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 serious disaster which comes from typhoons and heavy rains, high frequency of heat waves and droughts, and rising sea levels worldwide. In addition, the Group regard climate change as a material issue that will cause major changes in the natural environment and social structure which will 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 projects. On the other hand, in the energy business, demand for renewable energy is expected to grow, and our Group see this as an important opportunity.
Endorsement of TCFD Recommendations
MIRARTH HOLDINGS and MIRARTH Real Estate Advisory have expressed support for the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures) (Task Force on Information Disclosure Climate-related Financial Disclosures), established by the Financial Stability Board (FSB), and the TCFD Consortium (now GX Future Consortium)*2.
Starting with the final endorsement in June 2022, MIRARTH HOLDINGS MIRARTH HOLDINGS Group has been analyzing and responding to the risks and opportunities that climate change poses to its business, as well as strengthening and enhancing Information Disclosure on climate-related issues aligned with the TCFD recommendations on "governance," "strategy," "risk management," and "indicators and targets."
- *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, recommendations for companies and others to disclose their "governance," "strategy," "risk management," and "indicators and targets" related to climate change-related risks and opportunities.
TCFD Website - *2 TCFD Consortium (now GX Future Consortium): A private-sector-led organization established in 2019 to discuss effective corporate Information Disclosure and efforts to connect disclosed information to appropriate investment decisions by financial institutions and others.
TCFD Consortium Website
Governance
To address the risks and opportunities of climate change, our company has established a governance system centered on oversight by the Director Council and the Sustainability Committee. The Chief Officer for Climate Change Response is the President of Representative Director, and the Executive Officer responsible for climate change response, who is the practical responsibility, is the Director in charge of sustainability. The executive officer responsible for climate-related issues regularly reports to the Chief Officer on climate change responses, including identification and assessment of climate change impacts, management of risks and opportunities, progress of adaptation and mitigation efforts, and setting of indicators and targets, to the Chief Officer on climate-related issues. Attendees of the Sustainability Committee deliberate and examine each agenda item, and decisions on climate-related issues are made by the Chief Executive Officer.
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, Newly built detached houses condominium, Renewal resale, Real estate rental, Real estate management, Real estate Other), Energy Business, Asset Management Business, and other businesses.
Referenced External Scenarios
The TCFD recommendations advise explaining the resilience of the company's strategy based on multiple scenarios, including those below 2°C. To consider climate-related risks and opportunities, we conducted a scenario analysis of the Group's operations and 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)
IPCC reports were selected for physical risk analysis scenarios since it is considered as a standard reference document for meteorological conditions.
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)
IPCC reports were selected for physical risk analysis scenarios since it is considered as a standard reference document for meteorological conditions.
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 for two categories: 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 | Setting and managing targets for GHG emissions |
| 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 | Costs related to the development and implementation of new technologies and the modernization of internal processes are increasing. | Mid Term | Medium | Large | We gather information on new technologies and services, secure specialized personnel, and develop internal systems to implement the planned development and introduction of new technologies. | |
| 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 collaboration with competitors. | ||
| Reputation | Reduced value of brands | Sales have decreased due to lower property sales prices and rents, and profits have also declined due to customer attrition and constraints on raising capital. | Mid Term | Small | Medium | Setting energy-saving standards for new development projects and introducing equipment to 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 | Increased sales, reduced capital investment costs, etc. | Mid Term | Small | Medium | Introduction of low-emission equipment, renewable energy, 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 | We will promote business expansion, secure specialized personnel in green finance, and strengthen our 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 | Reduction of cash outflows | 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 for 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 using 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 ZEB/ZEH condominiums
detail
１． [Transition Risks] Strengthening of Various Regulations through Energy-Saving 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, Newly built detached houses, and Renewal resale. Based on the fiscal year ending 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 ZEB/ZEH specifications, is increasing, and a price markup (green premium) is expected compared to properties with standard specifications. Based on the 1.5-2°C scenario and the fiscal year ending March 2025, the estimated premium is approximately 560 million yen to 2.79 billion yen. The estimated range reflects the estimated range of green premiums based on data from the IEA (International Energy Agency). Note that the occurrence of green premiums is limited 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 with 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 person with ultimate responsibility for climate-related issues 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 person with ultimate responsibility for climate change responses will direct that existing Group-wide risk management programs consider, to the extent possible, climate-related risks that are material to business and financial planning. The risk identification, assessment, and management process will then be integrated.
Indicators and Targets
Our company sets key performance indicators (KPIs) and targets to manage and monitor risks and opportunities.
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 Achievements |
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.
