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

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

Overview of TCFD

TCFD

TCFD stands for the Task Force on Climate-related Financial Disclosure. It was established in 2015 by the Financial Stability Board, which is composed of the central banks and financial regulatory authorities of major countries. In June 2017, in order to reduce risks associated with destabilizing financial markets, TCFD recommended that companies disclose medium- to long-term business risks and opportunities presented by climate change and the impacts of these risks and opportunities on their financial conditions, as well as specific measures and strategies.

Policy

In light of the commitment on climate change that is common worldwide, MCUBS, an asset manager for IIF, recognizes the importance of information disclosure and expressed support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in August 2019.
To realize a virtuous cycle of environmental protection and economic growth, we aim to improve the energy efficiency and building resilience of properties owned by our investment corporations by cooperating with all our stakeholders so as to reduce the impact of climate change through real estate asset management.

Governance

Governance
Management Structure
Decisions on ESG policy, strategies, systems, and other matters are made centered on the Sustainability Committee chaired by the Chief Sustainability Officer (CSO). The committee meets once every quarter and uses the PDCA cycle, including confirmation of the climate change measures and targets and progress status of each investment corporation, for ESG promotion. The result of the matters confirmed are reported as needed to the Board of Directors, chaired by the President of MCUBS, and the Board of Directors of each investment corporation. In addition, under the committee, subcommittees—comprising ESG staff from the ESG Promotion Office and investment corporations—meet as appropriate to enhance their recognition and awareness of issues through the consideration of individual issues and sharing of information.

Strategy

Strategy
Risks and Opportunities of Climate Change
The TCFD recommendations classify climate change risks into “transition risks” and “physical risks.” Responses to climate change are likely to provide not only risks but also business opportunities through new economic activities and the creation of social value.
Risks

This table can be scrolled left and right.

Risk Category Based on TCFD Narrow Classification Period Understanding of Issues
Transition risks
Policies, and legal
  • Reinforced energy regulations including mandatory energy-saving performance
  • Costs incurred from the expansion of emissions trading systems and introduction of a carbon tax
  • Higher costs to respond to regulations
Medium term
Long term
  • Energy efficiency
  • Renewable energy
  • Quantification of the risk of higher costs to respond to future regulations
  • Environmental management systems (EMS)
Technology
  • Improved energy efficiency through the use of facilities with high energy-saving performance
  • Higher costs from introduction of facilities with high energy-saving performance
Medium term
Long term
  • Adoption of advanced technologies
Markets
  • Competitive advantage at properties with high environmental performance
  • Decrease in asset value
  • Decrease in share price
Short term
Medium term
Long term
  • Green building certification
  • Environmental performance of buildings
  • Engagement
Society
  • Increased social demands to curtail GHG emissions
  • Socioeconomic changes from expanded ESG investment, etc.
Medium term
Long term
  • Introduction of renewable energy
  • Quantification of future increases in operating costs
  • Sustainability finance
Reputation
  • Decline in reputation due to delayed measures to respond to climate change
Short term
Medium term
Long term
  • Monitoring status of target achievement
  • Gaining tenant cooperation
  • ESG risk management systems
Physical risks
Acute
  • Increased severity of typhoons, floods, etc.
Short term
Medium term
Long term
  • Building resilience
  • Quantification of future climate disaster risks
  • Increase in insurance premiums
Chronic
  • Climate change such as higher temperatures and se level rise
Long term
  • DD process when selecting properties
  • Flooding damage from temperature increase (sea level rise)
  • Higher future operating costs and quantification of risks
Opportunities
  • Enhancement of energy efficiency through technological development
  • A variety of funding methods (Green Bonds, sustainability finance, etc.)
  • Resolution of environmental issues for tenants and local communities, among others

Senario Analysis

Senario Analysis
In its World Energy Outlook 2017 (WEO 2017), the International Energy Agency (IEA) presents the main scenario (4°C Scenario) assumed based on measures necessary for the realization of the targets presented by each country under the Paris Agreement, as well as the Sustainable Development Scenario (2°C Scenario) premised on holding the increase in temperature to below 2°C above pre-industrial levels.
An IPCC report also presents the view that “global warming of 4°C or higher would pose risks to food security and water availability worldwide. … cause the extinction of species, greatly restrict human activities, and in some cases, may exceed the tolerable limitations.” There is a growing shared recognition worldwide that greenhouse gas emissions have a significant impact on the mechanisms of global warming and reduction of CO2, which accounts for a large portion of greenhouse gas emissions, will help to address global warming.
The MC-UBS Group undertakes simulations of the Value at Risk (VaR) and greenhouse gas emissions of its properties through participation in the United Nations Environment Programme—Finance Initiative (UNEP FI) TCFD Pilot Project and utilization of Carbon Risk Real Estate Monitor (CRREM).
Such simulations have revealed that the situation differs among properties and greenhouse gas emissions can be reduced by introduction of renewable energy. We recognize that these findings can help us to set up concrete reduction targets and formulate measures to increase energy efficiency.

Risk Management

Risk ManagementRisk Management Related to Climate Change
The Sustainability Committee identifies and evaluates important risks and opportunities related to climate change and confirms the status of progress.
In addition, the Risk Management Committee, in which MCUBS management personnel serve as members, checks the risk scenario related to responses to sustainability once every two months using a Risk Control Matrix (RCM), thereby implementing evaluation and management.

Indexes and Goals

Indexes and Goals
Indexes and Goals
IIF seeks to hold down the increase in average temperature in line with the Paris Agreement. The investment corporations have established reduction targets for CO2 emissions, etc. for the years up to 2030 and disclose a wide range of data. Going forward, we will again set up longterm targets after closely examining the results of simulations and thoroughly considering scenario analysis.

Initiatives for Reducing Environmental Impact

Resilience

IIF sees financial risks from climate change as medium to long term risks. We understand the short term risk is limited as we conduct due diligence when acquiring properties. However, when taking into consideration factors such as the increased severity of typhoons and floods from torrential rains exceeding expectations that have occurred in recent years, we believe it has reached a point where it should be recognized as an even more severe physical risk. To reduce the impact of the physical risk as much as possible, we are taking measures to improve the building resilience of our properties, such as the installation of waterproof boards and portable storage batteries. We will also respond to climate change by introducing renewable energy.

IIF Supports “Zero Emission Tokyo” Initiatives

IIF Supports “Zero Emission Tokyo” Initiatives

In support of initiatives by the Tokyo Metropolitan Government’s Bureau of Environment to make zero COemissions in Tokyo, IIF has donated 1,341tons of CO2 credits acquired through energy conservation efforts in accordance with Tokyo’s Cap -and- Trade Program

For details, please refer to the website of Tokyo Metropolitan Government Bureau of Environment
www.kankyo.metro.tokyo.jp/en/climate/index.html
 
*Tokyo Cap-and-Trade Program Credit: Japan’s first mandatory emission trading scheme to donate COcredits (excess reduction credits) acquired through energy conservation efforts.