Sustainability-Linked Loans

JRE procured funds through sustainability-linked loans for the first time in the J-REIT industry in January 2021, and continues to procure funds through sustainability-linked loans as follows.

Sustainability‐linked loans are loan instruments that aim to facilitate and support environmentally and socially sustainable economic activity and growth. In this loan scheme, the borrower sets sustainability performance targets (“SPTs”) based on its business management strategy, and the lender incentivizes the borrower’s achievement of those objectives by aligning loan terms to the borrower’s performance against the relevant predetermined SPTs.

Moreover, the SLLs are designed in such a way that, based on the set SPTs, achievement confirmation shall be made several times and, if the predetermined levels are achieved upon each confirmation, the reduction in the interest rate will be offered. Please refer to the link for the achievement status of sustainability performance targets and interest rates.

1. Sustainability-Linked Loans Framework

JRE has established a Sustainability-Linked Loan Framework for the purpose of flexible SLL implementation, and has been implementing Sustainability-Linked Loan financing based on this framework.
The Framework sets the KPI, SPT and loan characteristic as follows.

The Framework conforms to the Sustainability-Linked Loan Principles (revised 2023) ("SLLP") developed by the Asia Pacific Loan Market Association (APLMA), the Loan Market Association (LMA), and the Loan Syndications and Trading Association (LSTA), and the Guidelines for Green Loans and Sustainability-Linked Loans (2022 version) developed by the Ministry of the Environment of Japan.

We have obtained a second-party opinion from Japan Credit Rating Agency, Ltd. (JCR) stating that the Framework complies with the SLLP and the Ministry of Environment Guidelines on Expectations for Sustainability Linked Loans.

For details, please refer to the link. (available only in Japanese)

2. Sustainability-Linked Loans

Green Bonds

JRE issues the Green Bonds in order to further promote our sustainability initiatives. We will promote energy conservation, improve customer satisfaction and encourage acquiring green building certifications, through various measures such as ESG investments giving consideration to environment, which includes refurbishment work etc.
Thereby realize Positive Impact.^{Note 1}

• “Positive Impact” is defined as “that which produces a positive impact on society or the environment and simultaneously ensures the market-level return”. It is advocated by the United Nations Environment Programme–Finance Initiative (UNEP FI).
  For more detailed information, please refer to the following UNEP FI’s website.
  UNEP FI’s website

1.Green Bond Framework

Use of Proceeds from Green Bond Issuance

The net proceeds of the green bonds will be used to refinance and/or finance the refurbishments to or the acquisition of assets that meet the eligibility criteria (“Eligible Green Projects”) outlined below.

Eligible Green Projects

Eligible Green Projects must meet one or more of the following eligibility criteria. ^{(Note 2)}

[1] Refurbishments

Refurbishments with a primary purpose of achieving one of the following criteria which have been completed within 36 months prior to the date of green bond issuance and/or will be completed in the near future;

• Refurbishments with more than 10% reduction in CO2 emissions or energy consumption
• Refurbishments with more than 10% reduction in water consumption
• More than one level of star/rank improvement in the green building certifications listed in [2]
• Refurbishment that contributes to the conservation and recovery of biodiversity, including of diversity of outdoor plants will also be considered if one or more of “a” through “c” criteria in [1] are met.
• Refurbishment that contributes to the local community by improving public open space connected to the buildings and renovating for accepting people who are temporarily unable to return home will also be considered if one or more of “a” through “c” criteria in [1] are met.
• Either one of the certifications/recertification listed in [2]

[2] Acquisition

Buildings that have achieved the following top three levels of third-party green building certification/recertification within 36 months prior to the date of green bond issuance and/or will achieve:

• 3, 4 or 5 Stars under the DBJ Green Building Certification
• 3, 4 or 5 Stars under BELS
• B+, A or S Rank under CASBEE

(Note 2) Eligible Green Projects are managed by the Sustainability Committee, which is composed of JRE-AM’s President and CEO (Chief Sustainability Officer), General Manager, Sustainability Management Department (Sustainability Officer), and the chiefs and practitioners of other departments. The Eligible Green Projects are evaluated and selected based on sustainability policies and relevant criteria and determined by the President, based on JRE-AM’s job responsibilities and authority.

Management of Proceeds

JRE internally tracks and manages the allocated and unallocated amounts of the proceeds using an internal management system. If the proceeds through green bonds are temporarily not allocated to Eligible Green Projects, JRE will manage the unallocated funds as cash or cash equivalents until they are allocated to Eligible Green Projects.

Reporting

[1] Allocation Reporting

JRE will annually disclose the allocation information of the net proceeds of green bonds as of end of March on its website until the proceeds have been fully allocated to the Eligible Green Projects. When the proceeds are allocated toward refinancing Eligible Green Projects, the allocation information includes 1) completion dates of projects (dates of certification/recertification achieved, and dates of refurbishments completed) and 2) portion of refinanced and financed projects.

Japan Real Estate Investment Corporation 12th Unsecured Bond / Allocation Reporting

* Please view the table below while scrolling horizontally.

• Date of refurbishments completed
• Date of DBJ Green Building Certification obtained

[2] Impact Reporting

As long as relevant green bonds are outstanding, JRE will annually disclose the progress and levels of certifications of Eligible Green Projects that have been funded by the green bonds. Additionally, JRE will also disclose the following indicators of Eligible Green Projects annually:

• Energy consumption
• Water usage
• CO2 emissions

As for the Eligible Green Projects including refurbishments, as long as relevant green bonds are outstanding, the environmental impacts relevant to each project will be disclosed annually after the construction has been completed. In accordance with the criteria applied, JRE will indicate either an estimated % of reduction of energy consumption or water usage or CO2 emissions before and after refurbishment.

Japan Real Estate Investment Corporation 12th Unsecured Bond / Impact Reporting

* Please view the table below while scrolling horizontally.

As of March 31, 2023
	Progress of Certifications	Levels of Certifications	Energy Consumption*(MWh)	Water Usage* (m³)	CO2 Emissions* (t-CO2)
JRE Shiba 2Chome Daimon Building	Obtained		21,659	26,888	1,804
Akasaka Park Building	Obtained
JRE Shijo Karasuma Center Building	Obtained

From 1 April 2022 to 31 March 2023

Evaluation by External Organization

JRE has obtained a second-party opinion from Sustainalytics, an ESG rating agency, for the eligibility of green bond framework ^{(Note 3)}.
For the second-party opinion from Sustainalytics, please refer to the following website.
Second-party opinion from Sustainalytics

(Note 3) Green Bond eligibility means a Green Bond framework aligns with the four pillars (use of proceeds, project evaluation / selection, management of proceeds and reporting) of the Green Bond Principles 2018. The Green Bond Principles are guidelines regarding issuance of green bond established by International Capital Market Association (ICMA). For detailed information on the Green Bond Principles, please see the ICMA’s website below.
ICMA’s website

2.(Example) Refurbishments of JRE Shiba 2Chome Daimon Building

Outline of refurbishments of JRE Shiba 2Chome Daimon Building

Refurbishments of JRE Shiba 2Chome Daimon Building apply to the Eligible Green Projects. Among the above eligibility criteria, “refurbishments with more than 10% reduction in CO2 emissions or energy consumption” and “3 Stars under the DBJ Green Building Certification” are met by this project. Additionally, as for DBJ Green Building Certification, our efforts which contributes to disaster prevention and BCP, as well as installing highly efficient air conditioning and LED lighting inside the building were highly evaluated.
Outline of refurbishment of JRE Shiba 2Chome Daimon Building is as follows.

Overview of the Refurbishment

Refurbishment work of JRE Shiba 2Chome Daimon Building has been planned based on the concept of Positive Impact advocated by the United Nations Environment Programme Finance Initiative (UNEP FI).

• Adopted highly efficient air-conditioning units and LED lights to reduce environmental load
• Enhanced convenience and security by replacing tenant doors and adopting card access security systems
• Switched to individually controlled air-conditioning and renovated rest rooms, etc., caring for tenant employees’ health and comfort
• Enhanced the property’s presence by innovating internal fittings of common areas to renew impression

Positive Impacts Achieved

We have achieved greater impacts than originally estimated as follows.

• 

  Energy▲44.3%

  (*Comparison of annual results for 2020 and 2017)

• 

  Water▲49.5%

  (*Comparison of annual results for 2020 and 2017)

• 

  CO2▲32.8%

  (*Comparison of annual results for 2020 and 2017)

• 

  Average rent per area increased by17.5％

  (*Comparison between 31 Mar. 2021 (unofficially confirmed basis) and 31 Mar. 2018 (actual results))

• 

  Approx.80％tenant satisfaction

  (*Regarding the office space, elevator hall and rest room after renovation)

Photos After Renovation