Initiatives for Climate Change

Climate Change
Climate Change Initiatives-Support for TCFD

NBF's perception of climate change

In December 2015, the Paris Agreement was adopted at the twenty-first session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) as a new international framework for reducing greenhouse gas emissions and such after 2020. The agreement upheld a goal to keep the global average temperature increase well below 2℃ compared with the pre-industrial levels, as well as another goal to make the best efforts to limit the increase to 1.5℃. In November 2021, the Glasgow Climate Pact, which clearly stated the goal of achieving net zero emissions by the middle of this century to pursue the 1.5℃ target, was adopted at the twenty-sixth session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) held in Glasgow, U.K. The twenty-seventh sessions of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) held in Egypt in November 2022 also reaffirmed this direction.
NBF has positioned conducting business that reduces energy consumption and greenhouse gas (GHG) emissions to curb global warming and lower the risks associated with climate change as its social mission in carrying out real estate investment management business, and set such as one of the material issues (Materiality).

Support for TCFD (Task Force on Climate-related Financial Disclosures)

NBFM expressed support for the Task Force on Climate-related Financial Disclosures (TCFD) in 2021 to promote disclosure on climate-related issues. In addition to endorsing the TCFD, NBFM also joined the TCFD Consortium. The TCFD Consortium, in which many companies and organizations in Japan supporting the TCFD participate, discusses how information on climate-related issues should be disclosed and how it should be used. NBFM will continue to promote the disclosure of relevant information based on analysis of the risks and opportunities that climate change poses to its business and finances.

Governance

In accordance with the “Regulations Concerning ESG Initiatives,” NBFM has organized the ESG Promotion Committee, with the President and CEO of NBFM as the final decision-making authority. The committee makes decisions on identification, assessment and management of risks and opportunities related to climate change, which is an ESG issue, implementation of measures to mitigate risks, and setting targets and KPIs. Furthermore, NBF and NBFM’s Boards of Directors receive reports from the ESG Promotion Committee on resolutions on climate-related issues and the progress of initiatives and review the risk management process and give instructions on new actions as necessary.

For details on NBFM's ESG promotion system, please refer to ESG Promotion System.

Strategy

Scope and assumptions of scenario analysis

In the scenario analysis conducted in this study, all assets held by NBF were considered.
NBF refers to the following scenarios in its scenario analysis.
In addition, each scenario assumes the following outlook on the world.

Classification	Scenario overview	Main reference scenarios
4℃ scenario	A scenario in which temperatures are assumed to rise by 4℃ compared with pre-industrial levels. Climate change will progress without sufficient progress towards global decarbonization, and disasters will become more intense and physical risks greater than in the current world. Transition risks, such as tighter laws and regulations, will be relatively small, but there are concerns about increased air conditioning costs in offices and increased costs of preparing for more severe extreme weather events.	IEA Stated Policies Scenario (STEPS) IPCC RCP8.5
1.5℃ scenario	A scenario in which temperatures are assumed to rise by 1.5℃ compared with pre-industrial levels. While physical risks will remain relatively small as the world deepens its efforts to decarbonize, the legal and other risks associated with pressing ahead with such efforts will be greater and more severe than at present. Specifically, while costs associated with taxing GHG emissions from offices are likely to increase, business opportunities include higher rents for properties with high environmental performance.	IEA Net Zero Emissions by 2050 Scenario (NZE2050) IPCC RCP2.6

Identifying risks and opportunities, assessing financial impact and initiatives

NBF has identified the risks and opportunities related to its real estate investment management business and evaluated their business and financial impacts as follows. The business and financial impacts were assessed qualitatively with reference to each of the aforementioned scenarios.
In addition, to mitigate climate-related risks and realize opportunities, we will address risks and opportunities in various ways including the following.

Category		Principal risks and opportunities	Factors that may affect business and financial performance	Financial impact				Risk management, countermeasures, initiatives
				4℃ Scenario		1.5℃ Scenario
				Mid-term 2030	Long-term 2050	Mid-term 2030	Long-term 2050
Transition Risks	Policy and Legal	Introduction of GHG emissions regulations Introduction of carbon taxes	Increase in costs due to responding to legal regulations	Minor	Minor	Moderate	Major	Set GHG emissions reduction target Reduce energy consumption through renovation of owned buildings and collaboration with tenants Acquire properties with superior energy efficiency performance Introduce renewable energy
		Strengthening of energy conservation standards	Increase in renovation costs to improve energy efficiency	Minor	Minor	Moderate	Moderate	Implement energy efficiency retrofits in a well-planned manner Appropriate examination of cost-effectiveness of energy efficiency retrofits
		Strengthening of energy conservation standards	Increase in property acquisition prices due to scarcity of investment targets	Minor	Minor	Moderate	Moderate	Acquire properties based on price evaluation considering environmental performance Acquire properties with excellent environmental performance by leveraging sponsor pipelines
	Technology	Dissemination of new technologies related to environmental performance	Increase in renovation costs due to introduction of new technologies	Minor	Minor	Moderate	Moderate	Implement retrofits in a well-planned manner Appropriate verification of cost-effectiveness of renovations
	Technology		Increase in property acquisition prices due to scarcity of investment targets	Minor	Minor	Moderate	Moderate	Acquire properties based on price evaluation considering environmental performance Acquire properties with excellent environmental performance by leveraging sponsor pipelines
	Market	Changes in environmental performance values in financing	Increase in financing costs for properties with relatively low environmental performance	Minor	Minor	Moderate	Moderate	Build a portfolio with superior energy efficiency performance Introduce renewable energy Acquire environmental certifications, etc. to good effect
	Market	Change in tenants' needs for environmental performance	Decrease in rental income from properties with relatively low environmental performance	Minor	Minor	Moderate	Moderate	Build a portfolio with superior environmental performance Introduce renewable energy Acquire environmental certifications, etc. to good effect
	Reputation	Decrease in corporate (brand) value due to delayed response to climate change	Decrease in rental income (due to decline in brand strength)	Minor	Minor	Moderate	Moderate	Build a portfolio with superior environmental performance Introduce renewable energy Acquire environmental certifications, etc. to good effect
Physical Risks	Acute	Increase in the severity of extreme weather (Typhoons, floods, and heavy rains)	Increase in costs of countermeasures	Moderate	Major	Moderate	Moderate	Cost-effective, appropriate and systematic implementation of countermeasure works
			Decrease in operating revenue at the time of damage	Moderate	Major	Moderate	Moderate	Reduce the impact of the disaster through systematic implementation of countermeasure works Reduce the impact of the disaster by encouraging evacuation drills
			Incurring recovery costs when damage occurs	Moderate	Major	Moderate	Moderate	Reduce the impact of disaster through systematic implementation of countermeasure works Appropriate property insurance coverage
	Chronic	Rising sea levels	Increase in costs of countermeasures	Moderate	Major	Minor	Moderate	Grasp inundation risks using flood maps Cost-effective, appropriate and systematic implementation of countermeasure works
	Chronic	Rising average temperatures	Increase in costs due to increased air-conditioning load	Moderate	Moderate	Minor	Moderate	Install air-conditioning equipment with excellent energy efficiency performance
Opportunities	Resource Efficiency	Installation of high efficiency facilities	Reduction of utility costs	Minor	Minor	Moderate	Moderate	Install or replace with high-efficiency facilities
	Products and Services	Appealing to tenants and occupants by providing low emission facilities and services	Increase in income from attracting tenants/occupants	Minor	Minor	Moderate	Major	Build a portfolio with superior energy efficiency performance Introduce renewable energy Acquire environmental certifications, etc. to good effect
	Markets	Continuous offering of rental properties that meet the changing preferences of tenants and occupants Development of new customer base	Increase in income from attracting tenants/occupants	Minor	Minor	Moderate	Major	Build a portfolio with superior energy-saving performance Introduce renewable energy Acquire environmental certifications, etc. to good effect
	Markets	Development of new investor base	Increase in the amount of financing and decrease in financing costs by responding and appealing to investors who place importance on addressing climate change issues	Minor	Moderate	Moderate	Moderate	Leverage green finance
	Resilience	Improvement of adaptability to climate-related risks by improving disaster prevention performance	Improvement of resilience to natural disasters by improving disaster prevention performance	Minor	Moderate	Moderate	Moderate	Implement renovations for disaster prevention

● Transition risks

In order to achieve the Paris Agreement and the Glasgow Climate Pact's non-binding target of limiting the global average temperature increase to 1.5℃ compared with pre-industrial levels, as well as Japan's "carbon neutrality by 2050," curbing greenhouse gas emissions is an urgent issue.
NBF has made the following efforts assuming that the transition to a decarbonized society will strengthen policies and regulations, accelerate innovation, change the behavior of all parties in the office leasing business, and such.

Reduction of GHG emissions
NBF has set a goal of “reducing energy-derived CO₂ emissions by 46% or more by 2030 (compared with 2013 levels),” and is working to promote LED lighting and introduce high-efficient equipment based on energy-saving renovation plans for the properties it owns. In addition, there are 13 properties (approximately 18% of the portfolio based on the number of properties as of the end of December 2022) that are subject to the total volume control (Tokyo Cap-and-Trade Program), which imposes the reduction of GHG emissions from large-scale business facilities in Tokyo, and NBF is considering and promoting plans to achieve above-mandatory levels of an average of 27% reduction by 2024 and of 35% reduction between 2024 and 2029.
Introduction of electricity derived from renewable energy sources
By promoting the greening of electricity used in common and tenant areas of its owned properties, NBF aims to reduce GHG emissions from the properties it owns as well as meet the needs of its corporate tenants for purchasing green electricity.

● Physical risks

Climate change is causing average temperatures and sea levels to rise around the world, and damage from rising average temperatures, heavy rainfall, typhoons, etc. has been observed in Japan as well. With the progression of global warming, the risk of natural disasters becoming more severe is expected to further increase in the future. NBF is taking the following measures to mitigate the risks of the properties it owns, after regularly assessing disaster risks.

Systematic implementation of building and facility improvements
NBF is installing and improving flood barriers based on a flood countermeasure plan formulated after analyzing flood risks using flood hazard maps. In addition, we are systematically updating and enhancing emergency power generators.

Installation of flood barriers
（NBF Higashi-Ginza Square）

Inspection/update of emergency power generator
（NBF Takanawa Building）

Installation of an additional emergency power generator
（NBF Shibuya Garden Front）

Preparing for possible disasters
In order to improve resilience, NBF is strengthening its BCP system, placing disaster prevention stockpiles and conducting disaster drills.
NBF has established an advanced emergency communication system with NBF Office Management Ltd., which manages operation of the properties, to quickly identify the extent of the damage.

● Opportunities

The Paris Agreement has triggered a movement to embrace decarbonization as an opportunity for corporate management (decarbonization management), and NBF believes that efforts to mitigate climate change and adapt to change will contribute to the creation of new business opportunities.
NBF is undertaking the following initiatives at its owned properties to mitigate and adapt to climate change.

Acquisition of Green Building Certification
Against the backdrop of growing preferences for environmental performance upon leasing offices, NBF is promoting acquisition of green building certification as it views third-party certification regarding the specifications and various initiatives of its owned properties as added value, and aims for a 100% acquisition rate.
Procurement of Green Finance
NBF uses green finance, a method of procuring funds specifically for initiatives that have a positive effect on the environment, such as reducing greenhouse gas emissions and investing in renewable energy, and aims to procure more than 10 billion yen annually.

Risk Management

NBFM's processes for managing climate change-related risks pertaining to NBF's real estate investment management business are as follows.

Process for identifying and assessing risks and opportunities

Key risks and opportunities related to climate-related issues are discussed at least once every six months at the ESG Promotion Committee.

Processes for managing risk

The President & CEO, who has the highest responsibility for climate-related issues, instructs the Strategy Planning and ESG Promotion Department to discuss countermeasures for risks identified and assessed at the ESG Promotion Committee at least once every six months. Based on the results of the discussion of countermeasures and their implementation status reported, the Strategy Planning and ESG Promotion Department conducts monitoring (e.g., checking the implementation status against GHG reduction targets, analyzing the reasons for increases or decreases, and considering necessary countermeasures).

Integration into a company-wide risk management program

Climate change-related risks are integrated into the multi-disciplinary company-wide comprehensive risk management process in the same way as other business risks, and are discussed at least once every three months at the Risk Management Meeting.

Please click here for an explanation of the ESG Promotion Committee and the Strategy Planning and ESG Promotion Department.

Metrics and Targets

Please refer to the "Materiality" page for the KPIs and targets that NBF has set in relation to climate change issues for its real estate investment management business (the relevant indicators are "CO₂ emissions intensity," "green building certification coverage" and "procurement of green finance"). Please refer to the following pages for the actual results of each indicator.

CO₂ emissions intensity: Environmental Performance
Green building certification coverage: Utilization of Green Building Certification
Procurement of green finance: Green Finance