• Awareness of Climate Change
• Basic Policy / Commitment
• TCFD
• Information Disclosure Based on TCFD Recommendations

Awareness of Climate Change

Progress in climate change is a scientific fact as indicated mainly by the Paris Agreement (2015), IPCC Special Report (2018) and IPCC Sixth Assessment Report (Working Group 1, 2021), and the progress in climate change is expected to result in the occurrence and expansion of weather disasters such as the intensification of typhoons and heavy rains, the frequent occurrence of heat waves and droughts and progress in global sea level rise.
Achieving net zero by 2050 is increasingly necessary as a global effort to mitigate climate change, and the transition to socio-economic decarbonization and its process may have a significant impact on NIPPON REIT's business.
NIPPON REIT recognizes that it is essential to enhance the resilience of its businesses by identifying, assessing and managing risks and opportunities that may be brought about by climate change from a range of perspectives, including the securing of NIPPON REIT's sustainable and stable profitability on a long-term basis.

Basic Policy / Commitment

SRA supports the international goals set out in the Paris Agreement and will continue to promote initiatives to achieving net zero GHG emissions to contribute to climate change mitigation.

TCFD

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Information Disclosure Based on TCFD Recommendations

Governance

The operating officer for climate-related issues at SRA will periodically provide a report about matters related to climate change initiatives, such as the identification and evaluation of the impact of climate change, management of risks and opportunities, progress of initiatives pertaining to adaptation and mitigation, and establishment of metrics and targets, to the chief executive (President & CEO) in charge of climate-related issues at the Sustainability Promotion Committee in accordance with the Climate Change and Resilience Policy.
Policies, targets, and various measures related to climate change that have been drafted by the relevant divisions are discussed and examined by the Sustainability Promotion Committee and then determined by the Chief Officer of climate-related issues.
Discussions at the Sustainability Promotion Committee are reported regularly to the Board of Directors of SRA and the Board of Officers of NIPPON REIT.

Strategy

Scenario Analysis

To identify risks and opportunities related to climate and identify, evaluate and manage their impacts on the management activities, strategies and financial plans of NIPPON REIT, we examined changes in the external environment in 2050 and how they may affect our business by referring to the following "scenarios" published by international organizations, etc., and assuming changes in the world under each scenario.

	1.5℃ scenario	4℃ scenario
Transition Risks	IEA (International Energy Agency) World Energy Outlook2022 NZE2050	IEA World Energy Outlook 2022 STEPS
Physical Risks	IPCC (Intergovernmental Panel on Climate Change) the Sixth Assessment Report SSP1-2.6	IPCC the Sixth Assessment Report SSP5-8.5

4℃ scenario

Scenarios in which climate change mitigation measures that exceed the current level are not realized, GHG emissions will continue to increase, and the physical risks of weather disasters will increase.

1.5℃ scenario

Scenarios in which social policies for decarbonisation, emission regulations and technology investment, etc. make greater progress than at present in order to achieve the Paris Agreement goals, and the transition risk becomes relatively higher

Risk Management

Identification of risks and opportunities, the evaluation of their financial impact, and our initiatives

Based on the scenario analyses, SRA has identified risks and opportunities and evaluated their impact on our business as shown in the table below.

*	SRA qualitatively analyzed the degree of financial impact on financial indicators and evaluate it in three stages: large, medium and small.

Type of risk		Risk/Opportunity	Financial Impacts	Financial Impacts				Risk Management, Countermeasures, and Initiatives
				4℃		1.5℃
				Mid term 2030	Long term 2050	Mid term 2030	Long term 2050
Transition Risks	Policy and Legal	Toughening taxation on GHG emissions by introducing a carbon tax	Increasing tax burden on GHG emissions of properties due to the introduction of carbon tax	Small	Small	Medium	Large	Reducing and declining energy consumption and GHG emissions Setting and monitoring of GHG emission reduction targets Reducing energy consumption through the renovation of portfolio properties and collaboration with tenants
		Stricter energy efficiency evaluation, certification and labeling systems for buildings	Increasing cost burden due to rising environmental certification expenses for existing properties Increasing (operation) expenses, such as payment to external vendors to comply with the labeling systems	Small	Small	Large	Large	Setting of environmental certification targets and management of progress Management of energy usage through the introduction of energy management system Generation of expenses for renovating existing properties to improve energy efficiency
	Technology	Evolution and widespread adoption of renewable energy and energy-saving technologies	Increasing expenses for introducing new technologies to prevent the equipment of portfolio properties from becoming technologically obsolete	Small	Small	Medium	Large	Introduction of renewable energy Conversion of existing properties to ZEB/ZEH and the acquisition of ZEB/ZEH properties Introduction of advanced energy-saving technology Implementation of energy-saving renovation work
	Market	Changes in the ESG evaluation and investment and lending stance of investors and financial institutions	Rising funding costs	Small	Small	Medium	Large	Rising ratio of environmentally certified area (to total floor area) Implementation of green financing
	Reputation	Declining brand value due to delayed response to climate change	Decreasing rent income due to declining brand value	Small	Small	Medium	Medium	Acquisition of environmental certifications and energy-saving rating Implementation of equipment renewal and renovation in response to climate change
		Declining tenant demand for properties with low environmental performance (and resilience) and their asset value	More difficult acquisition of new tenants and residents Declining rent income due to rising vacancy rate Declining asset value	Medium	Large	Medium	Large
Physical Risks	Acute	Physical damage to portfolio properties due to abnormal weather (typhoons, floods, storm surges, etc.)	Increasing repair expenses and insurance premiums Increasing renovation expenses to prepare for abnormal weather Declining rent income when damage occurs	Medium	Large	Medium	Medium	Understanding of risks using hazard maps, etc. Implementation of flood prevention measures such as water stops in properties expected to flood Provision of appropriate property insurance
	Chronic	Rise in average temperatures	Increases in air-conditioning operation, maintenance, and repair expenses	Medium	Medium	Small	Medium	Introduction of air conditioning equipment with excellent energy-saving performance (Adoption of high efficiency type, etc.) Improving insulation performance of properties
Opportunity	Products and services	Increasing tenant needs for properties with high environmental performance (and safety against weather disasters)	Increase in revenue by attracting tenants and residents	Medium	Large	Medium	Large	Acquisition of environmental certifications and energy-saving rating Enhancing disclosure of information on environmental performance Implementation of equipment renewal and renovation in response to climate change
	Market	Changes in investment stance due to the expansion of ESG investment	Increasing appetite for investment of institutional investors Declining funding costs through green financing	Small	Small	Medium	Medium	Implementation of green financing Implementation of equipment renewal and renovation in response to climate change

Indicators and Targets

Since the status of GHG emissions from the portfolio and emission intensity are key indicators in the real estate sector, NIPPON REIT will monitor Scope 1, Scope 2 and Scope 3 emissions in accordance with the GHG Emissions Reduction Policy to strive for their continuous reduction.