Initiatives for Sustainability

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Environmental Initiatives

Engaging the social mission that is to improve the environmental performance of the properties we manage, we will lower the environmental impact by constantly reducing the negative environmental impact of these properties such as energy consumption, GHG emissions, water consumption and the generation of waste materials and having activities for the proper management of hazardous substances and reduction in their use, and make contribution to environmental sustainability with the following environmental initiatives in a proactive manner for increasing mid-long term profit.

Climate Change

Global warming, as the main factor for a climate change, has been the primal topic at international meetings so far and in 2015 Paris Agreement has adopted a new framework in 18 years since Kyoto Protocol. In this agreement, one of the goals is to keep the increase in global average temperature to well below 2℃, preferably to 1.5℃, compared to pre-industrial levels. In addition, at COP26 in 2021, the Glasgow Climate Pact was agreed that the 1.5℃ target remains in sight and scales up action on dealing with climate impacts., Kenedix recognizes that efforts to climate change is the most important issue for our business activities and properties under management.

Support for TCFD recommendations

The Asset Management Company expressed support for the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) and also joined the TCFD consortium, a group of domestic companies that support TCFD recommendations in October 2021.
TCFD is an international initiative established by the Financial Stability Board (“FSB”) at the request of the G20 for the purpose of discussing the disclosures of Climate-related financial information and the responses by financial institutions. TCFD publishes recommendations for companies to disclose their governance, strategy, risk management, and metrics and targets for Climate-related risk and opportunities.

On the other hand, TCFD Consortium is a group of companies and financial institutions that support the TCFD recommendations. The consortium was established with a view to further discussion on effective corporate disclosures of Climate-related information and initiatives to link disclosed information to appropriate investment decisions on the part of financial institutions and other organizations.
The Investment Corporation and the Asset Management Company will work to expand information disclosure based on TCFD and continue to actively promote ESG (Environment, Social and Governance) initiatives based on “Sustainability Policies” established by the Asset Management Company.


Governance structure for climate change

The initiatives for sustainability are promoted under the leadership of the Sustainability Committee established in the Asset Management Company.
The Sustainability Committee gathers, analyzes, and examines the policies and targets, activity plans and various initiatives, matters related to risk management, and other important matters related to sustainability or ESG for the Investment Corporation and the Asset Management Company, and shares them with related parties, with the aim of promoting initiatives for sustainability and ESG-related matters. The committee meets in principle, every 3 months, and the content reviewed is also reported to the Asst Management Company's Board of Directors with an independent external member, and to the Investment Corporation's Board of Directors with independent supervisory directors.
The Sustainability Committee is composed of the President & CEO (Chief Sustainability Officer), who is the Chair of the Sustainability Committee, and as members, the committee is composed of full-time directors, the Head of Strategic Planning Department, the General Managers of Strategic Planning Department, who are in charge of each REIT Department, the Head of Sustainability Office, the Head of Strategic Planning and the Head of Asset Management Division, who are in charge of each REIT Department, the Head of Finance & Accounting Department and Head of Corporate Administration Department.
In addition, the Head of Sustainability Office also serves as a member of the Public Relations and Sustainability Department of Kenedix, Inc., the parent company of the Asset Management Company. Under the unified policy of the entire Kenedix Group, an organizational structure has been established to promote initiatives related to sustainability and ESG across the board.


Scenario Analysis

The Asset Management Company conducted a scenario analysis based on multiple world outlook in order to understand the risks and opportunities that climate change may pose to the Investment Corporations it manages in the future, and to proactively consider and respond to these risks and opportunities. World outlook of each scenario is provided below. The analysis was conducted with reference to future climate projections and energy trends published by international organizations.

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(Major reference sources)

  Transition risks Physical risks
4℃ Scenario IEA (International Energy Agency)
World Energy Outlook 2020 STEPS
IPCC (Intergovernmental Panel on Climate Change)
Fifth Assessment Report RCP8.5
1.5℃ Scenario IEA (International Energy Agency)
IPCC (Intergovernmental Panel on Climate Change)
Fifth Assessment Report RCP2.6

Financial Impact based on Scenario Analysis

The Asset Management Company examined the medium-term(2030) and long-term(2050) impacts of the risks, opportunities, and financial impacts for the Investment Corporation it manages for each of world outlook in the 4℃ and 1.5℃ scenario described above. The summary of the evaluation is as follows.

Risks and Opportunities Financial impact Measures to address risks and opportunities
Category Factor 4℃
Transition Risks and Opportunities Policy and legal CO2 emission regulation
Introduction of CO2 emission regulations as a measure to comply with international frameworks incur costs and risks related to CO2 emissions.
Increase in costs to improve energy efficiency of existing properties Low Low Low Mid
  • Improvement of energy-saving in existing properties
  • Establishment of GHG reduction targets
Carbon tax
The introduction of carbon tax as a measure to comply with international frameworks incur costs and risks related to CO2 emissions.
Increase in carbon tax costs Low Low Mid High
  • Introduction of renewable energy
  • Acquisition of non-fossil certificates, etc.
Increase in acquisition costs of non-fossil certificates, etc. Low Low Mid Mid
Technology Advancement of energy-saving and renewable energy technologies
Further technology advancement will result in lower installation costs and effective achievement of energy-saving and renewable energy.
Increase in costs due to introduction of new technology Low Low Low Mid
  • Energy-saving in existing properties
Decrease in utility costs due to energy-saving, introduction of renewable energy, conversion to ZEB/ZEH, etc. Low Low Low Mid
  • Acquisition of ZEB/ZEH properties
  • Conversion of existing properties to ZEB/ZEH
Markets Evaluation by investors and financial institutions
Investors and financial institutions will value improvement of the environmental performance of properties.
Increase in financing costs due to low valuation Low Low Low Low
  • Energy-saving in existing properties
  • Acquisition of environmental certifications
  • Improvement of engagement with investors and financial institutions
  • Utilization of green finance
Decrease in financing costs due to high valuation Low Low Low Low
Focus on environmental certification
Environmental certification will be required for portfolio evaluation by investors and financial institutions as well as property selection by tenants.
Increase in cost of actions to improve evaluation Low Low Low Low
  • Acquisition of environmental certifications
Increase in acquisition costs of environmental certifications Low Low Low Low
Reputation Tenant behavior change due to environmental orientation
Environmental performance of properties will become valued due to regulation compliance and changing preferences.
Low environmental performance properties becoming stranded Low Low Mid Mid
  • Energy-saving in existing properties
  • Acquisition of environmental certifications
  • Engagement
Maintain and improve occupancy rates by improving environmental performance Low Low Mid Mid
Tenant behavior change due to disaster-prevention orientation
Disaster prevention aspect of properties will become valued due to increasing disasters caused by rising temperatures and sea level.
Low resilience properties becoming stranded Mid Mid Low Low
  • Due diligence on acquisition
  • Flood risk analysis of properties
  • Improvement of resilience
  • Engagement
Maintain and improve occupancy rates by improving resilience measures Mid Mid Low Low
Physical Risks and Opportunities Acute Intensification of heavy rains and torrential rains
The frequency of property damage will increase due to severe wind and extreme flood.
Increase in disaster recovery costs Mid Mid Low Low
Decrease in rental income during the recovery period Mid Mid Low Low
Chronic Rise in sea level
Chronic rise in sea level.
Increase in costs to cope with sea level rise Low Low Low Low
Rise in average temperature
Chronic rise in average temperatures.
Increase in utility costs during summer Low Low Low Low
  • Energy-saving in existing properties
The financial impact (low, mid, or high) of each scenario is formulated through discussions based on qualitative and quantitative perspectives at the Asset Management Company. The red color of the financial impact in each scenario represents risk items, and the green color represents opportunity items. This evaluation will continue to be reviewed and updated as necessary based on new external and internal factors that have arisen and close examination of the quantitative impact.

Risk Management

Risk Management System for Climate Change

Each REIT Department of the Asset Management Company and the Sustainability Committee identifies and evaluates the sustainability and ESG-related risks of the Investment Corporation and the Asset Management Company. These sustainability and ESG-related risks are managed on a daily basis by each department in charge, and important risks are periodically analyzed and reviewed by the Sustainability Committee under the supervision of the chairperson of the Sustainability Committee, and are managed appropriately. In addition, these risks are integrated into the overall risk management of the organization by sharing them with related parties as necessary.

Metrics and Targets

Metrics and Targets related to Climate Change

Reduction of energy consumption and CO2 emissions is one of our material issues. Kenedix group is making a contribution to environmental sustainability by using our business activities and property management operations in continuously cutting energy consumption and CO2 emissions in order to lower our environmental impact.
The Investment Corporation sets reduction targets related to climate change and conducts ongoing monitoring and promotes initiatives that lead to a reduction in environmental impact.

Establishment Targets of Reduction of GHG Emission (certified as SBT) etc.

Responding to climate change is one of the important social issues, and with initiatives for climate change countermeasures are accelerating domestically and internationally. The Investment Corporation also has established new GHG emission reduction targets in order to actively promote the reduction of environmental impact and contribute to sustainability of environment through the medium- to long-term reduction of GHG emission in the properties it owns.

GHG emission
reduction targets
In fiscal year ("FY") 2030 By 2050
Total amount: 42% reduction (base year: FY 2021)
Per unit: 50% reduction (base year: FY 2013)

Per unit: Emission per unit is calculated based on the total floor area considering the occupancy rate.

The Investment Corporation has obtained Science Based Targets (SBT) certification for the above GHG emission reduction targets.

Science Based Targets are GHG emission reduction targets certified as science-based by the Science Based Targets initiative (“SBTi”), an international joint initiative established in 2015 by CDP, the United Nations Global Compact, the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). In order to acquire SBT Certification, the targets must be consistent with the levels required by the international framework, the Paris Agreement (to reduce the increase in global average temperature due to climate change to a maximum of less than 2 degrees Celsius above the level during the Industrial Revolution).

KDO has set reduction targets of energy consumption, etc. (medium- to long-term targets) as follows:

Reduction targets
for energy consumption (medium- to long-term targets)
  • Reduce the energy intensity by an annual average rate of 1% or more in five years in accordance with the Act on Rationalizing Energy Use (the Energy Saving Act)
  • Set individual targets for properties subject to local regulations on measures to cope with global warming

Process to Promote Energy Efficiency/PDCA Cycle

KDO has established PDCA process as below to achieve the medium- to long-term target on reduction in energy consumption, and been monitoring and assessing performance on energy consumption at the “Sustainability Committee” held on regular basis and the “Energy Conservation Measures Committee” where an external consultant also attends.

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Reduction of GHG Emissions, Energy Consumption and Water Consumption

GHG emission

Change in GHG emission

  FY 2013
(Base year)
FY 2019 FY 2020 FY 2021
GHG Emission (t-CO2)(Note 1) 30,088 53,416 48,212 45,516
Intensity (t-CO2/m2)(Note 2) 0.061 0.075 0.068 0.066
Note 1: GHG emission for each fiscal year is estimated by the Asset Management Company using emission factors (adjusted emission factors) by electric utility in "Greenhouse Gas Emissions Calculation, Reporting, and Publication System” of the Ministry of the Environment. The figures are the total of Scope 1, 2, and 3, and the calculation methods of GHG emission for FY2021 and prior to FY2020 are different.
Scope 1: Direct emission from fuel combustion
Scope 2: Indirect emissions from the use of externally procured electricity and heat
Scope 3: Total emissions minus Scope 1 and Scope 2
Note 2: The intensity is calculated by dividing the GHG emission for each year by the total floor area, considering the occupancy rate of each owned property.

GHG emission (Scope 1+Scope 2 total)

  FY 2021
Scope 1 (t-CO2) 1,124
Scope 2 (t-CO2) 12,604
Scope 1+ Scope 2 (t-CO2) 13,728
Intensity (t-CO2/m²)(Note) 0.058
Note: The intensity is calculated by dividing the GHG emission (total of Scope 1 and 2) by the common area of owned property.

Energy and water consumption

FY 2018 FY 2019 FY 2020 FY 2021
Energy consumption (MWh) 116,280 114,336 108,558 107,709
Intensity (MWh/m²)(Note) 0.168 0.160 0.152 0.155
Water consumption (m³) 488,341 494,722 389,222 384,678
Intensity (m³/m²)(Note) 0.706 0.693 0.546 0.554
Note: The intensity is calculated by dividing each consumption by the total floor area, considering the occupancy rate of each property.

Independent Assurance Statement

GHG emission and energy and water consumption in FY2021 have been assured by a third party (Sustainability Accounting Co., Ltd.).

PDFIndependent Assurance Statement (326KB)

Measures to Improve Energy and Water Efficiency

Installation of LED lightings

The ratio of
converting lighting in
common area (Note)
  • Converting lighting in common area, tenant area, etc. and emergency lights (including emergency guide lights) to LED to actively promote reduction of electricity expenses
  • We will continue to convert lightings in tenant area by promoting Green Lease based on discussions with tenants in a planned way as well as in common area
Note: The ratio is calculated for the buildings that completed the LED replacement including those partially implemented and excluding Shinjuku 6chome Building (Land) for common area as of October 31, 2022.

Initiatives to Improve Environmental Performance of Building

KDO aims to maximize unitholder profits, obtain stable earnings, and achieve sustainable growth in investment assets by mainly investing in and operating mid-sized office buildings in the Tokyo Metropolitan Area (Tokyo and its three neighboring prefectures: Kanagawa, Saitama and Chiba).
In general, large-sized office buildings are regarded as efficient and easy to achieve certifications, however KDO and KFM have achieved new acquisition and improvement with the level of environmental certifications at mid-sized buildings through refurbishment and environmental measures to improve energy efficiency with over 15 years of experience and knowledge in real estate asset management.

Refurbishment Case Studies: Certified as Green Building Standard or Improve Level of Green Certification

KDX Iidabashi Square

Fully renovated following the move-out of the tenant that had occupied the whole building (completed in April 2016)

・Review of floor plan for multi-tenants
・Upgrading of common/private area
・Introduction of grid ceiling in private area
・HVAC renewal to enhance energy efficiency
・Installation of LED lightings in common/private area
・Renewal of sanitation facilities to more water-efficient equipment.

As a result

Achieved "two stars" in DBJ Green Building Certification in October 2016
The rank improved to "three stars" in November 2018

BELS Certification "3 Star"

Occupancy rate reached approx. 50% about one month after the renovation and full about six months after. The building successfully filled vacancies at an excellent pace

See the key points of renovation works by webcast

KDX Yokohama Kannai Building

Conducted a large-scale renovation of common areas, etc. following the move-out of the tenants that occupied 5 floors (completed in April 2021)

・Installation of Low-E glasses and LED lighting in common areas
・Conducting regular tenant satisfaction surveys
・Adoption of vibration control systems, installation of emergency generators, etc.

As a result

The rank improved from “two stars” to “three stars” in June 2021.

For the following properties, the rank of green certification has improved by implementing both software and hardware measures to enhance energy and water efficiency through LED introduction for lighting facilities and restroom renovation and improve customer satisfaction such as placing an emergency kit box in elevators and organizing tenant engagement activities for energy conservation.

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KDO considers it important to seek to identify and improve the environmental performance of non-certified properties. Accordingly, KDO collects data on its whole portfolio (Note) and implements measures to improve efficiency.

As of April 30, 2023

Note: The scope for above are buildings, where KDO has the authority to introduce and implement policies on operations on energy.

Stakeholder Engagement to Improve Property Performance

As KDO and KFM are continuously making effort to realize sustainable environment, we think it is crucial to cooperate with our tenants who constantly use the properties. KDO and KFM are aiming to cooperate by taking initiatives to raise awareness and promoting green lease that allow both owner and tenant to share economic merit to achieve sustainable environment.
KDO and KFM have identified “tenant engagement to improve environmental performance” as material topic and been making contribution through promoting tenant cooperation and cooperating with other stakeholders such as property management companies who actually manage the building and employees in asset management companies who manages the properties.

Proper measures for hazardous substances, soil contamination and other materials requiring special handling

Before acquiring a property and in conjunction with other transactions, we thoroughly examine properties by receiving an engineering report that covers the building's structure and facilities, including environmental items. We also receive an earthquake probable maximum loss assessment, a soil contamination survey and other information. These activities ensure that the building complies with laws and regulations.
The engineering report includes a confirmation that a building is free of asbestos, PCBs and fluorocarbons. If any hazardous substances are discovered, appropriate actions are taken, such as by establishing counter-measures, managing or disposing of these substances, in accordance with laws and regulations.
If a property we plan to acquire has soil contamination, we make the investment only after the completion of soil contamination counter-measures.

Brownfield Development at Yokohama Connect Square

Kenedix Group is promoting a large-scale development project in the 37th district of Yokohama Minato Mirai Central District in collaboration with our partner companies. For this project, we are contributing approximately 1 billion yen to take appropriate measures to deal with soil contamination such as removal of contaminated soil and installation of water shielding walls, etc.

Green Finance

Finance through green bonds and green loans by companies, local governments, or other organizations to raise funds for domestic and overseas green projects, which is a project contributing to environmental solution, are called green finance. As main characteristics of green finance, proceeds are allocated exclusively to green projects, and are tracked and managed in a reliable manner, ensuring transparency by reporting after the implementation of the finance.

Please refer to below regarding issuance of green finance.

New installation of fund-raising vending machines

Installed fund-raising vending machines in April 2020 in which a portion of the proceeds from the sales of the vending machines is used to support tree-planting activities through a public-interest foundation
KDO will continue to expand these new initiatives and deepen our active involvement to broaden the scope of our support in the future

Activities to Raise Tenant Awareness

We have prepared letters to tenants asking for reducing energy consumption, distributing manuals for office users and putting posters at each floor to raise awareness on energy efficiency.
※Eco-friendly paper including limestone materials are used for the posters.

Green Lease

The properties having introduced
Green Lease contract
End of September 2021   End of April 2023
 9 properties  ▶   9 properties
 16 tenants    ▶ 29 tenants

KDO conducted LED lighting installation works for a part of a tenant office space at the expense of KDO based on the Agreement. A certain ratio of the highly reduced amount of electricity charges and maintenance costs (costs for exchanging fluorescent bulbs) has been paid from the tenants in return as Green Lease fee. Also, the ratio of Green Lease Contract is 24.4%(Note) as of April 30, 2023.

Note: The ratio of Green Lease contract is calculated by dividing total area of Green Lease contract by total leased area of properties having introduced Green Lease contract as of April 30, 2023.

What is Green Lease?

It is an agreement specifying that building owners and tenants shall cooperate with each other to reduce environmental burden. The agreement contains provisions to facilitate renovation toward more environmentally-friendly office buildings by reducing building owners' investment burden through sharing the economic merits generated as a result of energy-saving renovation works among building owners and tenants. It also contains an agreement to streamline operations for energy saving, water saving and enhancing indoor conditions.

Introducing Lease Agreement with Clause for Environmental Cooperation

KDO has promoted including clause to cooperate to improve environmental performance of the property, comfort and productivity of office tenant into its base contract.

Cooperation with Property Managers

KDO and KFM are engaging with property management companies to share our vision, policies of sustainability and when making contract with a new tenant, property managers explain these ideas to tenants to achieve their cooperation.

Education to Employees on Green Building

KFM provides annual sustainability training by external specialists to improve awareness and knowledge on green building for its employees. Also, it is encouraged its employees to acquire qualifications related to green building and there are two employees who are CASBEE Accredited Professionals for Real Estate as of April 30, 2023.