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Environmental Initiatives

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Environmental Initiatives

Improving the environmental performance of the properties we manage is one of our social missions. We will lower the environmental impact and make contribution to environmental sustainability by constantly reducing the negative environmental impact of these properties, such as energy consumption, CO2 emissions, water consumption and the generation of waste materials. We also have activities for the proper management of hazardous substances and reduction in their use.


climate Change

Climate Change

Climate Change  Global warming, as the main factor for a climate change, has been the primal topic at international meetings so far and in 2015 Paris Agreement has adopted a new framework in 18 years since Kyoto Protocol. In this agreement, one of the goals is to keep the increase in global average temperature to well below 2℃, preferably to 1.5℃, compared to pre-industrial levels. In addition, at COP26 in 2021, the Glasgow Climate Pact was agreed that the 1.5℃ target remains in sight and scales up action on dealing with climate impacts., Kenedix recognizes that efforts to climate change is the most important issue for our business activities and properties under management.
 

Support for TCFD recommendations

The Asset Management Company expressed support for the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) and also joined the TCFD consortium, a group of domestic companies that support TCFD recommendations in October 2021. 
TCFD is an international initiative established by the Financial Stability Board (“FSB”) at the request of the G20 for the purpose of discussing the disclosures of Climate-related financial information and the responses by financial institutions. TCFD publishes recommendations for companies to disclose their governance, strategy, risk management, and metrics and targets for Climate-related risk and opportunities. 
On the other hand, TCFD Consortium is a group of companies and financial institutions that support the TCFD recommendations. The consortium was established with a view to further discussion on effective corporate disclosures of Climate-related information and initiatives to link disclosed information to appropriate investment decisions on the part of financial institutions and other organizations.
The Investment Corporation and the Asset Management Company will work to expand information disclosure based on TCFD and continue to actively promote ESG (Environment, Social and Governance) initiatives based on “Sustainability Policies” established by the Asset Management Company.
 

Governance

■Governance structure for climate change

The initiatives for sustainability are promoted under the leadership of the Sustainability Committee established in the Asset Management Company.
The Sustainability Committee gathers, analyzes, and examines the policies and targets, activity plans and various initiatives, matters related to risk management, and other important matters related to sustainability or ESG for the Investment Corporation and the Asset Management Company, and shares them with related parties, with the aim of promoting initiatives for sustainability and ESG-related matters. The committee meets in principle, every 3 months, and the content reviewed is also reported to the Asst Management Company’s Board of Directors with an independent external member, and to the Investment Corporation’s Board of Directors with independent supervisory directors.
The Sustainability Committee is composed of the President & CEO (Chief Sustainability Officer), who is the Chair of the Sustainability Committee, and as members, the committee is composed of full-time directors, the Head of Strategic Planning Department, the General Managers of Strategic Planning Department, who are in charge of each REIT Department, the Head of Sustainability Office, the Head of Strategic Planning and the Head of Asset Management Division, who are in charge of each REIT Department, and the Head of Finance & Accounting Division.
In addition, the Head of Sustainability Office also serves as a member of the Public Relations and Sustainability Department of Kenedix, Inc., the parent company of the Asset Management Company. Under the unified policy of the entire Kenedix Group, an organizational structure has been established to promote initiatives related to sustainability and ESG across the board. 
 

 

















Strategy

■Scenerio Analysis

The Asset Management Company conducted a scenario analysis based on multiple world outlook in order to understand the risks and opportunities that climate change may pose to the Investment Corporations it manages in the future, and to proactively consider and respond to these risks and opportunities. World outlook of each scenario is provided below. The analysis was conducted with reference to future climate projections and energy trends published by international organizations.

(Major reference sources)

  Transition risks Physical risks
4℃ Scenario IEA (International Energy Agency)
World Energy Outlook 2020 STEPS
IPCC (Intergovernmental Panel on Climate Change)
Fifth Assessment Report RCP8.5
1.5℃ Scenario IEA (International Energy Agency)
NZE2050
IPCC (Intergovernmental Panel on Climate Change)
Fifth Assessment Report RCP2.6

■Financial Impact based on Scenerio Analysis

The Asset Management Company examined the medium-term(2030) and long-term(2050) impacts of the risks, opportunities, and financial impacts for the Investment Corporation it manages for each of world outlook in the 4℃ and 1.5℃ scenario described above. The summary of the evaluation is as follows.

Risks and Opportunities Financial impact Measures to address risks and opportunities
Category Factor 4℃
Scenario
1.5℃
Scenario
Medium
term
Long
term
Medium
term
Long
term
Transition Risks and Opportunities Policy and legal CO2 emission regulation
Introduction of CO2 emission regulations as a measure to comply with international frameworks incur costs and risks related to CO2 emissions.
Increase in costs to improve energy efficiency of existing properties Low Low Low Mid
  • Improvement of energy-saving in existing properties
  • Establishment of GHG reduction targets
Carbon tax
The introduction of carbon tax as a measure to comply with international frameworks incur costs and risks related to CO2 emissions.
Increase in carbon tax costs Low Low Mid High
  • Introduction of renewable energy
  • Acquisition of non-fossil certificates, etc.
Increase in acquisition costs of non-fossil certificates, etc. Low Low Mid Mid
Technology Advancement of energy-saving and renewable energy technologies
Further technology advancement will result in lower installation costs and effective achievement of energy-saving and renewable energy.
Increase in costs due to introduction of new technology Low Low Low Mid
  • Energy-saving in existing properties
Decrease in utility costs due to energy-saving, introduction of renewable energy, conversion to ZEB/ZEH, etc. Low Low Low Mid
  • Acquisition of ZEB/ZEH properties
  • Conversion of existing properties to ZEB/ZEH
Markets Evaluation by investors and financial institutions
Investors and financial institutions will value improvement of the environmental performance of properties.
Increase in financing costs due to low valuation Low Low Low Low
  • Energy-saving in existing properties
  • Acquisition of environmental certifications
  • Improvement of engagement with investors and financial institutions
  • Utilization of green finance
Decrease in financing costs due to high valuation Low Low Low Low
Focus on environmental certification
Environmental certification will be required for portfolio evaluation by investors and financial institutions as well as property selection by tenants.
Increase in cost of actions to improve evaluation Low Low Low Low
  • Acquisition of environmental certifications
Increase in acquisition costs of environmental certifications Low Low Low Low
Reputation Tenant behavior change due to environmental orientation
Environmental performance of properties will become valued due to regulation compliance and changing preferences.
Low environmental performance properties becoming stranded Low Low Mid Mid
  • Energy-saving in existing properties
  • Acquisition of environmental certifications
  • Engagement
Maintain and improve occupancy rates by improving environmental performance Low Low Mid Mid
Tenant behavior change due to disaster-prevention orientation
Disaster prevention aspect of properties will become valued due to increasing disasters caused by rising temperatures and sea level.
Low resilience properties becoming stranded Mid Mid Low Low
  • Due diligence on acquisition
  • Flood risk analysis of properties
  • Improvement of resilience
  • Engagement
Maintain and improve occupancy rates by improving resilience measures Mid Mid Low Low
Physical Risks and Opportunities Acute Intensification of heavy rains and torrential rains
The frequency of property damage will increase due to severe wind and extreme flood.
Increase in disaster recovery costs Mid Mid Low Low
Decrease in rental income during the recovery period Mid Mid Low Low
Chronic Rise in sea level
Chronic rise in sea level.
Increase in costs to cope with sea level rise Low Low Low Low
Rise in average temperature
Chronic rise in average temperatures.
Increase in utility costs during summer Low Low Low Low
  • Energy-saving in existing properties
The financial impact (low, mid, or high) of each scenario is formulated through discussions based on qualitative and quantitative perspectives at the Asset Management Company. The red color of the financial impact in each scenario represents risk items, and the green color represents opportunity items. This evaluation will continue to be reviewed and updated as necessary based on new external and internal factors that have arisen and close examination of the quantitative impact.
■Risk Management
Each REIT Department of the Asset Management Company and the Sustainability Committee identifies and evaluates the sustainability and ESG-related risks of the Investment Corporation and the Asset Management Company. These sustainability and ESG-related risks are managed on a daily basis by each department in charge, and important risks are periodically analyzed and reviewed by the Sustainability Committee under the supervision of the chairperson of the Sustainability Committee, and are managed appropriately. In addition, these risks are integrated into the overall risk management of the organization by sharing them with related parties as necessary.

Metrics and Targets

■Metrics and Targets related to Climate Change
Reduction of energy consumption and CO2 emissions is one of our material issues. The Asset Management Company and the Investment Corporation are making a contribution to environmental sustainability by using our business activities and property management operations in continuously cutting energy consumption and CO2 emissions in order to lower our environmental impact. 
The Investment Corporation sets reduction targets related to climate change and conducts ongoing monitoring and promotes initiatives that lead to a reduction in environmental impact. As a result of the scenario analysis, the Investment Corporation and the Asset Management Company are currently in the process of redefining the targets.
Target on energy consumption etc.,

Targets of Reduction of GHG Emission and Energy Consumption, etc.

Responding to climate change is one of the important social issues, and with initiatives for climate change countermeasures are accelerating globally. The Investment Corporation has newly established GHG emission reduction targets in order to actively promote the reduction of environmental impact and contribute to sustainability of environment through the medium- to long-term reduction of GHG emission in the properties  it owns. 

GHG emission reduction targets (compared to fiscal year 2015 (per unit))
    In fiscal year 2030    By 2050
     40% reduction     
    Carbon neutrality  
(Note)The above reduction targets are for Scope1 and Scope2. 
(Note)The above reduction targets are for common areas of residential facilities.


The Investment Corporation has also set reduction targets of energy consumption, etc. (medium- to long-term targets) as follows
Energy Consumption(per unit)  Reduce the energy intensity by 5% (an annual average rate of 1%) or more in five years based on FY2018 
 Water Use(per unit)  Not increase water use in five years based on FY2018
(Note)The above reduction targets are for common areas of residential facilities.
Environmental Performance

Performance

■GHG Emission (CO2 Emission)
  FY 2015
(Baseline) 
FY 2017  FY 2018  FY 2019  FY 2020  FY 2021 
Total(t)   4,737  4,796  4,814  5,573  5,306  5,299
Intensity (t/㎡)
 0.00570  0.00551  0.00509  0.00560  0.00520  0.00506
(Note1)The above data are for common areas of residential properties. 
(Note2)GHG emission figures are calculated by the Asset Management Company using the substitute value of emissions coefficient for each electric power supplier announced by Ministry of the Environment.
 

■Energy Consumption and Water Use
(Residential Property)
  Units  FY 2018
(Baseline) 
 FY 2019   FY 2020
 FY 2021 
 Energy Consumption   Total(MWh)  6,930  6,961  7,366  7,684
 Intensity (MWh/㎡) 7.32
 7.00  7.22  7.33
 Water Use  Total(㎥)        
 Intensity(㎥/㎡)        
(Note)The above data are for common areas of residential properties (including some retail areas). 

(Healthcare Facility)
  Units
 FY 2018
(Baseline) 
 FY 2019   FY 2020   FY 2021
 Energy Consumption   Total(MWh)  12,437  25,693  27,318  29,639
Intensity (MWh/㎡)
8.66
 14.11  18.04 16.88
Water Use
 Total(㎥)        
 Intensity(㎥/㎡)        
(Note)Properties for which information has been received from operators are counted.
 
(Portfolio)
  Units
 FY 2018
(Baseline) 
 FY 2019   FY 2020
 FY 2021 
 Energy Consumption   Total(MWh)  19,368  32,655  35,361  38,062
 Intensity (MWh/㎡) 8.13
 11.60  13.71 13.37
 Water Use  Total(㎥)        
 Intensity(㎥/㎡)        
(Note)The above includes data for residential properties and healthcare facilities as well as accommodations.

Examaple of environmental initiatives

Example of environmental initiatives

■Installation of LED Lights in Common Area

KDR is making various efforts to conserve energy from the viewpoint of environmental consideration and cost reduction. One of our efforts is to reduce the cost of replacing light bulbs and electricity consumption by changing the lighting fixtures in common areas to LEDs as appropriate.


Until
2H 2016 
2H 2016
1H 2017

2H 2017
1H 2018

2H 2018
1H 2019
2H 2019
1H 2020
2H 2020
1H 2021

Total 
Property (props)  12 14 10 10 18 2 66
Expense (mln yen) 30.5 22.4 11.0 14.6 46.1 7.5 132.1
Annual reduction (mln yen) 8.0 7.7 3.5 3.2 7.5 1.2 31.1
 
 
 
 
 
 
 
 

Until
2H 2016 
2H 2016
1H 2017

2H 2017
1H 2018

2H 2018
1H 2019
2H 2019
1H 2020
2H 2020
1H 2021
Total
 Property (props)  12 14 10 10 18 2 66
 Expense (mln yen) 30.5 22.4 11.0 14.6 46.1 7.5 132.1
 Annual reduction (mln yen) 8.0 7.7 3.5 3.2 7.5 1.2 31.1
sharing board
■Sharing vehicle ports

A portion of the property grounds is leased for electric bicycle, electric motorcycle, and electric kickboard sharing ports to provide services to residents and the surrounding community and reduce environmental impact.

 


  • Electric bicycle

  • Electric motorcycle
  •  
     
     
     
     
     
     
     

    Electric kickboard
Remote Surveillance of Road Heating
■Remote Surveillance of Road Heating

ロードヒーティングの遠隔監視

We have installed remote surveillance system for road heating (snow melting equipment) at our three properties located in Sapporo. The installations have results in significant reduction in the fuel costs melting snow.

 

■Installing Secure Lockers for Deliveries

宅配ボックスの設置

Secure lockers for parcels eliminate the need for delivery companies to return to a property when a resident is not home the first time. This reduces transportation CO2 emissions and wasted working time for drivers.

Installation:128 lockers
Installation rate:95%
(as of January 2022)

 

■Outlets for recharging electric cars

宅配ボックスの設置

In order to respond to the spread of electric vehicles and plug-in hybrid vehicles, KDR has installed outlets for charging electric vehicles in the parking lot for residents.



Installation: 3 props
signage
■Use of digital signage to supply information

KDR has installed digital signage in the common areas of some of our residential properties to disseminate information on infection spread prevention, separating garbage, and energy conservation promotion.

fukugou

Investments in Mixed or Multi-use property

The Investment corporation invests in 28 Mixed or Multi-use properties (Residential 21 props and Healthcare 7 props, equivalent to 16% of portfolio as at June 2022). Investing in the properties hosting supermarket, convenience store or clinic contribute to reduce environmental impact by reducing walking distance to the property, to activate local community and to improve health for residents or neighbors. Investment in the property that promote to use public transportation and reduce CO2 emissions:Number of properties within a 10-minute walk to the nearest station 81%.


Examples of Mixed or Multi-use property:


stakeholder

Stakeholder engagement to improve property performance

As KDR and KFM are continuously making effort to realize sustainable environment, we think it is crucial to cooperate with our tenants who constantly use the properties. KDR and KFM are aiming to cooperate by taking initiatives to raise awareness and promoting green lease that allow both owner and tenant to share economic merit to achieve sustainable environment.Kenedix Group has identified “tenant engagement to improve environmental performance” as material topic and been making contribution through promoting tenant cooperation and cooperating with other stakeholders such as property management companies who actually manage the building and KFM employees who manages the properties.

Green Lease

■Green Lease 

A green lease is where building owners and tenants collaborate to reach voluntary agreements with regards to energy saving and other measures to reduce environmental burdens of real estate as well as improvements of indoor environments through contracts, memorandums of understanding and such and implement the contents of these agreements.

          
Based on the green lease at the KDR-owned healthcare facility “TEN”, KDR conducted LED lighting implementation work for energy-saving at the KDR’s expense.  A certain part of the tenant’s benefits of reduction in electricity charges for the lighting equipment and bulb replacement costs resulting from such renovations are paid to KDR as green lease fees.

 
 
 
 

Based on the green lease at the KDR-owned healthcare facility “TEN”, KDR conducted LED lighting implementation work for energy-saving at the KDR’s expense.  A certain part of the tenant’s benefits of reduction in electricity charges for the lighting equipment and bulb replacement costs resulting from such renovations are paid to KDR as green lease fees.

 
cooperation with PM
■Cooperation with Property Management Company
KDR and KFM are engaging with property management companies to share our vision, policies of sustainability and when making contract with a new tenant, property management company explains these ideas to tenants to achieve their cooperation.

■Promoting Lease Agreement with Clause for Environmental Cooperation
KDR has promoted including clause to cooperate to improve environmental performance of the property, comfort and productivity of our tenant into its base contract, etc.

■Education to Employees on Green Building
KFM provides annual sustainability training by external specialist to improve awareness and knowledge on green building for its employees. Also, it encourages our employees to acquire qualifications related to green building.