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Sustainability Management

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Healthcare & Medical Investment Corporation
Executive Director
Yuji Fujise
Healthcare Asset Management Co., Ltd.
President & CEO
Hisatoshi Ishiwara

Healthcare & Medical Investment Corporation (hereinafter, “HCM”) and Healthcare Asset Management Co., Ltd. (hereinafter, “HAM”), the Asset Management Company, aim to serve as a conduit between the nursing care and medical service industries in which social needs are expected to increase and the capital markets, based on the environmental awareness that upgrading and expansion of healthcare facilities is further required in order to respond to the growing demand for medical and nursing care services. In other words, HCM and HAM aim to realize a society where all people can live vibrantly and with peace of mind as well as secure stable revenue and achieve steady growth of assets under management by promoting appropriate maintenance and management and new supply of healthcare facilities through stable investment and ownership of healthcare facilities with the keywords of “nursing care," “medical service” and “health."

介護・医療業界と資本市場をつなぐパイプの役割

Basic Policy on ESG

Basic Philosophy

In order to realize a “society where all people can live vibrantly and with peace of mind," which is the investment philosophy of HCM, HAM aims to contribute to the aged society and maximize unitholder value over the medium to long term through the promotion of provision of healthcare facilities as social infrastructure and construction of a portfolio specializing in healthcare facilities.

HAM will collaborate with various in-house/outside stakeholders including operators, hospital personnel, the sponsors and executives and employees of HAM in order to practice asset management in consideration of ESG including the reduction of environmental burden, efforts toward resolution of social issues in an aged society and establishment of governance system.

Reducing the Environmental Burden

HCM strives for energy conservation and reduction of CO2 emissions by improving energy efficiency at its properties and introducing facilities that contribute to energy saving. Also, HCM aims for resource conservation and waste reduction with regard to capital expenditure of its properties and in the formulation and implementation of their repair plans.

Initiatives for Solving the Challenges of an Aged Society

HAM believes that HCM’s continuous investment in healthcare facilities and its stable management of assets will help towards solving the social challenges of an aged society. Therefore, HAM has cooperated with various internal and external stakeholders including unitholders, operators, hospital personnel, the sponsors, executives and employees.

(1) Initiatives in Collaboration with Operators and Hospital Personnel
HAM establishes intimate relationships of trust with operators of healthcare facilities and hospital personnel through dialogue, strives to grasp the operating conditions of HCM’s healthcare facilities and conducts asset management which is considerate towards the safety and security of users as well as the environment.
Additionally, in light of the heightened social awareness of the working environment of healthcare facility employees and healthcare professionals, HCM announces its efforts of improvement for operators of its healthcare facilities and hospital personnel in a way that is easy to understand, thereby deepening the understanding of unitholders.

(2) Initiatives in Collaboration with the Sponsors
HAM collaborates with its sponsors which have sophisticated expertise in nursing care/medical service, fund management and finance as it works to solve the challenges of an aged society and increase unitholder value through HCM’s stable management of assets and the medium- to long-term growth of its portfolio.

(3) Initiatives in Collaboration with Executives and Employees
HAM will strive to provide a healthy and comfortable work environment for our executives and employees so that they can maximize their potential, and HAM will proactively work to develop human resources through specialized education and training support. In addition, in order to implement the Basic Policy, HAM will continue to provide training on ESG to our executives and employees to raise their ESG awareness.

(4) Initiatives in Collaboration with Outsourcing Contractors and Other Business Partners
HAM seeks the understanding and cooperation of outsourcing contractors and other business partners with regard to ESG initiatives and promotes measures in line with the Basic Policy.

(5) Contribution to Local Communities
Through HCM’s asset management HAM will contribute to the improvement in the sufficiency rate of healthcare facilities in local communities and the realization of a regional healthcare vision.

Establishing a Governance Framework

HAM endeavors to put in place in-house structures, company regulations, etc. in order to promote the establishment of an autonomous compliance framework and governance framework.

(1) Establishment of an Autonomous Compliance Framework
In order to establish an autonomous compliance framework for executives and employees, HAM holds internal and external trainings on a continued basis in order to deepen understanding of laws required for operations and other rules.

(2) Establishment of a Governance Framework
For the strengthening of governance as well as accomplishing appropriate risk management, HAM puts in place in-house structures such as the establishment of various council bodies and formulation of company regulations, thereby securing transparency of decision making, avoiding conflict of interest and reducing a variety of risks.

Disclosure of Information to Unitholders and Other Stakeholders

HAM actively discloses information concerning the reduction of the environmental burden, initiatives for the resolution of social challenges of an aged society and the establishment of governance frameworks to its stakeholders and others, thereby contributing to the sustainable growth of HCM through deepening the understanding of unitholders and other stakeholders.

ESG Promotion System (ESG Leadership)

HAM recognizes energy conservation and CO2 emission reduction in "Basic Policy on ESG", as important environmental issues for properties owned by HCM, and commits to addressing these issues. In addition, recognizing that natural disasters, such as those caused by climate change, can have a significant impact on the residents and users of facilities, HAM has established a policy for ensuring resilience.

HAM has established the "Regulations for Sustainability Promotion System" in order to take a company-wide view of these issues and to set specific targets and measures. The Regulations stipulate internal systems, information disclosure, and other matters to ensure a sustainability promotion system as follows.

  • President & CEO is designated as the "Chief Officer of Sustainability (hereinafter "Chief Officer")" and Head of the Asset Management Department and Head of Finance & Administration Department are designated as the "Executive Officer of Sustainability (hereinafter "Executive Officers")". The "Chief Officer" and "Executive Officers" oversee the planning, formulation, and implementation of specific measures to address important issues, including climate change-related risks.
Chief Officer of
Sustainability
President & CEO
  • ・The Chief Officer of Sustainability puts in place systems for promoting sustainability and is responsible for proposal and implementation of various policies, targets and measures
  • ・Sustainability promotion items include analysis of climate change-related risks and opportunities at HCM, establishment of respect for human rights and DEI (diversity, equity, and inclusion) system at HAM and planning and implementation of policies, targets, and measures of those
Executive Officer
of Sustainability
Performance
Head of Asset Management Department
  • ・The Executive Officer of Sustainability Performance supervises planning and implementation of various measures for sustainability
  • ・Based on the analysis of climate change risks and opportunities, oversee the planning and implementation of various measures related to climate change-related risks and opportunities
Executive Officer
of Sustainability
Management
Head of Finance & Administration Department
  • ・The Executive Officer of Sustainability Management puts in place systems, regulations, etc. for promoting sustainability and manages planning and implementation of disclosure measures
  • ・Based on the analysis of current issues regarding respect for human rights and DEI (Diversity, Equity, and Inclusion), oversees the establishment of systems and formulation of regulations related to respect for human rights and DEI, as well as the planning and implementation of various measures
  • HAM has formulated an "EMS (Environmental Management System) Operation Manual," which stipulates details for operating "Basic Policy on ESG", "Regulations for Sustainability Promotion System", and each policy, and is used to establish, operate, and maintain an EMS based on the PDCA cycle.

HAM Website / Basic Policy on ESG
https://www.hcam.co.jp/pdf/esg.pdf

Furthermore, HAM has established an ESG Committee which deliberates and drafts various policies, targets and measures regarding sustainability.

Organization Chart (as of March 2024)

体制図

ESG Committee

Chairperson Either a full-time director, the Executive Officer of Performance or the Executive Officer of Management, designated by the Chief Officer
Members (1) Director
(2) Executive Officer of Performance
(3) Executive Officer of Management
(4) Member of Asset Management Department
(5) Member of Investment Department
(6) Member of Finance & Administration Department
(7) Member of Healthcare Business Promotion Department
(8) Compliance Officer
(9) Other person appointed by the Chairperson
Frequency of meeting At least once a month in principle
  • The Committee reports to the Chief Officer of Sustainability and Executive Officer of Sustainability Management with regard to various policies, targets, measures, etc. at least once every three months.
  • The committee reports to the Board of Directors at least once a year on various policies, targets and measures.

Promotion Process (PDCA Cycle)

PDCA

Reporting Process to Management

  • In principle, the ESG Committee will hold a meeting at least once a month. ESG Committee reports to the Chief Officer at least once every three months and to the Board of Directors at least once a year on various policies, targets and measures.
  • Whenever Investment Department acquires a new property, it will report to the "ESG Committee" on the resilience assurance for the property.

Number of Meetings by the ESG Committee

Fiscal 2021 Fiscal 2022 Fiscal 2023
(first half of the fiscal year)
Number of ESG Committee held 3 times 16 times 15 times
Number of Management review Once Once 4 times
Number of reports to the Board of Directors Once 4 times 4 times
Number of in house ESG training held /Participation rate Twice/100% For all executives and employees: Once/100%
For ESG Committee Member: Twice/100%
3 times/95.5%

ESG External training

TAKENAKA CORPORATION

As part of the training on ESG, the participants visited the Takenaka Research & Development Institute of TAKENAKA CORPORATION to observe the latest research and initiatives on ESG through building and construction.(2023)

HASEKO Corporation

As part of training related to the healthcare industry, HAM invited Naoko Yoshimura, Director and Operating Officer of HASEKO Corporation (and Director and Chief Researcher, Haseko Research Institute Inc.) to a study session on "Current Status and Future Prospects of the Senior Housing and Facility Business".(2023)

ANA Business Solutions Co.,Ltd.

Workshop with outside instructors to deepen understanding of DEI (Diversity, Equity, and Inclusion) and to promote diversity in the workplace.(2023)

Materiality

HCM and HAM aim to realize the investment philosophy and enhance unitholder value over the medium to long term by practicing asset management that is considerate of ESG (Environment, Social and Governance).

Issues that need to be solved Highly relevant SDGs
Environment
  • ・Reduction of water resource consumption
  • ・Energy conservation and reduction of CO2 emissions
  • ・Response to natural disasters caused by climate change (Resilience)
  • ・Waste management and reduction
Social
  • ・Elimination of the shortage of supply of housing for the elderly against the elderly population
  • ・Prevention of job separation due to nursing care through the promotion of supply of nursing care facilities
  • ・Improvement of business efficiency and reduction of work burden for nursing care staff
  • ・Prevention of abuse of residents and harassment of facility staff
  • ・Response to the deterioration of buildings of hospitals, promotion of earthquake resistance
  • ・Work-life balance, health of staff, etc.
Governance
  • ・Transparency in decision making
  • ・Fair transaction (Appropriate management of conflicts of interest)
  • ・Management of various risks (including elimination of antisocial forces)
(Source) Excerpt from the United Nations Information Centre's "SDGs Posters, Logos, Icons and Guidelines"

Initiatives / External Certifications

Third-party assurance of environmental performance data

Environmental performance data (CO2 emissions and water consumption) for FY2021 and FY2022 have been third-party assured by Sustainability Accounting Co., Ltd.

GRESB Real Estate Assessment

In the 2024 GRESB Real Estate Assessment, HCM received a“1 Star” in GRESB Rating, which is based on GRESB Overall Score and its quintile position relative to global participants. It also won a “Green Star” designation for two years in a row by achieving high performance both in “Management Component” that evaluates policies and organizational structure for ESG promotion, and “Performance Component” that assesses environmental performance and tenant engagement of properties owned.

BELS Evaluation

BELS (Building-housing Energy-efficiency Labeling System) is a third-party certification program to rate houses and buildings in accordance with the Building Energy Efficiency Act's requirement of effort to label energy efficiency. The rating is based on the BEI (Building Energy Index) value calculated from primary energy consumption based on national building energy consumption standards.

Evaluation and labeling are performed by registered housing evaluation agencies, designated inspection agencies or registered building survey agencies that are members of The Association for Evaluating and Labeling Housing Performance and have filed to perform BELS services, and the evaluation results are indicated on a five-star scale (one to five stars).

The following HCM properties have been rated.

Property name Evaluation Date of being rated

NOAH GARDEN L Grace
December 6, 2022

NOAH GARDEN Season Bell
December 6, 2022

CASBEE

Comprehensive Assessment System for Built Environment Efficiency (CASBEE) is a method for evaluating and rating the environmental performance of buildings and the built environment. It is a comprehensive assessment of the quality of a building, evaluating features such as interior comfort and scenic aesthetics, in consideration of environment practices that include using materials and equipment that save energy or achieve smaller environmental loads. The CASBEE assessment is ranked in five grades: Superior (S), Very Good (A), Good (B+), Slightly Poor (B-) and Poor (C).

HCM acquired CASBEE certified properties in the 19th fiscal period. (PD House Higashi-Osaka)

Initiatives based on TCFD Recommendations

Supporting the TCFD Recommendations and participation in the TCFD Consortium

In March 2023, HCM and HAM announced their support for TCFD(Task Force on Climate-related Financial Disclosures) and participated in the TCFD Consortium, an organization of domestic companies that support TCFD.

TCFD

TCFD is a task force established by the Financial Stability Board (FSB) at the request of the G20 to examine how climate-related disclosures and financial institutions should be addressed. TCFD encourages companies to disclose their "governance," "strategy," "risk management," and "indicators and targets" related to climate change-related risks and opportunities.

TCFD Consortium

Through a series of dialogues companies and financial institutions, TCFD Consortium aims to further discussion on effective and efficient corporate disclosure of climate-related information and their investment by financial institutions.

Addressing Climate Change Issues and Information Disclosure

HCM and HAM aim to realize a sustainable society by addressing climate change issues in cooperation with various internal and external stakeholders, including operators, hospital personnel, sponsors, executives and employees, while also focusing on climate change-related risks and opportunities specific to the healthcare facilities in which HCM invest, as well as realizing their basic philosophy.

In addition, information on addressing climate change-related risks and opportunities will be disclosed about the contents of TCFD recommendations and guidance, as represented by scenario analysis.

Scenario Analysis

In response to the global focus on climate change and extreme weather events, and the growing public demand for countermeasures, HAM conducts scenario analyses of the actual and potential impacts on HCM and HAM's business, strategic, and financial planning of the various risks and opportunities posed by climate change issues. The following process is used to analyze scenarios.

The analysis covers all real estate properties owned by HCM, as well as the overall business of real estate investment management. HAM also aims to analyze the medium-term (2030) and long-term (2050) impacts.

Scenario Analysis Process

Step.1:Understanding the characteristics of healthcare facilities

Since healthcare facilities owned by HCM may have certain restrictions on the physical freedom of residents and customers, it is important to carefully consider the risks and opportunities for natural disasters brought about by climate change, including the safety of the facility itself and evacuation response.

Various risks due to climate change have a significant impact on the operator business that operates the facilities, and the good or bad operating conditions of the facilities also have a significant impact on HCM's business.

Therefore, HCM and HAM will broadly consider the risks and opportunities from climate change from a comprehensive perspective, including the perspectives of not only investors but also residents/customers and operators.

Step.2:Setting climate-related scenarios

Recognizing that HCM's business could be significantly affected by climate change, as described in Step 1, the following two climate-related scenarios have been established.

Transition risk refers to the risk of changes in climate change policies, regulations, technological developments, market trends, and market valuations. Physical risk refers to the acute or chronic damage caused by disasters and other events resulting from climate change.

Climate-related scenarios
Setting Scenario 1.5°C scenario 4°C scenario
Reference
scenario
Transition
risk
IEA(International Energy Agency)
NZE2050
IEA(International Energy Agency)
World Energy Outlook 2020 STEPS
Physical
risk
IPCC
(Intergovernmental Panel on Climate Change)
Fifth Assessment Report RCP2.6
IPCC
(Intergovernmental Panel on Climate Change)
Fifth Assessment Report RCP8.5
Scenario overview
  • A scenario in which policies, regulations, and technological innovations are implemented to achieve a decarbonized and sustainable society, limiting average temperature increase to less than 1.5°C by the end of the century
  • Transition risk is high, but physical risk is low compared to the 4°C scenario.
  • A scenario in which the average temperature rises by about 4 °C by the end of the century, despite the achievement of national targets in accordance with the Paris Agreement and other policies of individual countries.
  • Transition risk is low, but physical risk is high compared to the 1.5°C scenario.

Step.3:Establishment of factors affecting business

Taking into account the characteristics of the facility in Step 1, the following scenario worldviews were organized by establishing the key factors that would affect HCM's business in each of the scenarios in Step 2.

Scenario worldview
Scenario worldview
Setting Scenario 1.5°C scenario 4°C scenario
Transition Risks
and
opportunities
Policy

Legal
  • Strengthen energy conservation standards
  • Revision of laws for the purpose of preventing natural disasters and strengthening of development regulations
  • Strengthen introduction of carbon tax
  • Introduce a carbon tax to the extent of the current policy
  • Expansion of public subsidy programs for investment in energy-saving equipment
  • Public subsidy programs for investment in energy-saving equipment are about the same as the current level
Technology
Development
  • Advanced energy-saving and renewable energy technologies
  • No progress in advancing energy-saving and renewable energy technologies
Market
Trends
  • Investors and financial institutions value environmental regulatory efforts, environmental performance, and certifications
  • Investors and financial institutions are closely monitoring physical risks such as natural disasters and evaluating efforts to strengthen resilience
Market
Reputation
  • Change in tenant and resident behavior due to environmental regulations and environmental orientation
  • Change in tenant and resident behavior due to disaster prevention orientation
Physical risks
and
opportunities
Acute
  • Certain increase in wind and flood damage
  • Extensive wind and flood damage
Chronic
  • Average temperature rises about 1.5°C, sea level rises 0.2-0.5 m
  • Average temperature rises about 4°C, sea level rises 0.4-0.8 m

Step.4:Assessment of impact on business, strategic, and financial planning

The climate change risks and opportunities affecting HAM‘s business under the scenario worldview established in Step 3 were evaluated as follows. Note that the large, medium, and small values in the evaluation results represent HAM’s qualitative judgment of the respective impact levels. In the future, HCM and HAM aim to quantitatively evaluate each impact level.

Risks and opportunities of the 1.5°C scenario

This table can scroll to the left or right.

1.5°C scenario
Risk
Classifications
Middle
Classification
Factors (Worldview) Classification Financial Impact Assessment Results
Transition
Risks and
Opportunities
Policy

Legal
Strengthen energy conservation standards
(Strengthened environmental performance standards, Mandatory reporting of renewable energy use and GHG emissions, Mandatory ZEB/ZEH compliance, etc.)
Risk Development costs to achieve standards, impact on yield levels Middle
  • Increased development costs and lower yield levels due to strengthened standards
  • Limited impact on acquisition and properties if investors are understanding
Risk Relative decline in environmental performance of owned properties Large
  • Decrease in liquidity and market value of properties with poor environmental performance
Opportunities Expansion of subsidies and other public assistance programs for environmental
investments
Large
  • Improve market value while reducing the cost of compliance with strengthened energy conservation standards by improving environmental performance through the use of subsidies, etc.
Strengthen introduction of carbon tax Risk Impact on costs associated with legal compliance (carbon tax, non-fossil
certificate acquisition costs, etc.)
Middle
  • Increase in cost borne by HCM
  • Risk of tenant move-out due to higher operator costs and lower rental revenues
Technology
Development
Advanced energy-saving and renewable energy technologies
(Lower installation costs and higher efficiency through technological innovation)
Risk Cost implications of new technologies Small
  • Limited increase in investment burden due to lower installation costs resulting from technological innovations
Opportunities Reduction of water and utility costs through improved energy efficiency Middle
  • Operator utility costs reduced and potential for increased rents from green leases
Market
Trends
Changes in Evaluation Standards
(Investors and financial institutions closely monitor environmental performance and certification of properties under management)
Risk Low evaluation of environmental performance and certification by investors
and financial institutions
Large
  • Increased financing costs, stricter financing terms, and lower unit prices if environmental investments, certifications, and portfolio valuation improvements are not made
Opportunities High evaluation of environmental performance and certification by investors
and financial institutions
Middle
  • Lower financing costs and higher unit prices due to environmental investments, certifications, and improved portfolio valuation
Market
Reputation
Tenant/Resident behavior change
(Environmental performance of properties is becoming more important due to regulatory compliance, changing orientation, etc.)
Risk Low evaluation of the property's environmental performance by residents
and tenants
Large
  • Risk of a decrease in rents due to a decline in the liquidity and market value of the properties or move-out of the operator.
Opportunities High evaluation of the property's environmental performance by residents
and tenants
Large
  • Stabilize business by improving occupancy rates through better environmental performance of properties and by increasing the competitiveness of properties owned
Acute Increase in wind and flood damage
(Climate change will increase wind and flood damage to some extent, but not significantly)
Risk Disaster recovery response Middle
  • Limited disaster recovery costs
Risk Prolonged recovery period Middle
  • Damage to the facility is minor and the period of inactivity is limited
Physical
Risks and
Opportunities
Chronic Temperature rise/sea level rise
(Average temperature rises about 1.5°C, sea level rises 0.2-0.5 m)
Risk A certain degree of increase in air conditioning equipment operation due to
rising temperatures
Middle
  • Although air-conditioning equipment operation will increase to a certain degree, there is no need to renew them, and the increase in utility costs will be limited.
Risk Property falls within hazard area due to sea level rise Small
  • Sea level rise is expected to be to the extent anticipated in existing hazard maps, etc., and the impact on properties owned will be minimal.
Risks and opportunities of the 4°C scenario

This table can scroll to the left or right.

4°C scenario
Risk
Classifications
Middle
Classification
Factors (Worldview) Classification Financial Impact Assessment Results
Transition
Risks and
Opportunities
Policy

Legal
Strengthening regulations for the purpose of natural disaster prevention
(Expansion of hazard areas and tightening of development regulations)
Risk Existing properties fall within the hazard area Large
  • Risk of reduced rents due to lower liquidity of properties held, decline in market value, shortening of tenant contract terms, and increased relocations
Risk Impact on property acquisition prices due to revision of property acquisition
standards and store opening standards
Large
  • Decrease in portfolio yields due to higher acquisition prices of resilient properties
Market
Trends
Changes in Evaluation Standards
(Investors and financial institutions emphasize resilience of properties under management)
Risk Low evaluation of environmental performance and certification by investors
and financial institutions
Large
  • Increased financing costs, stricter financing terms and lower unit prices if resilience is not strengthened
Opportunities High evaluation of environmental performance and certification by investors
and financial institutions
Middle
  • Increased investment costs for resilience strengthening, but certain reduction in financing costs
Market
Reputation
Tenant/Resident behavior change
(Increasing number of natural disasters has led to an emphasis on disaster prevention aspects of properties.)
Risk Low evaluation of the property's environmental performance by residents
and tenants
Large
  • Lower liquidity of less resilient properties, decline in market value, and risk of reduced rents due to operator move-out
Opportunities High evaluation of the property's environmental performance by residents
and tenants
Large
  • Potential for business expansion through higher occupancy rates due to growing needs for improved resilience and increased competitiveness of properties owned
Physical
Risks and
Opportunities
Acute Severe wind and flood damage
(Increased frequency of property damage due to more severe wind and flood damage)
Risk Human damage to residents and operators caused by the disaster Large
  • Compensation for human damage, significant loss of competitiveness of the facility due to reputation decline with human damage
Risk Disaster recovery response Large
  • Increased disaster recovery and resilience strengthening costs
Risk Prolonged recovery period Large
  • Decreased rents due to long periods of inactivity
  • Decrease in rents due to deterioration of operator financial condition and move-out
Chronic Temperature rise/sea level rise
(Average temperature rises about 4°C, sea level rises 0.4-0.8 m)
Risk Significant increase in air conditioning equipment operation and renewal frequency due to rising temperatures Large
  • Increased utilities costs due to a significant increase in air-conditioning equipment operation will put pressure on operator management, increasing the risk of move-out and a decline in rents
  • Increased costs due to equipment renewal
Risk Property falls within hazard area due to sea level rise Large
  • Unexpected sea level rise causes owned property to fall within the hazard area and the market value to decline
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