Addressing Climate Change
Perceptions on Climate Change
MIRARTH HOLDINGS Group recognizes that the progression of climate change is a scientific fact. So, it is essential to take measures to counter the increasing damage caused by natural disasters due to climate change, such as typhoons and heavy rains, frequent heat waves and droughts, and rising sea levels worldwide. In addition, the Group regards climate change as a material issue that will cause major changes in the natural environment and social structure and have a significant impact on our management and business as a whole. In anticipation of the transition to decarbonization of the social economy, including the establishment of frameworks to reduce greenhouse gas emissions and tighter emission regulations as part of global efforts to mitigate climate change, there is a growing social demand for reducing greenhouse gas emissions and enhancing resilience in the development and operational stages of real estate business. On the other hand, in the energy business, demand for renewable energy is expected to grow, and our Group views this as an important opportunity.
Endorsement of TCFD Recommendations
MIRARTH HOLDINGS and MIRARTH Real Estate Advisory have expressed their support for the TCFD (Task Force on Climate-related Financial Disclosures)*1 recommendations established by the Financial Stability Board (FSB), and have joined the TCFD Consortium (now GX Future Consortium)
*2.
Since declaring its support in June 2022, MIRARTH HOLDINGS will take this as a starting point for our group's analysis and response to the risks and opportunities that climate change poses to our business, and for strengthening and enhancing our information disclosure on climate change challenges in line with the Governance, Strategy, Risk Management, and Metrics and Targets stated in the TCFD recommendations.
- *1 TCFD (Task Force on Climate-related Financial Disclosures): An international initiative 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 publishes recommendations for companies and others to disclose their Governance, Strategy, Risk Management, and Metrics and Targets related to climate change-related risks and opportunities.
TCFD Website - *2 TCFD Consortium (now GX Future Consortium): A privately-led organization established in 2019 with the aim of discussing effective information disclosure by companies and initiatives to connect disclosed information to appropriate investment decisions by financial institutions and others.
TCFD Consortium Website
Governance
MIRARTH HOLDINGS establishes a governance structure centered on oversight by the Board of Directors and the Sustainability Committee to address the risks and opportunities of climate change. The Chief Executive Officer for addressing climate change is the Representative Director, and the Executive Officer for addressing climate change, who is in charge of practical operations, is the Director in charge of sustainability. The Executive Officer for addressing climate change reports regularly to the Chief Executive Officer on matters related to climate change response, including identification and assessment of climate change impacts, management of risks and opportunities, progress of adaptation and mitigation efforts, and establishment of Metrics and Targets, at the Sustainability Committee meetings. After deliberation and consideration of each agenda item by the attendees of the Sustainability Committee, decisions are made by the Chief Executive Officer for addressing climate change.
Strategies
Scope of Analysis
In scenario analysis, we analyze the Group's overall business activities, including Real Estate Business (New built-for-sale condominium, Liquidation, New detached house, Renewal and resale, Real estate rental, Real estate management, Real estate Other), Energy Business, Asset Management Business, and other businesses.
Referenced External Scenarios
The TCFD recommendations suggest that companies explain the resilience of their strategies based on multiple scenarios, including those below 2°C. To consider climate-related risks and opportunities, MIRARTH HOLDINGS conducted a scenario analysis of the Group's businesses. The summary of the scenario analysis is provided below. The scenario analysis and our process for identifying and assessing risks and opportunities are described in the "Risk Management" section below.
| Source Organization | 1.5-2°C Scenario | 4°C Scenario |
|---|---|---|
| IEA (International Energy Agency) | NZE2050 | STEPS |
| IPCC (Intergovernmental Panel on Climate Change) | RCP4.5 | RCP8.5 |
Why this scenario was chosen
IEA NZE2050 (1.5-2°C scenario transition risk)
IEA was selected as a possible reference since the main source of greenhouse gas emissions is energy consumption.
IPCC RCP4.5 (1.5-2°C scenario physical risk)
Of IPCC reports that are considered standard reference materials for meteorological conditions, those that correspond to the analysis scenarios for physical risks were selected.
IEA STEPS (4°C scenario transition risk)
IEA was selected as a possible reference since the main source of greenhouse gas emissions is energy consumption.
IPCC RCP8.5 (4°C scenario physical risk)
Of IPCC reports that are considered standard reference materials for meteorological conditions, those that correspond to the analysis scenarios for physical risks were selected.
A possible worldview in each scenario
Each scenario assumes the following worldview.
| 1.5-2°C scenario (Large transition risk, small physical risk) |
|---|
| This scenario aims to limit the rise in global temperature by the end of the 21st century to 1.5°C to 2°C compared to pre-industrial levels, through strengthened social policies and emission regulations for decarbonization and progress in addressing climate change, in order to achieve the goals of the Paris Agreement. It is assumed that there will be a significant movement toward decarbonization or low carbon in all aspects, including policies, investors, and consumers, and that companies will be strongly required to respond to climate change, with transition risks such as a decline in competitive advantage if they do not respond. On the other hand, it is assumed that the frequency and severity of climate disasters will be suppressed to some extent, and physical risks will be relatively lower. |
| 4°C scenario (Small transition risk, large physical risk) |
| This is a scenario in which the global temperatures at the end of the 21st century will rise by 4°C above pre-industrial levels, since sufficient climate change mitigation measures are not realized, and greenhouse gas emissions continue to increase. Physical risks are expected to increase, with a marked increase in the severity of natural disasters, sea level rise, and extreme weather events. On the other hand, as efforts toward decarbonization stall in policy and in capital markets and consumers, transition risks will be relatively small. |
Identification of risks, opportunities and response measures, strategies
Based on the 1.5-2°C scenario, where policies and regulations are strengthened for realizing a decarbonized society, and the 4°C scenario, where the physical impacts of climate change arise from intensified extreme weather, we identified risks and opportunities and evaluated their impact on our business as follows. In response to the identified risks and opportunities, we will promote the following initiatives. We also estimated the financial impact of two classifications: transition risk and opportunity.
| Classification | Major Risks and Opportunities | Financial Influence | Time span | Financial Impact |
Response measures, Strategies | ||
|---|---|---|---|---|---|---|---|
| 4°C Scenario | 1.5-2°C Scenario | ||||||
| Transition Risk | Policy and Law | Strengthening taxation by introducing a carbon tax |
Decrease in sales volume due to higher selling prices | Short Term | Small | Medium | Targets for GHG emissions Settings and Management |
| Strengthening various regulations, etc. due to energy conservation policy | Increased development costs due to regulatory compliance | Mid Term | Large | Large | Collaboration with suppliers to improve energy efficiency and strengthen sales strategies | ||
| Technology | Increased costs associated with the transition to decarbonization technologies | Increased costs for the development and introduction of new technologies and the innovation of internal processes | Mid Term | Medium | Large | Gather information on new technologies and services and implement the planned development and introduction of new technologies through securing professional human resources and building internal systems. | |
| Market | Increase in service prices by relevant suppliers against a backdrop of growing decarbonization needs | Development and construction of properties with high environmental performance such as ZEB/ZEH, etc., and increase in renovation/repair costs | Mid Term | Medium | Medium | Price stabilization through collaboration with suppliers | |
| Increasing scarcity of wind- and flood-resistant sites and intensifying competition in acquiring sites in favorable locations | Decrease in sales due to lost business opportunities | Short Term | Large | Large | Location selection and strengthening ties with other companies in the industry. | ||
| Reputation | Declining value of brands | Decrease in sales due to lower property sales prices and rents, and declining profits due to customer attrition and constraints on raising capital | Mid Term | Small | Medium | Set energy conservation standards for new development projects and introduce the equipment into existing properties | |
| Physical Risk | Acute | Damage to construction sites and operational power generation facilities due to natural disasters, and extensions to construction periods. | Increased construction-related costs, decreased electricity sales, and increased repair costs. | Short Term | Large | Medium | Adoption of construction methods and designs resistant to wind and flood damage, risk assessment using hazard maps, insurance coverage, and reserves for repair costs. |
| Chronic | Lower productivity at construction sites and increased failure rates of equipment in operation due to rising temperatures. | Increased costs due to longer construction periods and increased repair expenses. | Mid Term | Medium | Medium | Thorough implementation of occupational safety management at construction sites, introduction of design concepts that address climate change, and selection of product standards. | |
| Classification | Major Risks and Opportunities | Financial Influence | Time span | Financial Impact |
Response measures, Strategies | |
|---|---|---|---|---|---|---|
| 4°C Scenario | 1.5-2°C Scenario | |||||
| Products and Services | Increase in demand for low emission facilities and ZEB/ZEH condominiums | Increase in sales | Mid Term | Small | Medium | Promote the introduction of low emission equipment and renewable electricity |
| Development of technologies and products to address climate change | Increase in sales, reduced equipment investment costs | Mid Term | Small | Medium | Introduction of low-emission equipment, renewable electricity, and power generation facilities | |
| Expansion of O&M business | Increase in O&M sales | Mid Term | Small | Medium | Capital investment and securing engineers to expand O&M business | |
| Market | Lower financing costs due to improved ESG ratings | Rising stock prices, reduced financial costs, expanded funding opportunities, and increased funding amounts. | Short Term | Medium | Medium | Promote business expansion, secure specialized human resources for green finance, and strengthen procurement base. |
| Creation of opportunities to change residence | Increase in sales | Mid Term | Medium | Small | Development and promotion of ZEH/ disaster-resistant condominiums | |
| Utilization of public support schemes | Reducing cash outflow | Mid Term | Medium | Medium | Business expansion through urban redevelopment projects, etc. | |
| Policy and Law | Legal frameworks and demand expansion to accelerate the spread of renewable energy | Positive impact on speed and volume of development | Mid Term | Small | Large | Secure funding and reinforce personnel for asset expansion |
| Resource Efficiency | Promoting the use of renewable energy and internal use | Securing funding and strengthening personnel to expand renewable energy investment and increase assets | Short Term | Small | Small | Promoting market research and the development of new business models, and forming a project team with personnel possessing expertise in both renewable energy and real estate |
Quantitative assessment of financial impact
Our Group has estimated the financial impact on the following items, which we determined to have a particularly significant impact on our business and for which quantitative estimation based on data is possible. Please note that the financial impact figures presented here are limited in scope, as they are estimated based on current policy trends and currently available data.
Items evaluated
1. Financial impact of strengthened regulations and other measures due to energy conservation policies.
2. Financial impact of increased demand for low-emission facilities and ZEH/ZEB condominiums
Detail
１． [Transition Risks] Strengthening of various regulations due to energy conservation policies
If the ZEB/ZEH standards become mandatory or building energy-saving standards are gradually strengthened, the cost of meeting energy-saving specifications will be added to the construction cost in each business of New built-for-sale condominium, Liquidation, New detached house, and Renewal and resale. Based on the fiscal year ended March 2025, the financial impact under the 1.5-2°C scenario is estimated to be approximately 150 million yen. Furthermore, regarding the 4°C scenario, progress in strengthening regulations is limited, so the quantitative impact is assessed as minimal.
2. [Opportunity] Increased demand for low-emission facilities and ZEB/ZEH condominiums
With the acceleration of decarbonization, demand for properties with high environmental performance, including those meeting ZEB/ZEH specifications, is increasing, and a premium (green premium) is expected to be added to selling prices compared to properties with standard specifications. Under the 1.5-2°C scenario and using the fiscal year ended March 2025 as the baseline, the estimated premium is approximately 560 million to 2.79 billion yen. The estimated range reflects the estimated range of green premiums based on data from the International Energy Agency (IEA). Note that green premiums only apply to the 1.5-2°C scenario, where the transition to decarbonization is progressing, and therefore a quantitative evaluation has not been conducted under the 4°C scenario.
Risk Management
Our process for managing climate change-related risks is as follows.
①Process for identifying and assessing risks and opportunities
Significant risks and opportunities related to climate-related issues are discussed in the Sustainability Committee, and the Executive Director in charge of climate change responses convenes internal personnel once a year to identify and assess climate-related risks and opportunities.
②Processes to manage risk and integration into a group-wide risk management program
The Chief Executive Officer for addressing climate change will designate a person or department to oversee managing climate-related risks identified and assessed by the Sustainability Committee that are material to the business and financial plan and will direct the development of countermeasures for these risks.
To mitigate risks or realize opportunities, we shall define relative KPIs (Key Performance Indicators) if possible and attempt to monitor and set targets.
The Executive Director in charge of climate change responses shall summarize the progress of each initiative and KPI at least once a year and report the status to the Sustainability Committee.
The Chief Executive Officer for addressing climate change will direct that climate-related risks that are material to business and financial planning be considered within the existing Group-wide management program to the extent possible, thereby, integrating the risk identification, assessment, and management process.
Metrics and Targets
MIRARTH HOLDINGS has established key performance indicators (KPIs) and targets to manage and monitor risks and opportunities. The Metrics and Targets we have set are as follows.
Greenhouse Gas Emissions
1. Achieving Net Zero by 2050
[Long-term target]
- Achieve net-zero Scope 1, 2 and 3 *1 emissions across the entire Group by FY2050.
2. Reducing Greenhouse Gas Emissions
[Medium-term target]
- Reduce Scope 1, 2, and 3 emissions across the entire Group by 45% from FY2022 levels by FY2030.
-
- Reduce Scope 1 and 2 emissions by 70% from FY2022 levels by 2030 (SBT validated).
- Reduce Scope 3 emissions *2 by 45% from FY2022 levels by 2030 (SBT validated).
Greenhouse Gas Emission Reduction Targets and Results
Unit: t-CO₂
| FY2022 (Base year) |
FY2023 Performance |
FY2024 Performance |
FY2030 Target [SBT validated] |
|
|---|---|---|---|---|
| Scope 1 + Scope 2 | 3,593 － |
2,191（▲39.0％） | 2,113（▲41.2％） | 1,078（▲70.0％） |
| Scope 3 | 616,368 － |
587,132（▲4.7％） | 727,432（18.0％） | 339,002（▲45.0％） |
- *1 Scope 1: Direct greenhouse gas emissions from the Company’s own activities (e.g. combustion of fuels such as city gas)
Scope 2: Indirect emissions from the use of electricity, heat, or steam supplied by other companies
Scope 3:Indirect emissions outside Scope 1 and 2 (emissions from other entities related to the Company’s activities) - *2 Scope 3 emissions cover Category 1 (Purchased goods and services), Category 2 (Capital goods), and Category 11 (Use of sold products).
The FY2030 targets have been certified as Science Based Targets (SBTs) by the Science Based Targets initiative (SBTi), a global climate action organization, based on scientific evidence.
