Among the goals, the target to "Reduce entire portfolio’s total GHG emissions covering Scope 1+ 2 by 42% by 2030 (compared to 2021)" has received SBTi certification. This is based on scientific evidence aimed at aligning with the Paris Agreement, which aims to hold the increase in the global average temperature well below 2°C above pre-industrial levels and strives to limit the temperature increase to 1.5°C above pre-industrial levels.
In the process to set our new targets, i.e., “Reduce total GHG emissions covering our value chain (including Scope 3) to net zero by 2050”, United Urban conducted a scenario analysis by using CRREM. a tool for assessing and monitoring the transition risks.
The pathway results show our efforts for energy saving (investment in highly efficient equipment and improvement in operation) and renewable energy introduction will be on the line of 1.5°C scenario by the late 2030s. However, from the late 2030s and onward, we recognize the risks of exceeding the 1.5°C pathway.
United Urban steadily promotes measures for energy saving and renewable energy for the time being and examines measure to further reduce GHG emissions with an eye on social, economic, and technological trends.
As an owner of large-scale business facilities whose greenhouse effect gas emissions are assumed to be high, United Urban sets a target to reduce the “specific energy consumption rate” by 1% per annum on average for 5 years (“Specific energy consumption rate” is calculated by the factors like energy consumption, floor space, etc.). Untied Urban makes efforts to accomplish the target by such means as introducing highly-efficient equipment suitable to each facility on replacement of air-conditioners or lighting equipment.
In recent years, environmental issues, including climate change, have been growing more severe globally. In Japan, large-scale natural disasters have been occurring more frequently due to extreme weather, which has had a major impact on economic and social activity. The Paris Agreement was adopted at the 2015 United Nations Climate Change Conference (COP) to address climate change at the global level through the coordinated efforts of international society. Under the framework of the Paris Agreement, there is an increased expectation and need for the private sector to play a role in reducing GHG emissions.
MRA believes that addressing climate change is critical in the management of United Urban’s portfolio. We fully recognize the risks and opportunities associated with climate change and continue to pursue initiatives to solve the issue through real estate investment and management in order to realize a sustainable society for all stakeholders.
Based on our current recognition of climate change, MRA and United Urban have revamped the Environmental Policy established in 2012 and formulated the Sustainability Policy in 2022. Created as guidelines for implementing initiatives to resolve environmental, social, and economic issues and create new value, the Sustainability Policy incorporates approaches to tackling climate change, reducing our environmental footprint, realizing a recycling-based society and sustainable cities, contributing to local communities, and respecting human rights, as well as cooperation and collaboration with stakeholders and enhancement of productivity and job satisfaction of executives and employees.
To address climate change, it is stated in the policy that we will strive to reduce greenhouse gas emissions by actively promoting efficient use of natural resources and energy from the perspective of sustainability and resource efficiency as well as realize a decarbonized society by introducing environmentally friendly technologies and systems.
Recognizing the importance of climate-related financial information disclosure, MRA announced our endorsement of the TCFD’s recommendations in January 2022.
Moreover, MRA formed a cross-organizational team of members representing various departments, which conducted a scenario analysis of climate risks and opportunities for United Urban’s portfolio in accordance with the TCFD’s recommendations.
MRA’s climate-related information disclosure, based on the TCFD’s framework, is shown below.
Disclosure Items Recommended by the TCFD
| Item | Summary |
|---|---|
| Governance | The organization’s governance around climate-related risks and opportunities |
| Strategy | The footprint and potential impacts of climate-related risks and opportunities on the organization’s business, strategy and financial planning (scenario analysis) |
| Risk management | Processes for identifying, assessing and managing climate-related risks |
| Metrics and targets | Metrics and targets for assessing and managing climate-related risks and opportunities |
For the purpose of carrying out sustainability activities, including measures to tackle climate change, MRA has formulated the Sustainability Regulations. Through the system based on these regulations, we implement sustainability activities in a strategic and organized manner.
| Body | Overview |
|---|---|
| Board Meeting | Formulate and revise the Sustainability Policy and supervise sustainability activities |
| Chief Sustainability Officer |
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| Chief Sustainability Operation Officer |
|
| Sustainability Committee |
|
In accordance with the Sustainability Regulations, the Board Meeting also receives reports from the Chief Sustainability Operation Officer on materiality at least once a year and performance of sustainability activities more than four times a year and conducts a continued monitoring based on those reporting.
The Sustainability Committee was established in 2013 with the aim of resolving ESG issues through a cross-organizational approach. Since a responsive decision-making is a priority, the committee members include MRA’s management team (President and CEO, CIO, CFO).
The Sustainability Committee mainly discusses and reports on the following items:
Moreover, the system enables committees and sub-committees relating to sustainability activities to be formed based on the decision of the Chief Sustainability Operation Officer. These committees can discuss and report on necessary matters and plan and implement measures. With the aim of reducing energy consumption at properties owned by United Urban, the Energy-Saving Committee and Energy-Saving Sub-Committee have been set up as task forces within MRA and work to streamline energy use.
With the intention to enhance ESG awareness at MRA and accelerate more practical efforts to address ESG issues at United Urban, the heads of all departments at MRA serve as members of the Sustainability Committee. Also, we formed a cross-departmental ESG team consisting of each member from the four asset management departments assigned as ESG officers, and strengthen the internal system at the working level.
With regard to the impact of future climate change on the company’s real estate asset management business, looking ahead to 2050, MRA conducted a scenario analysis in accordance with the TCFD’s recommendations. In the scenario analysis, we discussed how we should respond to changes in the external environment as well as business risks and opportunities in 2030.
The TCFD’s recommendations suggest consideration based on multiple warming scenarios. MRA assessed the impact of climate-related risks and opportunities for the current scenario (3-4°C scenario) and transition scenario (1.5°C scenario).
An overview of the respective scenarios, including the global outlook in each case, is shown below.
| Current Scenario (3-4°C Scenario) | Transition Scenario (1.5°C Scenario) | |
|---|---|---|
| Overview | Foresees a world in which reduction efforts of carbon emission do not exceed the current level and the average temperature rises by a maximum of 3°C to 4°C at the end of 21st century | Foresees a world in which decarbonization efforts advance in order to keep the rise in the average temperature at 1.5°C at the end of 21st century |
| Global outlook in scenario |
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| Main reference scenarios |
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The scenario analysis mainly covers ownership and management of assets that United Urban entrusts to MRA for management. We conducted the scenario analysis while also bearing in mind the impact during property acquisition/disposal and on financing.
The TCFD’s recommendations divide climate-related risks into two categories: physical risks and transition risks. In the scenario analysis, we identified physical risks in the current scenario and transition risks in the transition scenario, then specified the key risks that are presumed to have a strong correlation with our business.
In information disclosure recommended by the TCFD framework, climate-related risks are typically organized as shown below.
Risk Categories
| Climate-related risks | Physical risks | Acute risks |
|---|---|---|
| Chronic risks | ||
| Transition risks | Policy/legal risks | |
| Technology risks | ||
| Market risks | ||
| Reputation risks |
Climate-Related Risks
| Physical risks | Risks associated with global warming and climate change |
|---|---|
| Transactions risks | Legal, technological and market risks pertain to low-carbon economy |
Physical Risks
| Acute risks | Direct and indirect risks due to growing severity of extreme weather and natural disasters |
|---|---|
| Chronic risks | Risks due to long-term changes such as increased average temperature, rising sea level, and changing weather and rainfall patterns |
Transition Risks
| Policy and legal risks | Risks related to promoting measures to mitigate and adapt to the causes of climate change’s adverse impacts |
|---|---|
| Technology risks | Risks associated with R&D and technology introduction for energy efficiency and low-carbon economy |
| Market risks | Risks derived from changing supply and demand for products and services |
| Reputation risks | Risks regarding reputation of the transition to a low-carbon economy |
Assumed that greenhouse gas emission reduction measures, legal restrictions, and so forth will be kept as the present level, the current scenario (4°C scenario) proposes that increased frequency and severity of natural disasters and rising average temperatures will be the major climate-related risks.
In the transition scenario (1.5°C scenario), it is assumed that greenhouse gas emission restrictions will be tightened, and real estate owners will be required to improve environmental performance beyond the current level. Other climate-related risk will include a relative decrease in demand for buildings with poor environmental performance as people’s behavior becomes more environmentally conscious.
We extracted the risks and opportunities regarded as highly important for each scenario and specified the items that have a significant impact on UUR’s portfolio. Then we assessed the financial impact on operating income in the short-term, mid-term (FY2030) and long-term (FY2050). In this scenario analysis, we have set certain assumptions regarding changes in the socioeconomic environment, including business scope and policy trends, as well as assumed natural disasters. We have not considered the likelihood of all identified risks and opportunities materializing. Therefore, MRA will continue to closely monitor future changes in the external environment, regularly review risks and opportunities, and strive to refine the numbers as much as possible.
| Category | Climate-Related Event | Main Risks and Opportunities | Response Measures | Division | Risk/Opportunity Impact Amount | Response Measures Impact Amount | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Risk | Opportunity | Transition Scenario | Current Scenario | Transition Scenario | Current Scenario | ||||||||||
| 2030 | 2050 | 2030 | 2050 | 2030 | 2050 | 2030 | 2050 | ||||||||
| Transition Risks & Opportunities | Policy & Regulations | Strengthening GHG Emission Regulations | 1 | Increase in operating costs due to international requirements on emission reduction | Update to energy-efficient equipment and introduce energy-saving technologies | ■ | ▲132 | ▲724 | ▲437 | ▲1,325 | 8 | 26 | - | - | |
| 2 | Increase in financial burden due to carbon tax, etc. | Introduce internal carbon pricing systems, implement emission reduction projects, and utilize carbon offsets | ■ | ▲874 | ▲7,510 | ▲672 | ▲4,806 | 649 | 7,509 | 499 | 4,806 | ||||
| 3 | Decline in asset value due to stringent measures on rental properties with low-environmental-performance | Improving environmental performance through appropriate investment and maintenance, considering asset replacement | ■ | Not-calculated | |||||||||||
| Technology | Transition to low-carbon technologies in construction | 4 | Increase in installation costs due to the mandatory introduction of high-energy-performance equipment in existing buildings | Promote the introduction of high-energy-performance equipment using green leases, reducing cost burdens | ■ | ▲1,201 | ▲3,642 | - | - | 12 | 139 | 4 | 137 | ||
| Market & Reputation | Increasing environmental awareness among people | 5 | Decrease in rental income due to reduced demand for low-environmental-performance buildings and decreased competitiveness | Increasing the number of environmentally certified properties | ■ | ▲498 | ▲1,511 | - | - | 498 | 1,511 | - | - | ||
| 6 | Higher rents and asset value lead by an increase in occupancy rates of environmentally certified buildings reduced linen costs due to changes in service standards, and increased hotel revenue, expansion of green finance | - | ■ | 3,110 | 9,424 | - | - | - | - | - | - | ||||
| 7 | Changes in capital inflows based on ESG investment criteria | Develop business strategies in line with ESG standards | ■ | Not-calculated | |||||||||||
| 8 | Decreased stakeholder trust due to negative environmental impacts | Enhance transparency and reliability through proactive communication with stakeholders | ■ | Not-calculated | |||||||||||
| Physical Risks & Opportunities | Acute | Frequent and severe heavy rain | 9 | Increased repair costs and reduced rental income due to flood damage | Implementing flood control measures such as flood barriers in properties with potential flooding | ■ | ▲33 | ▲110 | ▲40 | ▲222 | 1 | 5 | 2 | 11 | |
| 10 | Equipment failure and functional stoppage of lifelines due to flooding of owned properties | Develop BCP manuals and conducting disaster preparedness training | ■ | ▲1 | ▲17 | ▲7 | ▲102 | 0 | 3 | 1 | 20 | ||||
| Chronic | Rising average temperature | 11 | Decrease in rental income due to changes in consumption patterns and reduced outdoor activities | Consider tenant replacement and repurposing in response to environmental changes | ■ | ▲59 | ▲195 | ▲71 | ▲395 | 59 | 195 | 71 | 395 | ||
| 12 | Increase in operational costs and usage restrictions in water-stressed areas | Introduce water-saving technologies and developing water reuse systems, adopt environmental designs that support natural water cycles, developing and using groundwater | ■ | ▲2 | ▲7 | ▲11 | ▲34 | 79 | 869 | 82 | 904 | ||||
In our internal risk management regulations, which stipulate holistic risk management policy of the asset management company, MRA sets our basic risk management approach, which specifies risk management as a key management issue. From the perspective of performing asset management tasks, the risks to be managed are categorized as follows:
How we shall manage risks is stupilated in accordance with the detailed risk management rules. Its suitability and effectiveness are reviewed periodically and reported to MRA's President and CEO, and the board members.
Monitoring and recognizing risks and risk control activities are performed by using a risk control matrix as follows:
■ GHG Emission Reduction Target
■ Energy Consumption Reduction Target
■ Specific Measures
One of the metrics to manage climate-related risks and opportunities is the environment certification coverage rate for the portfolio of United Urban.
As of the end of May 2024, this figure was 83.9%, achieving the medium-term target of 80% on GFA basis in 2024. We manage to maintain 80% or more going forward.
Acquisition Coverage by Environmental Certifications
| Number of properties | Total floor area | Percentage of total floor area | ||
|---|---|---|---|---|
| DBJ Green Building |  |
2 | 26,999.50m2 | |
 |
10 | 269,222.11m2 | ||
 |
3 | 115,050.49m2 | ||
| Subtotal | 15 | 411,272.10m2 | 24.7% | |
| CASBEE for Real Estate |  |
19 | 256,219.69m2 | |
|
21 | 260,811.82m2 | ||
|
1 | 10,224.31m2 | ||
| Subtotal | 41 | 527,255.82m2 | 31.6% | |
| BELS | |
10 | 85,016.05m2 | |
|
5 | 30,593.49m2 | ||
|
15 | 120,471.98m2 | ||
|
16 | 260,016.18m2 | ||
| Subtotal | 46 | 496,097.70m2 | 29.7% | |
| LEED | GOLD | 1 | 2,977.93m2 | |
| Subtotal | 1 | 2,977.93m2 | 0.2% | |
| Environmental certifications | Total | 95 | 1,399,816.01m2 | 83.9% |
MRA will incorporate the measures for reducing climate-related risks recognized based on the scenario analysis in accordance with the TCFD’s recommendations into asset management of United Urban and link them to specific actions.
Moreover, we will promote constructive dialogue with stakeholders through information disclosure aligned with the TCFD’s framework and play a role in formulating and implementing climate change-related strategies of United Urban.