The following is the adverse sustainability impact statement of Sekisui House Reit, Inc ("SHR") pursuant to Regulation (EU) 2019/2088 ("SFDR"). SHR has no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan, and relies on Sekisui House Asset Management Co., Ltd. (the “Asset Manager”) to manage and operate the properties in SHR’s portfolio. SHR and the Asset Manager are hereinafter referred to collectively as "we". "us" or "our". Please note that SFDR requirements, including the scope of their application to issuers outside the European Economic Area, continue to evolve. We are therefore taking a principles-based approach to compliance with the SFDR disclosure standards, which are subject to change.
1. Summary
We consider principal adverse impacts of our investment decisions on sustainability factors. The present statement is our consolidated statement of the principal adverse impacts on sustainability factors ("PAI"). The statement covers the reference period from January 1, 2023 to December 31, 2023 (unless otherwise stated). The statement will be reviewed at least once during every 12-month period. Our vision is to maximize unitholder value through asset management while delivering high-quality social capital to people and society. We and the Asset Manager conduct real estate investment management that takes into consideration environment, social and governance (collectively referred to as "ESG") factors in accordance with Sekisui House, Ltd.’s ("Sekisui House") Sustainablity Vision, which aims to achieve the following goals: decarbonized society, society in which humans and nature coexist, a circular economy, society characterized by health and longevity, and diverse society. The Asset Manager has established a Sustainability Policy consistent with this vision. We use the definition of PAI as described in Recital 20 of SFDR being "those impacts of investment decisions and advice that result in negative effects on sustainability factors," with sustainability factors referring to environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters as defined in Article 2 (24) of SFDR. We believe that investment decisions that negatively affect climate or other environment-related resources, or have negative implications for society, can have a significant impact to risk and value creation for SHR's unitholders. To this end, we consider PAI of our investment decisions throughout all major steps of the investment decision and property management process throughout the lifecycle of the properties in SHR's portfolio.
2. Description of principal adverse sustainability impacts
Nearly all types of economic activity have the potential to impact various PAI indicators, both positively and adversely. We aim to manage the risk connected to PAI from our investment decisions in several ways, including general screening criteria, due diligence and our ESG initiatives. Some of the PAI indicators listed below are currently already being monitored and reported. As the availability of data improves, it is our intention that more indicators will be added.
SHR does not invest in investee companies, but invests in real estate. As adverse sustainability indicators 1-16 as contained in Table 1 of Annex 1 of the SFDR Delegated Regulation pertain to investee companies, these are

Table 2
Additional climate and other environment-related indicators SHR does not invest in investee companies, but invests in real estate. As adverse sustainability indicators 1-17 as contained in Table 2 of Annex 1 of the SFDR Delegated Regulation pertain to investee companies, these are not included in this PAI statement, which pertains to real estate investments.
excluding certain properties due to data availability. In addition, properties that were disposed of during the period are excluded. The relevant data has been verified by a third party for the years 2022 and prior, and the same verification is underway for the 2023 data.
Table 3
Additional indicators for social and employee, respect for human rights, anti-corruption and anti- bribery matters SHR has no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan, and relies on the Asset Manager to manage and operate the properties in SHR's portfolio. Accordingly, additional indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters in this PAI statement pertain to the Asset Manager and the tenants of the properties in SHR's portfolio, to the extent available.
For descriptions of actions which SHR takes and will take with respect to the PAI indicators, please refer to our ESG website: https://sekisuihouse-reit.co.jp/en/esg/index.html
3. Description of policies to identify and prioritize principal adverse sustainability impacts
Subject to data availability, we monitor the selected PAI indicators for the existing properties in SHR's portfolio. Prior to our investment in a property, we conduct a due diligence review of the property, including ESG due diligence, which includes selected PAI indicators. The due diligence findings related to selected PAI indicators are reported and reviewed prior to the investment decision. The Asset Manager's green finance framework is applicable to both green bonds (Note)  and green loans, under which certain environmentally-friendly investment projects ("Eligible Green Projects") are evaluated and selected by the Sustainability Committee, which is chaired by the Asset Manager's President & Representative Director and participated by all full-time directors, Compliance Officer and heads of all department of the Asset Manager, in accordance with its Sustainability Policy and eligibility criteria described below. (Note) Information about the former green bond framework that applies to the outstanding green bonds issued prior to the renewal of the green finance framework in December 2022 can be found on our website: [https://ssl4.eir-parts.net/doc/3309/tdnet/1656516/00.pdf ] . . Eligibility Criteria for Green Finance . A building that received a third-party certification described below at the borrowing or payment date of green finance, and/or that is expected to receive such certification: 3, 4, or 5 Stars under the DBJ Green Building Certification; o B+, A or S rank under the CASBEE certification for Real Estate; o BELS Certification: 3 Stars, 4 Stars, 5 Stars; or o BELS Certification: following assessment of ZEH and ZEB o ZEH-M, Nearly ZEH-M, ZEH-M Ready, ZEH-M Oriented; or . . ZEB, Nearly ZEB, ZEB Ready, ZEB Oriented. When we select assets for investment in connection with our green bonds or green loans, the properties must meet the relevant eligibility criteria. For further information, please refer to our ESG website: https://sekisuihouse-reit.co.jp/en/esg/index.html
4. Engagement policies
Due Diligence and Screening Prior to SHR's investment in a property, the Asset Manager conducts a due diligence review of the property, including environmental risk assessment, by investigating the history of use of hazardous substances such as asbestos and PCB, geological conditions and soil contamination. We do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances. However, from time to time we acquire properties not meeting the standards as long as they are deemed fixable promptly after acquisition. Also, we make investment decisions for properties outside Japan in accordance with the applicable environmental laws and ordinances in the respective jurisdictions and based on reasonable local practices.
Engagement
We, in collaboration with tenants and property managers, implement various environmental measures, such as for energy conservation and CO 2 reduction, at some of SHR's properties. At Akasaka Garden City, tenants are regularly convened to hold CO 2 reduction promotion meetings, where energy consumption and CO 2 emissions are reported to each tenant, and energy conservation efforts are explained in conjunction with these reports to raise environmental awareness. We also enter into lease agreements, which include provisions that require our tenants to cooperate with us in collecting energy consumption data, obtaining green certifications and taking other environmental measures and engaging in other ESG efforts such as reduction of waste generated during the renovation of buildings and use of building materials that are environmentally-friendly (such lease agreements, the "Green Leases"), with our tenants. We have set the promotion of Green Leases as one of our KPIs. As one of our KPI targets, we aim to increase the proportion of the portfolio under Green Leases to 70% or higher by 2030 based on leasable area. As of April 30, 2024, SHR has entered into Green Leases with 34.2% of the tenants based on the leasable area. We will promote Green Leases while strengthening cooperation with tenants.
5. References to international standards
The Global Real Estate Sustainability Benchmark ("GRESB") is a third-party organization promoting actionable insights, ESG data and benchmarks that measure the sustainability performance of real estate companies, including asset managers, around the world. In the 2023 GRESB Real Estate Assessment, SHR received "3 Stars" in GRESB Rating, which is based on GRESB Overall Score and its quintile position relative to global participants. In 2023, SHR also received a "Green Star" designation for seven consecutive years by achieving high performance both in Management Component that evaluates policies and organizational structure for ESG promotion, and Performance Component that assesses environmental performance and tenant engagement of owned properties. In addition, in 2023, SHR received the highest "A" rating in the GRESB Public Disclosure, which assesses the width of ESG information disclosure, for the fourth consecutive year in recognition of our ESG information disclosure efforts. CDP is an international non-profit organization that manages a worldwide system for the disclosure of environmental information by corporations and municipalities. Since its establishment in 2000, CDP has been leading efforts to promote corporations to disclose their environmental impact including reducing greenhouse gas emissions, and protecting water resources and forests by utilizing capital markets and corporate procurement. SHR participated in the CDP Climate Change 2023 category for the first time and received a score of "A-", which is the second highest evalution. SHR believes that its GHG emission reduction initiatives, governance, and risk management were particularly well received. MSCI ESG Ratings investigate, analyze, and rate the extent to which companies are appropriately managing the risks and opportunities related to ESG and provide a comprehensive corporate ESG rating of seven levels, ranging from "AAA" to "CCC". SHR acquired "AA" in the rating. In addition, SHR has been included in the “MSCI Japan ESG Select Leaders Index” in 2022. The Index is composed of select companies with high ESG performance from among the companies in the MSCI Japan IMI Index. Dow Jones Sustainability Asia/Pacific Index ("DJSI Asia/Pacific") of the Dow Jones Sustainability Indices is an ESG investment index which was jointly created by S&P Jones Indices based in the U.S. and RebecoSAM based in Switzerland. Constituent companies with excellent sustainability performance are selected based on “Governance & Economic, Environmental and Social” criteria. SHR was newly selected as a constituent of the DJSI Asia/Pacific in year 2023, receiving high evaluation in transparency of disclosure and risk management in the “Governance & Economy” category, measures for addressing climate change in the “Environment” category, and human rights initiatives in the "Society" category. The Sustainability Yearbook is issued annually by S&P Global Inc. to evaluate the major companies around the world based on the "Governance & Economic, Environmental and Social" perspectives, and award the companies with excellent sustainability performance. The top 15% companies with excellent sustainability performance in each industry are selected as a "Sustainability Yearbook Member", and are published in "The Sustainability Yearbook". SHR received high evaluation in transparency of disclosure and risk management in the “Governance & Economy” category, measure for addressing climate change in the “Environment” category, and human rights initiatives in the "Society" category, resulting in being selected for the first time as a "Sustainability Yearbook Member" for the Equity Real Estate Investment Trusts (REIT) industry. FTSE4Good Index Series is an index series provided by FTSE Russell, a global index provider designed to measure the performance of companies that demonstrate strong ESG practices, the constituents are regularly reviewed based on highly transparent management methods and clearly defined ESG criteria. SHR was selected as a constituent of the Index Series in recognition of SHR's ESG efforts upon the 2022 review. Sustainalytics ESG Risk Ratings is an ESG Risk Rating provided by Morningstar Sustainalytics to institutional investors to measure a company's exposure to industry-specific material ESG risks and how well a company is managing those risks. In 2024, SHR was assessed to be at Negligible Risk. The Asset Manager became a signatory of the Principles for Responsible Investment ("PRI"), which was established under the leadership of the then-United Nations Secretary-General in 2006, together with an international network of investors. In 2023, the Asset Manager acquired the highest rating of "5 stars" in two categories, "Policy Governance and Strategy" and "Real Estate", on PRI's annual assessment. Click here for ASSESSMENT REPORT. Click here for PRIVATE TRANSPARENCY REPORT. The Asset Manager expressed support for the Task Force on Climate-related Financial Disclosures ("TCFD") recommendations, which was established by the Financial Stability Board. We also support the United Nations' Universal Declaration of Human Rights, the SDGs and the Ten Principles of the UN Global Compact. 6. Historical comparison See Table 1, Table 2 and Table 3 above.