNV GL’s Opinion

11

Ⅴ Work Undertaken

12

Ⅵ Findings and DNV GL’s Opinion (eligibility against for Sustainability criteria)

13

Schedule-1 Sustainability Bond Nominated Projects & Assets Outline

25

Schedule-2 Sustainability Bond Eligibility Assessment Protocol

26

(1)

Use of Proceeds

26

(2)

Process for Project Selection and Evaluation

28

(3)

Management of Proceeds

29

(4)

Reporting30

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Obayashi Sustainability BondDNV GL Second Party Opinion

I Introduction (About issuer and sustainability bond)(1) Obayashi Corporation
The predecessor of Obayashi Corporation (hereafter, Obayashi) was founded on 25
January 1892 as a civil engineering and building construction contractor in Osaka.
Obayashi has been as one of the largest general construction company. Obayashi
Group has expanded its presence all over the world with 14,739 employees.
Obayashi Group is consisted of 89 consolidated subsidiaries and 28 affiliates (as of
31 March 2019).

(2) Obayashi Sustainability Initiatives
As “Obayashi Basic Principles”, Obayashi established their Vision and Mission thatthey have to play a role in society, in “Obayashi Philosophy,” and establishes aguideline that helps us to realize its philosophy in “Obayashi Code of Conduct”.
Obayashi considers sustainability initiatives to be the practical embodiment of
Obayashi Basic Principles and its core corporate activities.

Page 4 of 35a) Obayashi Philosophy
Obayashi disclosed its contribution to realize sustainable society considering global
environment in its corporate philosophy,
Obayashi's Vision and Mission in Society
A Leading Sustainability Company
1 Exercise honest craftsmanship with superior technologies and create newvalue in every space.
2 Care for the global environment and create solutions to social challenges as agood corporate citizen.
3 Value each person with a stake in our business.
By keeping these promises, Obayashi Corporation contributes to realizing asustainable society.

b) “Obayashi Code of Conduct” and Social Contribution
Social contribution initiatives have been clearly directed in the guidelines to realize
the Obayashi Philosophy and continue being an enterprise trusted by all
stakeholders.
Please refer to the Appendix-1 “Obayashi Code of Conduct.”Page 5 of 35c) Obayashi Environmental Policy and Vision
The Medium-Term Business Plan 2017 was issued which shows its business goal
and initiatives achieved in the first five years of Obayashi’s roadmap.
Obayashi established its environmental and social initiative in managementfoundation strategy.

Environmental Initiative:
・

Based on its medium- to long-term environmental vision "Obayashi Green
Vision 2050", Obayashi will promote efforts to solve global environmental
issues in constructions and business activities in and around the constructions.
Please refer to the Appendix-2 “Obayashi Environmental Policy and Vision”

Social Initiative:
To provide high quality constructions, Obayashi will promote continuous
improvement of quality management system, ICT application on construction
site, technology development and human resource development.
Obayashi will ensure the safety and health of workers and promote a
comfortable workplace where diverse human resources can work actively.
As a good corporate citizen, Obayashi will promote positive activities to solve
social issues, including preparation for disasters, support for restoration andreconstruction at the time of disasters, and coexistence with local
communities, etc.

d) Obayashi ESG materiality
Obayashi has identified the social issues which Obayashi group faces and how
they respond to them. Obayashi has set six materialities. Obayashi also links their
ESG initiatives (materiality) and SDGs targets identified by Obayashi. Those areclearly disclosed at Obayashi web site and OBAYASHI Corporate Report 2018.
Please refer to the Appendix-3 “ESG materiality” and Appendix-4 “Obayashi
Sustainability projects and SDGs contributions.”

Page 6 of 35(3) Obayashi Sustainability Bond
Sustainability Bond issued at this time intends to promote its corporate activities aim torealize sustainable society, by raising funds in capital markets regarding to its activities
for sustainability promoted as practice of Obayashi Basic Principle. Also, it contributes tothe realization of the medium- and long-term environmental vision “Obayashi Green
Vision 2050” subsequently to the Obayashi Green Bond issued in October 2018.
Obayashi intends to allocate the fund raised by sustainability bond to following
sustainability project/portfolio.
*Fund allocation includes finance and/or refinance. Please refer to the schedule-1•

Environmentally friendly “Wellness Building” under the concept “smart
buildings that are good for all people”•

Secure skilled workers for construction industry and strengthen trust
relationship with suppliers•

Renewable energy business based on the action plan of “Obayashi Green
Vision 2050”

In this paper, no assurance is provided regarding the financial performance of the
BOND, the value of any investments in the BONDS, or the long term environmental
benefits of the transaction. DNV GL Business Assurance Japan K.K.(henceforth referred
to as DNV GL) ’s objective has been to provide an assessment that the BOND has met
the criteria of the Sustainability Bond Guidelines and the associated Technical Criteria on
the basis set out below.

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Ⅱ Scope and Objectives
Obayashi issues a sustainability bond to address its project portfolio ;Environmentally friendly “Wellness Building” under the concept “smart buildings thatare good for all people”, Secure skilled workers for construction industry andstrengthen trust relationship with suppliers, and Renewable energy business based on
the action plan of “Obayashi Green Vision 2050“ in order to achieve environmental
and social contribution defined in ESG materiality (Appendix-3) which also align with
Obayashi Philosophy “sustainability society”. Obayashi also intends to strengthen its
business foundation and also addresses to obtain its stakeholder’s deeper
understanding of “Obayashi Green Vision 2050” and “ESG materiality” through thesustainability bond.
Obayashi intends to finance investments in specific sustainability project categories,
including:-

Schedule-1 shows the nominated sustainability projects and assets. Those arecategorized 3 project portfolios.

-“Environmentally friendly ‘Wellness Buiding’ under the concept ‘smart buildings’
that are good for all people” includes 2 projects and assets, “Secure skilled workers
for construction industry and strengthen trust relationship with suppliers” includes
1 social project, and Renewable energy business based on the action plan of“Obayashi Green Vision 2050.” “Renewable energy” includes 3 projects and assets(R&D for hydrogen society, Wind power and Bioenergy), respectively.

-

As some directly and/or indirectly green and social benefit of above
projects/business, “CO2 emission reduction” from energy source and contribution
to specific target population & social issues are prospected.

-

Total fund of Obayashi's sustainability bond, 10 billion JPY (redemption period 5
years) will be fully allocated to sustainability activities which include both financeand refinance. Refinance amount and/or ratio will be reported/disclosed in
OBAYASHI Corporate Report or environmental achievement report on its website(homepage) annually.

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In this sustainability bond projects, environmental risks (e.g. land use, ecologicalsystem impact) have been identified by issuer and issuer has taken appropriate
countermeasures to mitigate its impact for all projects. Issuer also has
demonstrated to comply related law and regulation (including discussion with local
authority, citizens), environmental impact assessment, public acceptance andrequired evaluation.

-

Environmental benefit will be reported annually by issuer, CO2 emission reduction
by executing renewable energy projects, and social contribution through vocational
training and education (e.g. numbers of trainee, certified skilled workers). Above
information will be reported/disclosed in OBAYASHI Corporate Report orenvironmental achievement report on its website(homepage) annually. As for the‘Smart Building’ which were certified such as BELS(ZEB) and WELL, Obayashi has
published the net efficiency of CO2 emission reduction evaluation/plan based on its
primary energy consumption by eco design basis and implements appropriatemonitoring and analysis to maintain WELL certification condition, environmental
and social benefits will not be included in annual report by its performance.

DNV GL holds no other engagements with Obayashi including its direct shareholders, forwhich we foresee conflict of interest to carry out the Scope of Work as defined in the
Request for Proposal.

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Obayashi intends to distribute any unallocated proceeds in line with the Use ofProceeds and Management of Proceeds sections set out in the Obayashi Sustainability
Bond Framework.
DNV GL has been commissioned by Obayashi to provide a Sustainability pre-issue
second party opinion. Our methodology to achieve this is described under ‘V Work
Undertaken’ below. We were not commissioned to provide independent assurance orother audit activities.
In this paper, no assurance is provided regarding the financial performance of the
BOND, the value of any investments in the BONDS, or the long-term environmental
benefits of the transaction. Our objective has been to provide an assessment that the
BOND has met the criteria established on the basis set out below.
The scope of this DNV GL opinion is limited to the Sustainability Bond Guidelines
2018 (SBG2018) in accordance with Green Bond Principles 2018 (GBP2018) andSocial Bond Principles 2018 (SBP2018). DNV GL also considered the requirements of
the Green Bond Guidelines, 2017 (MOE, Japan 2017) and Climate Bond Standard
Version 2.1 during its assessment, however at the time of review, Technical Criteria
for – “Renewable energy (Wind Energy and Bioenergy)” are available for Issuer use.
Technical Guidance for ‘Energy Efficient’ (Green Buildings, commercial property) is
applicable to this BOND.
No opinion of conformance with the Standard is provided here and no Certification
has been applied for at this time. Any future application for Certification under the
Climate Bond Standard would be at the discretion of the Issuer, Obayashi.

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Ⅲ Responsibilities of the Directors of Issuer (Obayashi) and theAssurance Providers, DNV GL
The management of Obayashi has provided the information and data used by DNV GL
during the delivery of this review. Our statement represents an independent opinion andis intended to inform Obayashi management and other interested stakeholders in the
BOND as to whether the established criteria have been met, based on the information
provided to us. In our work we have relied on the information and the facts presented to
us by Obayashi.
DNV GL is not responsible for any aspect of the nominated assets referred to in thisopinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV GL shall not be held liable if any of the information or data
provided by Obayashi’s management and used as a basis for this assessment were notcorrect or complete.

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Ⅳ Basis of DNV GL’s Opinion
To provide as much flexibility for the issuer, Obayashi, as possible, we have adapted
our Sustainability Bond Guidelines*1 (considering Green Bond Principles*2, Social
Bond Principles*3), refer to the Green Bond Guidelines, 2017*4 and Climate Bonds
Standard*5 assessment methodologies, which incorporates the requirements of theabove, to create a Obayashi-specific Sustainability Bond Eligibility Assessment
Protocol (henceforth referred to as “Protocol”).
Obayashi-specific Protocol (eligibility) has the capacity for potential application of theBond under the Green Bond Guidelines, 2017 and Climate Bond Standard should
Technical Criteria under the Standard become available. Our Protocol includes a setof suitable criteria that can be used to underpin DNV GL’s opinion. The overarching
principle behind the criteria is that a sustainability bond should “enable capital-raisingand investment for new and existing projects with environmental and social benefits”.
As per our Protocol, the criteria against which the BOND has been reviewed aregrouped under the four Principles:•

Principle One: Use of Proceeds. The Use of Proceeds criteria are guided by therequirement that an issuer of a sustainability bond must use the funds raised to financeeligible activities. The eligible activities should produce clear environmental and social
benefits.

•

Principle Two: Process for Project Evaluation and Selection. The Project Evaluationand Selection criteria are guided by the requirements that an issuer of a sustainability
bond should outline the process it follows when determining eligibility of an investmentusing Sustainability Bond proceeds, and outline any impact objectives it will consider.

•

Principle Three: Management of Proceeds. The Management of Proceeds criteria are
guided by the requirements that a sustainability bond should be tracked within the issuingorganization, that separate portfolios should be created when necessary and that adeclaration of how unallocated funds will be handled should be made.

•Principle Four: Reporting. The Reporting criteria are guided by the recommendationthat at least Sustainability Reporting to the bond investors should be made of the use ofbond proceeds and that quantitative and/or qualitative performance indicators should be
used, where feasible.

*1:Sustainability Bond Guidelines (June 2018, International Capital Market Association)*2:Green Bond Principles (June 2018, International Capital Market Association)*3:Social Bond Principles (June 2018, International Capital Market Association)*4:Green Bond Guidelines, 2017 (March 2017, Ministry of the Environment, Japan)*5:Climate Bonds Standard | version 2.1 (Climate Bonds Initiative)

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Ⅴ Work Undertaken
Our work constituted a high level review of the available information, based on theunderstanding that this information was provided to us by Obayashi in good faith. We
have not performed an audit or other tests to check the veracity of the information
provided to us. The work undertaken to form our opinion included:•

Creation of an Obayashi-specific Protocol, adapted to the purpose of the BOND,
as described above and in Schedule-2 to this Assessment;•

Assessment of documentary evidence provided by Obayashi on the BOND andsupplemented by a high-level desktop research. These checks refer to current
assessment best practices and standards methodology;•

Discussions with Obayashi management, and review of relevant documentation;•

Documentation of findings against each element of the criteria. Our opinion as
detailed below is a summary of these findings.

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Ⅵ Findings and DNV GL’s Opinion (eligibility against for Sustainability
criteria)
1. Principle One, Use of Proceed
DNV GL has confirmed that the proceeds from the sustainability bond issued by
Obayashi will be allocated to the 3 project portfolios (including 6 projects) which meetthe sustainability bond criteria below;
Eligibility Criteria of Sustainability Bond (brief description):
Wellness Building (project portfolio 01, including 2 projects)
Vocational training and subsidies (project portfolio 02)
Renewable energy (project portfolio 03, including 3 projects)
Schedule-1 shows lists of sustainability project
All the proceeds will be financed and/or refinanced to the sustainability projects.
Detail information about sustainability projects are followings.

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Project Portfolio 01 :Environmentally friendly “Wellness Building” under the concept “smart buildingsthat are good for all people”(fund allocation plan : 5.4billion-JPY)

Project 01-1 Technical Research Institution (Techno-station main building)
Obayashi conducts ZEB-compliant in fiscal year ended May 2014 for the TechnicalResearch Institution (Techno station main building), acquired BELS certification in 27th
March 2019 by installing solar PV and various energy efficiency improvement. In addition,
the techno-station main building because WELL certifiedTM at the Gold level under WELL
Building Standard v1 in the category of New and Existing Building for the first time in theworld as the whole building certification, on November 21, 2017, which contributes tocreating a working environment that achieved safety, security, health and comfort. Those
Obayashi’s initiatives achieve the improvement of both energy consumption and working
efficiency.
Obayashi intends to allocate the funds to part of the repayment funds of long-term debt
since Obayashi procures the long-term debt as additional introduction cost from financial
institutions.
DNV GL conducted the site visiting to Technical Research Institution as well as document
review. DNV GL confirmed the above green (energy efficiency) contribution and work
environment improvement have been established and appropriately maintained the BELS
and WELL certification conditions by continuous monitoring, inspection and investigation,
through interview with Obayashi.

Project 01-2
New Environmentally friendly “Wellness Building” under the concept “smart
buildings that are good for all people”
Obayashi will evaluate and select the building which meet the sustainability eligible
project against their “process for project evaluation and selection” in their framework.
DNV GL will assess the project and revise this opinion.

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Project 01-1

Technical Research Institution (Techno-station main building), with Roof top
type solar PV(Kiyose-city, Tokyo) BELS(ZEB) : 27th Mar 2019, WELL CertifiedTM at Gold Level on 21st Nov
2017)

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Project Portfolio 02 :Secure the skilled workers of construction industry and strengthen trust
relationships with suppliers
Project 02 : Vocational training operation and subsidy for developing of the young
skilled workers (fund allocation plan : 1.0billion-JPY)

Construction industries are facing the issues about securing skilled workers andcomparably lower salary which need to improve. Those issues are clearly disclosed andrequested to improve by MLIT (Ministry of Land, Infrastructure, Transport and Tourism)
and Japan Federation of Construction Contractors. Obayashi initiative through this project02 align with above national and industrial directions. Obayashi also identifies the issues
which they need to focus, such as target population and concrete social benefit guided bysocial bond principles. Project 02 are divided into 2 use of proceeds.
One is for operation of vocational training school. The other is additional subsidy forcertified skilled workers (427 skilled workers were certified in 4 categories) according to
the MLIT and industrial directions. This subsidy is excess to the industrial standard andregulation, therefore it contributes to improve the issues that construction industry faces
and is considered to be eligible as social project.

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Project 02 Vocational training operation and subsidy
for developing of the young skilled workers(Vocational training school, accommodation, field training, in Yashio-city, Saitama)

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Project Portfolio 03 : Renewable energy business based on the action plan “Green
Vision 2050”
Obayashi addresses to Promote the renewable energy business in order to achieve
low carbon society in “3+1 Society” based on medium-to long-term environmental
vision, “Green Vision 2050.”
In this Project Portfolio, 3 projects (Project 03-1 to 3) related to the “Promotion of
the renewable energy business” are nominated to the eligible project as Obayashi
sustainability bond.

Project 03-1 : R&D for CO2-free hydrogen production and logistics system(fund allocation plan : 0.4billion-JPY*partially refinance)
Obayashi will allocate the proceeds from the sustainability bond to the R&D cost for
CO2-free hydrogen production including pilot manufacturing plant construction andlogistics systems (production, storage and distribution). CO2-free hydrogen is
generated by renewable energy source, using geothermal power generation.
Obayashi has launched this project according to the joint research agreement with
Tuaropaqui Trust in December 2018, who owns geothermal power station in New
Zealand. CO2-free hydrogen pilot manufacturing plant construction (target hydrogenproduction capacity; 100t/year) will be completed in 2020.

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Project 03-2 Otsuki biomass power plant(fund allocation plan* : approx. 3.2billion-JPY *including Project03-3)
Otsuki biomass (wood chip) power plant is located in Otsuki city, Yamanashi
prefecture started commercial operation in December. 2018. The rated output is
14.5MW (net output 12.5MW).
DNV GL confirmed that fuel for the power generation is wood chip only* andObayashi secures supply of wood chip by the long-term(20-year) contraction.
(*exception for emergency operation)
The funds from sustainability bond will be allocated to the subsidiary company (OCFinance Corporation, 100% owned by Obayashi) then be financed to the subordinatedloan for the SPC (Specific Purpose Company).

OutlineRated output

14.5MW (net 12.5MW)
Biomassfuel(Wood chip only*)*exception for emergency operation

location

Otsuki city, Yamanashi prefecture

Commercial operation

From 2nd Dec 2018

Project 03-2 Otsuki biomass power plant

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Project 03-3 : Kamikita ogawara onshore wind power (Plan)(fund allocation plan* : approx. 3.2billion-JPY *including Project03-2)
Kamikita ogawara onshore wind power is located in Rokkasho, Aomori which consists
6 towers of wind power. Total rated power is max. 21.6MW (3.6MW/tower) andcapacity factor will be 22 to 25％ at the planning. Kamikita ogawara onshore wind
power is planned to start commercial operation form Jan. 2022.
The proceeds from sustainability bond to will be allocated to the subsidiary company(OC Finance Corporation, 100% owned by Obayashi) then be financed to thesubordinated loan for the SPC (Specific Purpose Company), specially established forrenewable energy projects.

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2. Principle Two, Process for Project Evaluation and Selection
DNV GL has confirmed that the sustainability projects of all three project portfolios
including 6 projects described in the Schedule-1, were evaluated and selected
through the appropriate process by the relevant department of Obayashi based on its
corporate philosophy, management foundation strategy (environmental and social
initiatives) based on the of Medium-Term Business Plan 2017 and in line with 6 ESG
materiality defined by Obayashi, through interview and document review. Projects
are evaluated and selected with deliberations between expert divisions, such as Head
Office Corporate Strategy Division ESG & SDGs Department. President, who is CSR
committee chairman, approves and authorizes the sustainability eligible projects.
DNV GL has reviewed evidence that demonstrates that Obayashi regularly assesses
opportunities for improvement and devises action plans and initiatives to mitigate
negative environmental and social impacts from its operation. DNV GL also confirmedthat Obayashi plans the project and asset integrity for long-term and appropriate
environmental and social benefits evaluation in the project and asset life time.
Specifically, as for the negative impact (environmental risks, such as land use,ecological system and public acceptance) caused by these projects, appropriate
countermeasures and practical action plans which comply relevant regulations andlaws have been taken and will be taken after the evaluation (e.g. Environmental
assessment report). DNV GL confirmed that Obayashi resulted its effect is limited andappropriate action will be executed if required. DNV GL also confirmed that Obayashi
appropriately conducted periodical monitoring and analysis in order to maintain theenergy saving and working environment for WELL and BELS(ZEB) certification,
through Obayashi Technical Research Institute site observation and interviewing aswell as document review.

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3. Principle Three, Management of Proceeds
DNV GL has reviewed and confirmed Obayashi’s plans to trace/manage the proceedsfrom the Bond, from the time of issuance to the time of disbursement, as well as theappropriateness and clarity of their plan to manage total amount of the proceeds.
Obayashi will manage the cash or cash equivalents which equals to fund, until
decision of the proceed allocation. DNV GL has confirmed that Obayashi will
periodically (at least every quarter) review the outstanding balance of the Bond. Totalamount of fund has not been defined in this document, then will be disclosed in thelegal documentation. Obayashi will allocate the fund till Mar. 2024. If the unallocatedfunds arise, Obayashi will allocate them to the other sustainability (green and/or
social) eligible projects according to their sustainability bond framework.
As stated above, DNV GL provides no assurance regarding the financial performanceof the Bond, the value of any investments in the Bond, or the effects of thetransaction.

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4. Principle Four, ReportingDNV GL has confirmed that Obayashi has plans to report/disclose the specificinformation required by the Sustainability Bond Guidelines 2018 in OBAYASHI
Corporate Report and/or Obayashi’s website annually. These will include descriptionof the project list and its progress, allocation including refinance amount andmanagement of the proceeds invested, as well as the associated qualitative or
quantitative environmental and social impacts* [e.g. amount of CO2 emission
reduction evaluation according to the renewable energy power generation, andvocational training and education (e.g. numbers of trainee, certified skilled workers)].
DNV GL will conduct periodic ongoing reviews and state about validity ofevaluation/calculation process and its result in the periodical report.

* Evaluation/Calculation process of environmental and social benefit•

Renewable energy (Wind power, Bioenergy) : CO2 emission reduction amountbased on the actual operation record (electricity generation) (t-CO2/kg)•

CO2 free hydrogen production: Project progress•

Vocational training and education record (e.g. numbers of trainee, certified
skilled workers)(note; Green building environmental benefit)
Obayashi has published the efficiency of CO2 emission reduction
evaluation/plan based on its primary energy consumption by eco design basis(such as BELS certification on the Environmental achievement report in
Obayashi web site), environmental benefit will not be included in annual
report by its performance.

Considering all of the above assessments, DNV GL has confirmed that the nominatedsustainability projects of Obayashi are designed and are planned to be executed inaccordance with related criteria of the Sustainability Bond (considering Sustainability
Bond Guidelines 2018, Green Bond Principles 2018, Social Bond Principles and Green
Bond Guidelines, 2017 by Ministry of the Environment, Japan).

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DNV GL Business Assurance Japan K.K.

30th. May. 2019Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV GL – Business Assurance, Australia

DNV GL – Business Assurance Japan K.K.

Masato Kanedome
Project Leader
DNV GL – Business Assurance Japan K.K.

About DNV GL
Driven by our purpose of safeguarding life, property and the environment, DNV GL enables organisations to advance thesafety and sustainability of their business. Combining leading technical and operational expertise, risk methodology andin-depth industry knowledge, we empower our customers’ decisions and actions with trust and confidence. We
continuously invest in research and collaborative innovation to provide customers and society with operational andtechnological foresight.
With our origins stretching back to 1864, our reach today is global. Operating in more than 100 countries, our 16,000
professionals are dedicated to helping customers make the world safer, smarter and greener.

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Schedule-1 Sustainability Bond Nominated Projects & Assets Outline
No.

01

02

03

Project Portfolio

Environmentally friendly“Wellness Building” under
the concept “smart buildi
ngs that are good for all
people”

Secure skilled workers forconstruction industry an
d strengthen trust relationship with suppliers“Renewable energy busin
ess based on the action p
lan “Green Vision 2050“

Nominated projects
and assets

Green Project
category

Social Project categoryFundamountRemarks(location、plan、size、etc)

01-1︓
Obayashi's Technical R
esearch Institute*refinance

Energy Efficiency bu
ilding (comparablewith certified Green、low carbon buildi
ng)Promoting Well-being residence
and work environment(population who use wellness bui
lding building. Improvement of H
ealth, Work efficiency)

5.4b-JPY

Kiyose, Tokyo. Built in 2014. WELL
certification(gold, 2017),
BELS(ZEB, 2019) CASBEE(S-class,2013),LEED-EBOM-Platinum(2013)(target population, social benefit)

01-2︓
Sustainability eligible p
roject (Wellness Buildi
ng, TBA)

Project eligibility will be evaluated by external reviewer (TBA)

02-1︓
Vocational training andsubsidy－

Providing Education and vocation
al training(skilled workers, secure to maintain/upgrade infrastructure and respond to natural disaster)

1.0b-JPY

03-1︓
R&D for CO2 Free hydrogen manufacturing an
d logistics *partially refinance

Renewable energy
(R&D)

－

0.4b-JPY

03-2︓
Otsuki Biomass power

Renewable energy(Bioenergy, wood
chip)

－

approx. 3.
2b-JPY03-3︓
Kamikita ogawara onshore wind power (Plan)

Renewable energy(Onshore wind
power)－

Various location in Japan, 2019〜2
023(plan)、management(operationand maintain) cost of vocational training and subsidy to the skilled wor
kers certified by Obayashi.
New Zealand, 2018-2019、R&D incl
uding the construction of pilot plant.

Otsuki, Yamanashi, Nov 2018 start
ed commercial operation, 14.5MW(Plan)
Rokkasho, Aomori. Mar 2021 start
commercial operation, max21.6MW

Total bond proceeds︓10.0b-JPY
Obayashi will evaluate and select the project and assets which meet the sustainable eligible project against their Framework (process for Project Evaluationand Selection). External reviewer will revise pre-issuance opinion before funding.

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Schedule-2 Sustainability Bond Eligibility Assessment Protocol
Obayashi Sustainability Bond Framework and Amendment to Shelf Registration Statement will be published for explanation materials to investor(1)

Use of Proceeds

Ref.

Criteria

Requirements

Work Undertaken

DNV GL Findings

1aType of bond

The bond must fall in one of thefollowing categories, as defined by the
Sustainability Bond Guidelines inaccordance with Green and Social Bond
Principles:•
Sustainability Use of Proceeds Bond•
Sustainability Use of Proceeds
Revenue Bond•
Sustainability Project Bond•
Sustainability Securitized Bond

Documents reviewed:
Obayashi Sustainability Bond
Framework
Amendment to Shelf
Registration Statement (draft)
Discussions with Obayashi
management

The reviewed evidence confirms that the BOND falls in
the category:

The cornerstone of a Sustainability
Bond is the utilization of the proceedsof the bond which should beappropriately described in the legal
documentation for the security.

Documents reviewed:
Obayashi Sustainability Bond
Framework
Amendment to Shelf
Registration Statement (draft)
Project documents (including
asset specifications)
Discussions with Obayashi
management

As identified by the purpose of the BOND, Green and/or
Social project and assets, is to use the proceeds tofinance and refinance for projects falling under thefollowing categories:-Green and Social, Wellness Buildings (2projects)• Obayashi Technical Research Institute• Sustainability eligible asset (TBA)- Vocational Training and subsidy (1project)• Vocational Training and subsidy-Finance and Refinance to Renewable energy (3 projects)• R&D for CO2 Free hydrogen manufacturing andlogistics• Otsuki biomass power• Kamikita ogawara onshore wind power
DNV GL’s assessment concluded that these assets

1b

Sustainability
Project
Categories

Sustainability Use of Proceeds Bond.

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Ref.

Criteria

Requirements

Work Undertaken

DNV GL Findings
would present a low risk of CO2 emissions and relative toenvironmental negative effect quantify and qualify forinclusion under the Green Bond Principles within the
Renewable Energy category and Energy Efficiency
category, as well as Social aspects under the Social Bond
Principles (Social contribution and target population ofeach project). Above information is included in legal
documents such as Amendment to Shelf Registration
Statement. DNV GL concluded that 1b requirement issatisfied.

1c

Environmental, social
benefits

All designated Sustainability Project
categories should provide clear
environmentally, socially sustainable
benefits, which, where feasible, will bequantified or assessed by the issuer.

Documents reviewed:
Obayashi Sustainability Bond
Framework
Project documents (including
asset specifications (e.g. BELS,
WELL), social issues (secureskilled workers and technology)
and countermeasure in
construction industry faces,
environmental impact report)
Renewable energy CO2 emission
reduction evaluation spread
sheet
Discussions with Obayashi
management

DNV GL notes that Wind power project and Biomass
power project can present risks of land use and ecology
system through construction and operation. DNV GL
reviewed Obayashi’s provided document and confirmedthat Obayashi already identified the environmental risk
and addressed appropriate countermeasure. Obayashi
has clearly demonstrated those projects will contribute
benefit for environment such as CO2 emission reduction.
Obayashi also provided documents to DNV GL which
are related to the social issues and countermeasures forconstruction industry that aligns with Social Bond
Principles (Social contribution and target population ofeach project).
DNV GL concluded that 1c requirement is satisfied.

1d

Refinancing
share

In the event that a proportion of theproceeds may be used for refinancing,
it is recommended that issuers provide
an estimate of the share of financing
vs. re-financing, and whereappropriate, also clarify whichinvestments or project portfolios may
be refinanced.

Documents reviewed:
Obayashi Sustainability Bond
Framework
Amendment to Shelf
Registration Statement (draft)
Discussions with Obayashi
management

The proceeds of the BOND, in their entirety (10 billion
JPY), will be allocated to sustainability project. Following
project will be refinanced (Refinance share will be
disclosed in annual report)-Refinance to the Wellness Buildings project portfolio-Refinance to renewable energy project portfolio

Page 28 of 35(2)

Process for Project Selection and Evaluation

Ref.

Criteria

Requirements

Work Undertaken

DNV GL Findings

2aInvestment-decision

The issuer of a Sustainability Bondshould outline the decision-making
process it follows to determine theeligibility of projects using
Sustainability Bond proceeds. This
includes, without limitation:• A process to determine how the
projects fit within the eligible
Sustainability Projects categories
identified in the Sustainability Bond
Guidelines considering Green andSocial Bond Principles;• The criteria making the projects
eligible for using the Sustainability
Bond proceeds; and• The environmental and social
sustainability objectives

Documents
reviewed:
Obayashi
Sustainability
Bond Framework
Obayashidocument(internal protocol
and procedures)
Discussions with
Obayashimanagement.

As per the Obayashi Sustainability bond frame work, the issuer has
set out the following criteria including Sustainability Bond Guidelines(ICMA 2018) and Green Bond Guidelines (MOE, 2017) for project
selection :“Eligible sustainability project” means alignment with their corporate
philosophy and environmental and social policy including-Promote the renewable energy business-Promote environmentally responsible real estate development
projects

In addition to information disclosed
by an issuer on its Sustainability
Bond process, criteria andassurances, Sustainability Bond
investors may also take into
consideration the quality of theissuer’s overall framework andperformance regarding
environmental sustainability.

Documents
reviewed:
Obayashi
Sustainability
Bond Framework
Obayashicorporatephilosophy,
environmental
and social
policies
Discussions with
Obayashimanagement

As per the interview and review documents provided by Obayashi,
DNV GL confirmed that Obayashi has addressed to achievesustainable society through its business based on the Obayashi Green
Vision 2050 established in 2011, ESG materiality. Obayashi has
published and disclose OBAYASHI Corporate Report and web site
including its sustainable activities and initiatives described above.

2bprocess

Issuer’s environmental
and social andgovernance framework

whose eligible criterial is stated in ‘Obayashi Green Vision 2050’. In
this sustainability bond, Obayashi has decided eligible project
overarching it and considering the compliance with GBP 2018 as
follows.
Those nominated projects and assets are discussed with Obayashi’s
related department and responsibilities (e.g. ESGs & SDGs
department, Financial department, Environmental department, CSR
committee representatives (representative director, President))
DNV GL concluded that 2a requirement is satisfied throughinterview, discussion and document review.

https://www.obayashi.co.jp/en/sustainability/environment.html
https://www.obayashi.co.jp/en/sustainability/esg.html
DNV GL confirmed and found nothing to suggest that Obayashi’s
environmental and social activity is not in line with their activity tocontribute sustainable environment and society through its projects
in sustainability bond

Page 29 of 35(3)

Management of Proceeds

Ref.

Criteria

Requirements

Work Undertaken

DNV GL Findings

3aTracking

The net proceeds of Sustainability
Bonds should be credited to a subaccount, moved to a sub- portfolio orotherwise tracked by the issuer in an
appropriate manner and attested toby a formal internal process that will
be linked to the issuer’s lending andinvestment operations for
Sustainability Projects.

Documents reviewed:
Obayashi Sustainability Bond
Framework
Procurement scheme
Amendment to Shelf Registration
Statement (draft)
Obayashi’s internal protocol (e.g.
accounting management
procedure, document control
procedure)
Discussions with Obayashi
management

DNV GL confirmed by reviewing documents andinterviewing that Obayashi plans to trace the proceeds form
the Bond, from the time of issuance to the time of
disbursement are appropriate. The full amount of theproceeds will be managed by Obayashi’s financial
department with existing accounting system and using
sustainability bond request for approval document form.
DNV GL confirmed Obayashi internal process can manage
and track the outstanding balance of the sustainability bondproceeds.
DNV GL concluded that 3a requirement is satisfied.

So long as the Sustainability Bonds
are outstanding, the balance of the
tracked proceeds should beperiodically reduced by amounts
matching eligible sustainability
investments or loan disbursements
made during that period.

Documents reviewed:
Obayashi Sustainability Bond
Framework
Obayashi’s internal protocol (e.g.
accounting management
procedure)
Discussions with Obayashi
management

DNV GL reviewed documents and interviewed that
Obayashi plans to trace at the proceeds from the Bond, fromthe time of issuance to the time or disbursement period, andreduce the net balance of proceeds by amounts in line withthe projects and assets debt refinance schedule. At the endof each financial period (at least every one quarter), theoutstanding balance of the Bond will be reviewed by
Obayashi financial department.
DNV GL concluded that 3b requirement is satisfied.

Pending such investments or
disbursements to eligible
Sustainability Projects, the issuer
should make known to investors theintended types of temporary
investment instruments for thebalance of unallocated proceeds.

Documents reviewed:
Obayashi Sustainability Bond
Framework
Amendment to Shelf Registration
Statement (draft)
Discussions with Obayashi
management

The net proceeds of the Bond will be placed in a existingaccounting system and managed by financial departmentusing request for approval document form for sustainability
bond proceeds.
The net proceeds of the bond also will be fully and
immediately disbursed where possible or held in cash or cash
equivalent until disbursement to the nominated projects andassets as per the Obayashi sustainability bond framework.
DNV GL concluded that 3c requirement is satisfied.

procedure-1

3b

Tracking
procedure-2

3c

Temporaryholdings

Page 30 of 35

(4)
Ref.

ReportingCriteria

Requirements

Work Undertaken

DNV GL Findings(DNV GL観察結果)

4aPeriodical
reportingIn addition to reporting on the use of proceeds
and the temporary investment of unallocatedproceeds, issuers should provide at least annuallya list of projects to which Sustainability Bond
proceeds have been allocated including- when possible with regards to confidentiality
and/or competitive considerations- a brief description of the projects and theamounts disbursed, as well as the expectedenvironmentally sustainable impact.

Documents reviewed:
Obayashi Sustainability
Bond Framework
Environmental benefit
evaluation spread
sheets (CO2 emission
reduction evaluation
spread sheet)
Discussions with Obayashi
management

Obayashi will publish the annual report including a
dedicated section on the sustainability bond in OBAYASHI
Corporate Report or website. This will include descriptionof the project and value of the proceeds invested, as wellas the associated qualitative and quantitativeenvironmental and social impacts. Obayashi plans to reporton the total amount of CO2 emission reduction evaluation
based on the operation records (e.g. amount of electricity
generation per year, MWh/y) as environmental benefit andgreen projects progress, vocational training skilled workers
numbers and certified skilled workers number as social
contribution.
. DNV GL concluded that 4a requirement is satisfied.

Page 31 of 35

Appendix-1
Obayashi Code of Conduct

The guidelines help us realize the Obayashi Philosophy and continue being anenterprise trusted by all stakeholders.

1

2

Fulfill our social mission(1)

Provide high-quality buildings, infrastructure, and services(2)

Foster an environmentally responsible society(3)

Value every one of our associates(4)

Build stronger mutual trust with suppliers(5)

Build good relationships with communities

Ensure strict adherence to corporate ethics(1)

Comply with laws and regulations and take a sensible course of action(2)

Promote fair and free competition(3)

Maintain appropriate relationships with stakeholders(4)

Avoid all contact with antisocial forces(5)

Ensure appropriate information disclosure and transparency of management

Page 32 of 35

Appendix-2
Obayashi Environmental Policy and Vision(ⅰ)Environmental Policy-Principles
As a good corporate citizen, Obayashi considers active efforts and continuous
improvement of environmental issues to be integral components of business
management. We envision our future society, seeking to contribute to a realization ofsustainable society.
-Policies
1

2

3

We strive to protect the environment, acting in full compliance with allenvironmental statutes and ordinances, communicating with local
communities.
We gather our knowledge for realization of resilient society that integrates
the elements of low-carbon, recycling-oriented and respecting the natural
world.
We use the expertise we have acquired through our environmental
protection activities, developing even more effective technologies andimplementing new businesses to realize sustainable society.

We sincerely focus on our business, with our affiliates, subcontractors and suppliers,
holding targets and vision to realize a sustainable society.
(ⅱ) Vision (Obayashi Green Vision 2050)
Our medium- to long-term environmental vision, "Obayashi Green Vision 2050," which
was established by using backcasting methodology in February 2011, outlines the future
course of our business activities in terms of helping to build a sustainable society. It sets
forth specific action plans and numerical CO2 emissions reduction targets that will be
crucial to achieving our vision for society in 2050.
Our vision for society in 2050 is what we call a “3+1 Society,” an approach that
integrates the elements of “low-carbon,” “recycling-oriented” and “respect for thenatural world,” predicated on “safety and security.” To achieve that, we have establisheda concrete action plan and are moving forward with various initiatives.

Page 33 of 35

Appendix-3
Obayashi ESG materiality
Upon the stard of Medium-Term Business Plan 2017, Obayashi set its sights on Vision for the
Future. Inspored by it, we are better clarifying and promoting initiatives to solve social
challenges and realize a sustainable society. In FY2019.3, we have set out six ESG
materialities.
1. Establish Environmentally Responsible Society
Response to climate change (pursue a decarbonized society)Contribution to the establishment of recycling-oriented society (promoting effective useof resources through the 3 R's (reduce, reuse, recycle))(Impact on our business)
Expansion of construction demand through development of environmentally related
technology and generation of new businesses
Delay in response to stricter environmental laws and regulation, increase in the costs ofenvironment management, decline in competitiveness
2. Enhance Quality Control and Technological Capabilities
Improvement in construction management skills to maintain high quality
Development of groundbreaking technology to meet many different needs and resolve
problems(Impact on our business)
Improvement in productivity, strengthening of competitiveness, and increase inbusiness opportunities
Loss of trust, decline in competitiveness, loss of business opportunities
3. Ensure Occupational Health and Safety
Comprehensive occupational health and safety management system
Promotion of safety training and other efforts(Impact on our business)
Securing talented human resources, strengthening the supply network of excellent
suppliers
Deterioration in trust in the company from ordering customers and decline inproductivity due to occurrence of accidents

Page 34 of 35

4. Develop and Retain Human Resources
Hiring diverse human resources, comprehensive flexible personnel and training systems
to respond to globalization
Promoting diversity and establishing a work place environment that is easy for anyone
to work in effectively(Impact on our business)
Securing talented human resources, improving organizational capabilities, andexpanding business domains
Outflow of talented human resources, decline in productivity, increasing organizational
rigidity
5. Implement Rigorous Compliance
Promoting management that places highest priority on compliance with laws andregulations
Improvement of the system of internal controls(Impact on our business)
Improvement of trust in the company by society, improvement in organizational
capabilities, strengthening of business baseSuspension/cessation of business activities, loss of trust, loss of business opportunities
6. Conduct Responsible Supply Chain Management
Ensuring that everyone understands the procurement guidelines and strictly adheres tothemConducting surveys of the procurement process and conditions(Impact on our business)
Improving competitiveness by building a strong network with suppliers andstrengthening the ability to respond in the BCP (business continuity plan) in the eventof a disaster
Suspension/cessation of business due to halting of procurement, and a loss of trust andloss of business opportunities from the occurrence of human rights issues and otherproblems

Page 35 of 35

Appendix-4

Obayashi Sustainability projects and SDGs contributions
Obayashi identified the social issues and those countermeasures which Obayashi group
execute. Obayashi has established “ESG issued (materiality)” (divided into 6 categories)
based on above (Appendix-3).
Obayashi links Sustainability projects related to the ESG materiality, its initiatives andSDGs contribution, as following table. Obayashi also does same links with other theirbusiness area which are disclosed in its web site and OBAYASHI corporate report 2018.
Table
No.

01

02

03

Project Portfolio

Environmentally frien
dly “Wellness Building” under the concept“smart buildings thatare good for all people”

Secure skilled worker
s for construction ind
ustry and strengthen
trust relationship with
suppliers“Renewable energy business based on theaction plan “Green Vision 2050“

ESG materiality, their initiatives and SDGs contribution
Nominated projects
and assets

Green Project
category

Social Project
category

01-1︓
Obayashi's TechnicalResearch Institute

Energy Efficiency building (comparabl
e with certified Gre
en building、low ca
rbon building)

Promoting Well-bei
ng residence andwork environment

02-1︓
Vocational training andsubsidy－

Providing Education and vocational tr
aining03-1︓
R&D for CO2 Free
hydrogen manufacturi
ng and logistics

Renewable energy(Energy storage using geothermal R
&D)

－

03-2︓
Otsuki Biomass power

Renewable energy(Bioenergy, wood
chip)

－

03-3︓
Kamikita ogawara
onshore wind power

Renewable energy(Onshore wind
power) (Plan)

－

01-2︓
Sustainability eligible
project (Wellness
Building TBA)

SDGs 3 ︓Good Health and Well-being
SDGs 11 : Sustainable Cities and Communities
SDGs 4 : Quality Education
SDGs 9 : Industry, Innovation and Infrastructure
SDGs 7 : Affordable and Clean energy

SDGs
Contribution