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7. Response as an Asset Manager

(1) Daiwa Asset Management

① Governance

Daiwa Asset Management ("the company") addresses ESG issues, including climate-related risks, in accordance with its "General Policy on Stewardship Activities" and its "ESG Investment Policy," which incorporates sustainability considerations, both decided by its Stewardship Committee. Activities and policies are deliberated and monitored by the Stewardship Committee. The company's ISSB-related monitoring status for its portfolio is reported by the Stewardship Committee to the Board of Directors. The structure comprises the acting entities (fund managers, analysts, stewardship team, etc.), the Stewardship Committee, and the Board of Directors.

Framework

② Strategy

Identified climate-related risks and opportunities are reflected in the corporate value assessment model and used in the selection of investee companies. Through engagement activities, the company guides companies toward decarbonized management to enhance investees' corporate value. Particularly regarding climate change, it performs scenario analysis using indicators such as Climate Value at Risk (CVaR)* to check portfolio risk and resilience.

  • * Climate Value at Risk (CVaR) analysis is a risk-assessment method provided by MSCI indicating how much corporate value may change in the future due to climate change. For details, see the company's "Sustainability Report 2025."

Reflecting identified climate-related risks and opportunities in the corporate value assessment model

③ Risk Management

The company grasps investees' climate-related risks and opportunities through corporate disclosure, external vendor data, its own research, and dialogue with companies. It has a structure to measure portfolio GHG emissions and conduct climate-change scenario analysis based on external vendor data, and grasps and manages risk through periodic analysis.

④ Metrics and Targets

As GHG emissions indicators, the company monitors and analyzes total carbon emissions, carbon footprint*1, and carbon intensity*2 by fund and by asset class. Based on this data and its own research, it conducts engagement activities to encourage investees' proactive decarbonization.

  • *1An indicator measuring emissions relative to portfolio size (market capitalization).
  • *2An indicator measuring carbon emissions per unit of investee sales.

Analysis of the main indicators relating to total CO2 emissions

It compared the total carbon emissions, carbon footprint, and weighted average carbon intensity of each managed asset class against the respective benchmarks; carbon footprint measures emissions relative to portfolio size (market capitalization), and carbon intensity measures carbon emissions per unit of investee sales. By monitoring and analyzing these indicators, the company appropriately manages climate-related risks. Scope 1, Scope 2, Scope 3 (upstream), and Scope 3 (downstream) were calculated separately, as shown below. By grasping investees' total carbon emissions, the company uses the results in engagement activities and strives to promote decarbonization across the entire supply chain.

The main indicators for domestic equities and overseas corporate bonds were generally below their benchmarks. Domestic corporate bonds exceeded the benchmark, reflecting a higher-than-benchmark weighting of electric power companies' bonds in the portfolio. The weighted average carbon intensity of overseas equities was affected by a large investment share in Indian companies.

The company will continue to encourage investees' climate-change initiatives through engagement.

For details, see the company's "Sustainability Report 2025."

Portfolio Total Carbon Emissions
Scope 1 and 2
(t-CO2e)
  Daiwa AM Benchmark Difference
Domestic equities 7,061,629 8,571,358 –18%
Overseas equities 1,185,494 1,261,435 –6%
Domestic corporate bonds 203,221 86,627 135%
Overseas corporate bonds 180,125 212,237 –15%
Total 8,630,469 10,131,657 –15%
Scope 3 Upstream
(t-CO2e)
  Daiwa AM Benchmark Difference
Domestic equities 24,072,359 26,946,971 –11%
Overseas equities 1,550,708 2,274,369 –32%
Domestic corporate bonds 228,312 197,761 15%
Overseas corporate bonds 329,331 307,783 7%
Total 26,180,710 29,726,883 –12%
Scope 3 Downstream
(t-CO2e)
  Daiwa AM Benchmark Difference
Domestic equities 44,888,554 52,923,072 –15%
Overseas equities 3,440,366 6,296,638 –45%
Domestic corporate bonds 271,171 314,717 –14%
Overseas corporate bonds 704,503 693,113 2%
Total 49,304,594 60,227,540 –18%
Carbon footprint of portfolio (Scope 1, Scope 2)
Weighted average carbon intensity of portfolio (Scope 1, Scope 2)
  • *The benchmarks used were the same as those used in the previous section for portfolio's total carbon dioxide emissions.
  • *Source: Some information is derived from © 2025 MSCI ESG Research LLC. Reproduced by permission.

(2) Daiwa Real Estate Asset Management

① Governance

In accordance with its "Climate Change and Resilience Policy," Chief Climate-Related Issues Officers (general managers of departments engaged in sustainability promotion) regularly report to the Chief Executive Officer for Climate-Related Issues (President and Representative Director) at Sustainability Promotion Committee meetings on matters such as the identification and assessment of climate-change impacts, the management of risks and opportunities, the progress of adaptation and mitigation initiatives, and the setting of indicators and targets. After deliberation and examination of climate-change issues at the Sustainability Promotion Committee, the President and Representative Director makes final decisions.

Under this structure, climate-related issues are supervised by the President and Representative Director.

② Strategy

To identify the risks and opportunities that climate change poses to each investment corporation and to assess their financial impact on the business, the company conducted a qualitative analysis using two scenarios—a "1.5°C/2°C scenario" and a "4°C scenario"—referencing future climate projections published by international organizations.

Main Scenarios adopted
1.5/2°C scenario 4°C scenario
Transition Risks IEA World Energy Outlook2024 NZE IEA World Energy Outlook2024 STEPS
Physical Risks IPCC Fifth Assessment Report RCP4.5 IPCC Fifth Assessment Report RCP8.5

Target of Analysis and Prerequisites
Target All properties owned by the investment corporation
Scope Overall real estate investment and management business
Target
period		 DOI / DLI / DLP: From 2025 to 2050, with medium-term and long-term time frames
(Medium term: 2025–2030, Long term: 2031–2050)

Financial Impact of Scenario Analysis (Daiwa Office Investment Corporation)

Classification Drivers of Risks and Opportunities in Real Estate Operations Potential Financial Impact Type Financial Impact Response Measures
4℃ 1.5℃/2℃
Medium-Term Long-Term Medium-Term Long-Term
Transition Risks and Opportunities Policy / Regulation Stricter GHG Emissions Regulations Due to the Introduction of a Carbon Tax
  • Tax burden increases in proportion to the GHG emissions of properties following the introduction of a carbon tax.
 Risk Low Low Medium High
  • Introduce energy management systems and renewable energy.
  • Systematically reduce energy consumption and GHG emissions at owned properties.
  • Improve GHG emissions through strategic property replacement and renovation.
  • Install energy- and water-saving equipment.
Mandatory Compliance with Energy-Efficiency Standards
  • Additional compliance costs increase property acquisition prices and renovation expenses.
 Risk Low Low High High
Higher Occupancy and Rental Rates for Properties with Superior Environmental Performance
  • Rental income increases from owning properties with superior environmental performance.
 Opportunity Low Low Medium Medium
Reduced Utility Costs Through Improved Environmental Performance
  • Utility costs are reduced through improved energy efficiency.
 Opportunity Low Low Low Low
Technology Advancement and Adoption of Energy-Efficiency and Renewable-Energy Technologies
  • Renovation costs increase due to the introduction of new technologies.
  • Costs increase due to net zero energy building (ZEB) renovations.
 Risk Low Low High High
  • Introduce advanced technologies.
  • Conduct planned renovation work.
  • Implement ZEB and energy-efficiency renovations.
  • The advancement and adoption of energy-efficiency and renewable-energy technologies reduce installation and maintenance costs at properties.
 Opportunity Low Low High High
Market / Reputation Changes in the Investment and Lending Stance of Investors and Lenders
  • Delays in environmental initiatives, including disclosure, mitigation and adaptation measures, lower assessments by investors and financial institutions.
  • Declines in unit prices and ESG ratings may lead to divestment and higher financing costs.
 Risk Low Low Medium Medium
  • Provide sufficient disclosure on the environmental performance of owned properties.
  • Appropriately disclose ESG information, including climate-related information.
  • Investigate and analyze natural-disaster risks and implement countermeasures.
  • Proactively utilize green finance.
  • Proactive disclosure and initiatives improve assessments by investors and financial institutions.
  • The use of green finance reduces financing costs.
 Opportunity Low Low Medium Medium
Changes in Tenant Demand for Environmental Performance
  • Rental income declines for properties with relatively poor environmental performance or without environmental certification.
  • Delayed environmental action reduces brand value and unit prices.
 Risk Low Low Medium Medium
  • Increase the proportion of properties with environmental certification.
  • Improve ESG assessments by external organizations.
  • Implement energy-efficiency initiatives with tenants through green leases and similar arrangements.
  • Reduce operating costs by installing energy- and water-saving equipment.
  • Rental income increases for properties with high environmental performance or environmental certification.
  • Taking the lead on environmental initiatives strengthens the brand and raises unit prices.
 Opportunity Low Low Low Low
Physical Risks Acute Increased Damage from More Severe Storms and Floods
  • Repair costs and insurance premiums increase.
  • Rental income declines due to lower occupancy.
  • Renovation costs increase to prevent flooding and prepare owned properties for damage or destruction.
  • More extremely hot days increase cooling demand and electricity consumption.
 Risk Low Medium Low Low
  • Conduct risk assessments using hazard maps and other resources.
  • Own resilient properties and properties in areas less susceptible to flood damage.
  • Strengthen business continuity planning (BCP).
  • Promote greening at owned properties.
Chronic Increased Damage from Rising Average Temperatures and Sea Levels Risk Low Low Low Low

Financial Impact of Scenario Analysis (Daiwa Securities Living Investment Corporation)

Classification Drivers of Risks and Opportunities in Real Estate Operations Potential Financial Impact Type Financial Impact Response Measures
4℃ 1.5℃/2℃
Medium-Term Long-Term Medium-Term Long-Term
Transition Risks and Opportunities Policy / Regulation Stricter GHG Emissions Regulations Due to the Introduction of a Carbon Tax
  • Tax burden increases in proportion to the GHG emissions of properties following the introduction of a carbon tax.
 Risk Low Low Medium High
  • Introduce energy management systems and renewable energy.
  • Systematically reduce energy consumption and GHG emissions at owned properties.
  • Improve GHG emissions through strategic property replacement and renovation.
  • Install energy- and water-saving equipment.
Mandatory Compliance with Energy-Efficiency Standards
  • Additional compliance costs increase property acquisition prices and renovation expenses.
 Risk Low Low High High
Higher Occupancy and Rental Rates for Properties with Superior Environmental Performance
  • Rental income increases from owning properties with superior environmental performance.
 Opportunity Low Low Medium Medium
Reduced Utility Costs Through Improved Environmental Performance
  • Utility costs are reduced through improved energy efficiency.
 Opportunity Low Low Low Low
Technology Advancement and Adoption of Energy-Efficiency and Renewable-Energy Technologies
  • Renovation costs increase due to the introduction of new technologies.
  • Costs increase due to net zero energy building (ZEB) renovations.
 Risk Low Low High High
  • Introduce advanced technologies.
  • Conduct planned renovation work.
  • Implement ZEB and energy-efficiency renovations.
  • The advancement and adoption of energy-efficiency and renewable-energy technologies reduce installation and maintenance costs at properties.
 Opportunity Low Low High High
Market / Reputation Changes in the Investment and Lending Stance of Investors and Lenders
  • Delays in environmental initiatives, including disclosure, mitigation and adaptation measures, lower assessments by investors and financial institutions.
  • Declines in unit prices and ESG ratings may lead to divestment and higher financing costs.
 Risk Low Low Medium Medium
  • Provide sufficient disclosure on the environmental performance of owned properties.
  • Appropriately disclose ESG information, including climate-related information.
  • Investigate and analyze natural-disaster risks and implement countermeasures.
  • Proactively utilize green finance.
  • Proactive disclosure and initiatives improve assessments by investors and financial institutions.
  • The use of green finance reduces financing costs.
 Opportunity Low Low Low Medium
Changes in Tenant Demand for Environmental Performance
  • Rental income declines for properties with relatively poor environmental performance or without environmental certification.
  • Delayed environmental action reduces brand value and unit prices.
 Risk Low Low Medium Medium
  • Increase the proportion of properties with environmental certification.
  • Improve ESG assessments by external organizations.
  • Implement energy-efficiency initiatives with tenants through green leases and similar arrangements.
  • Reduce operating costs by installing energy- and water-saving equipment.
  • Rental income increases for properties with high environmental performance or environmental certification.
  • Taking the lead on environmental initiatives strengthens the brand and raises unit prices.
 Opportunity Low Low Low Low
Physical Risks Acute Increased Damage from More Severe Storms and Floods
  • Repair costs and insurance premiums increase.
  • Rental income declines due to lower occupancy.
  • Renovation costs increase to prevent flooding and prepare owned properties for damage or destruction.
  • More extremely hot days increase cooling demand and electricity consumption.
 Risk Low Medium Low Medium
  • Conduct risk assessments using hazard maps and other resources.
  • Own resilient properties and properties in areas less susceptible to flood damage.
  • Strengthen business continuity planning (BCP).
  • Promote greening at owned properties.
Chronic Increased Damage from Rising Average Temperatures and Sea Levels Risk Low Low Low Low

Financial Impact of Scenario Analysis (Daiwa Securities Logistics Private Investment Corporation)

Classification Drivers of Risks and Opportunities in Real Estate Operations Potential Financial Impact Type Financial Impact Response Measures
4℃ 1.5℃/2℃
Medium-Term Long-Term Medium-Term Long-Term
Transition Risks and Opportunities Policy / Regulation Stricter GHG Emissions Regulations Due to the Introduction of a Carbon Tax
  • Tax burden increases in proportion to the GHG emissions of properties following the introduction of a carbon tax.
 Risk Low Low Medium High
  • Introduce energy management systems and renewable energy.
  • Systematically reduce energy consumption and GHG emissions at owned properties.
  • Improve GHG emissions through strategic property replacement and renovation.
  • Install energy- and water-saving equipment.
Mandatory Compliance with Energy-Efficiency Standards
  • Additional compliance costs increase property acquisition prices and renovation expenses.
 Risk Low Low High High
Higher Occupancy and Rental Rates for Properties with Superior Environmental Performance
  • Rental income increases from owning properties with superior environmental performance.
 Opportunity Low Low Medium Medium
Reduced Utility Costs Through Improved Environmental Performance
  • Utility costs are reduced through improved energy efficiency.
 Opportunity Low Low Low Low
Technology Advancement and Adoption of Energy-Efficiency and Renewable-Energy Technologies
  • Renovation costs increase due to the introduction of new technologies.
  • Costs increase due to net zero energy building (ZEB) renovations.
 Risk Low Low High High
  • Introduce advanced technologies.
  • Conduct planned renovation work.
  • Implement ZEB and energy-efficiency renovations.
  • The advancement and adoption of energy-efficiency and renewable-energy technologies reduce installation and maintenance costs at properties.
 Opportunity Low Low High High
Market / Reputation Changes in the Investment and Lending Stance of Investors and Lenders
  • Delays in environmental initiatives, including disclosure, mitigation and adaptation measures, lower assessments by investors and financial institutions.
  • Declines in unit prices and ESG ratings may lead to divestment and higher financing costs.
 Risk Low Low Low Low
  • Provide sufficient disclosure on the environmental performance of owned properties.
  • Appropriately disclose ESG information, including climate-related information.
  • Investigate and analyze natural-disaster risks and implement countermeasures.
  • Proactively utilize green finance.
  • Proactive disclosure and initiatives improve assessments by investors and financial institutions.
  • The use of green finance reduces financing costs.
 Opportunity Low Low Low Low
Changes in Tenant Demand for Environmental Performance
  • Rental income declines for properties with relatively poor environmental performance or without environmental certification.
  • Delayed environmental action reduces brand value and unit prices.
 Risk Low Low Low Low
  • Increase the proportion of properties with environmental certification.
  • Improve ESG assessments by external organizations.
  • Implement energy-efficiency initiatives with tenants through green leases and similar arrangements.
  • Reduce operating costs by installing energy- and water-saving equipment.
  • Rental income increases for properties with high environmental performance or environmental certification.
  • Taking the lead on environmental initiatives strengthens the brand and raises unit prices.
 Opportunity Low Low Low Low
Physical Risks Acute Increased Damage from More Severe Storms and Floods
  • Repair costs and insurance premiums increase.
  • Rental income declines due to lower occupancy.
  • Renovation costs increase to prevent flooding and prepare owned properties for damage or destruction.
  • More extremely hot days increase cooling demand and electricity consumption.
 Risk Medium High Low Low
  • Conduct risk assessments using hazard maps and other resources.
  • Own resilient properties and properties in areas less susceptible to flood damage.
  • Strengthen business continuity planning (BCP).
  • Promote greening at owned properties.
Chronic Increased Damage from Rising Average Temperatures and Sea Levels Risk Medium Medium Low Low

③ Risk Management

Each investment corporation sets out, in its "Climate Change and Resilience Policy," processes to identify, assess, and manage the impacts of climate-change risks and opportunities on its management activities, strategy, and financial plans.

  • Chief Climate-Related Issues Officers summarize climate-related risks and opportunities and report on progress to the Sustainability Promotion Committee, in principle, once a year.
  • The Sustainability Promotion Committee continuously identifies, assesses, and manages climate change risks and opportunities that are important to the business and financial plans and affect the asset management operations of the Investment Corporation. Based on the above reports, the committee prioritizes issues of strategic importance to the business.
  • The Chief Executive Officer for Climate-Related Issues instructs the organization to factor important climate-related risks with high priority, which have been deliberated by the Sustainability Promotion Committee, into the existing company-wide risk management program. The risk identification, assessment, and management processes are thus integrated.

＜Risk Identification＞

For each scenario, the Asset Manager classified the financial impacts of identified risks and opportunities into short-term, medium-term and long-term impacts and examined relative scales of impacts on the Investment Corporation. Shown below are medium-term and long-term risks from climate change that have a certain degree of financial impact.

Transition risks Policy and legal risks, technology risk, market risk, and reputation risk
Acute physical risks Event-driven climate risks, including typhoons and floods
Chronic physical risks Climate risks caused by long-term shifts in climate patterns, including sustained higher temperatures and sea level rise

④ Metrics and Targets

Each investment corporation views the transition to a decarbonized society as an opportunity and has established the following target KPIs as key monitoring indicators in the process of managing climate-change risks and opportunities.

Metrics and Targets
Target Year Item Unit DOI DLI DLP
Mid-term By 2030 Scope 1 and
Scope 2		 t-CO2/m2 42% reduction
(compared with FY2023)		 - -
Scope3 t-CO2/m2 25% reduction
(compared with FY2023)		 - -
Energy Consumption MWh/m2 7% reduction
(compared with FY2023)		 8% reduction
(compared with FY2022)		 -
CO2 emissions t-CO2/m2 - 20% reduction
(compared with FY2022)		 10% reduction
(compared with FY2023)
Long-term By 2050 CO2 emissions t-CO2/m2 Achieved carbon neutrality Achieved carbon neutrality Achieved carbon neutrality
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