Sustainability Finance

Overview

Sustainability Finance Framework

With the basic philosophy of contributing to the enhancement of people's lives and local communities through investment in retail facilities and related properties, AEON REIT Investment Corporation aims to ensure stable income in the medium to long term by investing in assets that form the backbone of local communities and their lifestyle infrastructure. To achieve this philosophy and goal, it is important to take ESG into consideration in all aspects of operations and collaborate with stakeholders who facilitate it. Based on this concept, AEON Reit Management with which the Investment Corporation entrusts the management of its assets, has established a policy for sustainability and will facilitate its implementation. The Asset Management Company has recently decided to formulate the Sustainability Finance Framework to realize this philosophy and these objectives, and to in turn use them to enhance financing methods and the development of sustainability finance, etc. through the expansion of the base of investors with a strong interest in ESG investment.

Use of funds

The Investment Corporation will appropriate the full amount of funds to be raised by Green bond, Green loan (including Green derivatives, the Interest rate derivatives accompanying to the said loan), Sustainability bond or Sustainability loan (including Sustainability derivatives, the Interest rate derivatives accompanying to the said loan) for funds to acquire Green Qualified Assets or Sustainability Qualified Assets, or funds to refinance borrowings, to repay borrowings or to redeem the investment corporation bonds already issued, which were appropriated to acquire Green Qualified Assets or Sustainability Qualified Assets.

Green Qualification criteria 1
Sustainability Qualification criteria 1
Any of the effective certifications listed in a through e below has already been or will be acquired.
  1. Three, four or five stars in the DBJ Green Building Certification
  2. B+, A or S ranking in the Certification for CASBEE for Real Estate
  3. Three, four or five stars in the BELS
  4. Silver, Gold or Platinum in the LEED certification
  5. Any third-party certification, other than the certifications above, whose ratings are equivalent to such respective ratings
Green Qualification criteria 2 Repair work of equipment, etc. that aim for effective environmental improvement in terms of energy efficiency and water consumption, etc. at real estate operated
Sustainability Qualification criteria 2*

Social Projects that contribute to either (1) or (2) below.
In addition, of the projects in (a) through (e) below, those that meet two or more items and can be deemed to contribute to local communities and to fulfilling the lives of people as life infrastructure assets of local communities are considered to be projects that meet the qualified criteria.

(1) Socioeconomic improvement and empowerment
(a) Facilities that are sufficiently creating local employment

(2) Access to essential services
(b) Facilities that are able to supply necessary resources and evacuation space at the time of disaster by concluding a disaster prevention agreement with a local government
(c) Facilities that contribute to healthy and cultural lives of local people with childcare facilities or medical facilities moving in as a tenant
(d) Facilities that will become basic infrastructure for the daily lives of local people by having public tenants such as a post office
(e) Facilities where barrier-free or gender-free equipment is provided

* All of the projects at right are required to meet the condition of matching the project classification indicated by the Social Bond Principles and being suitable for people to be covered.

Criteria to determine adherence to qualification criteria

Criteria for selection

The Finance and Planning Department of the Asset Management Company assesses and examines whether properties for which funds procured through Sustainability Finance or Green Finance are used meet the qualification criteria.

Process

Proposals for sustainability projects or green projects, for which funds procured through Sustainability Finance or Green Finance are used, are made by the Finance and Planning Department of the Asset Management Company, and decisions are made at meetings of the Investment Committee and board meetings of the Investment Corporation.

Status of fund procurement and acquisition of third-party certification

Amount of procured funds and allocation

  Funds Date of procurement Date of repayment/ redemption Allocation Use of initial funds
Green loan (1) ¥3.3bn Oct. 21, 2019 Oct. 20, 2022 Allocated Acquisition of AEON MALL Kofu Showa
(existing building)
Acquisition of AEON MALL Kagoshima
(2) ¥5.3bn Oct. 20, 2023 Oct. 21, 2030 Allocated Acquisition of AEON MALL Wakayama
(3) ¥4.0bn Oct. 20, 2023 Oct. 20, 2031 Allocated Acquisition of AEON MALL Wakayama
Total ¥12.6bn        
Green bond (1) ¥12.0bn Dec. 6, 2019 Dec. 6, 2029 Allocated Acquisition of AEON MALL Kofu Showa
(existing building)
Acquisition of AEON MALL Kagoshima
Total ¥12.0bn        
Green Finance Total ¥24.6bn        
Sustainability loan
(including Sustainability Derivatives)
(1) ¥5.1bn Mar. 22, 2022 Oct. 22, 2039 Allocated Acquisition of AEON MALL Shinkomatsu
Total ¥5.1bn        
Sustainability bond (1) ¥18.0bn Dec. 4, 2020 Dec. 4, 2030 Allocated Acquisition of AEON MALL Mitouchihara
Acquisition of AEON MALL Ishinomaki
Total ¥18.0bn        
Sustainability Finance Total ¥23.1bn        
- Grand total ¥47.7bn        

Upper limit of Procurement

Item Number of properties Latest fiscal year
Total properties 49 468.3bn
Sustainability Qualified Asset 36 404.5bn
Green Qualified Asset 36 404.5bn
  DBJ Green Building 31 341.7bn
  CASBEE 4 53.0bn
  Building-Housing Energy-efficiency Labelling System (BELS) Certification 1 9.8bn
Sustainability Finance Upper Limit of Procurement 181.2bn
Green Finance Upper Limit of Procurement 181.2bn
*1 The Upper limit of the Sustainability Finance Procurement = Total Acquisition Value of Sustainability Qualified Assets × the total asset LTV *2 The Upper limit of the Green Finance Procurement = Total Acquisition Value of Green Qualified Assets × the total asset LTV *3 The total asset LTV is calculated based on figures as of July 31, 2023, while number of total properties and amounts are calculated based on figures as of July 31, 2023.

List of properties certified by third-party certification body

https://www.aeon-jreit.co.jp/en/sustainability/external.html

Renovations selected in Green qualification criteria 2 and expected reduction rate

No funds have been procured for properties that meet Green qualification criterion 2.

Management of procured funds

Plan and method of use

A plan for use is developed for each procurement plan.
Funds are allocated from the account of the Investment Corporation for the abovementioned uses of funds immediately after they are procured.

Tracing and management of procured funds

In principle, funds are allocated by the day immediately following the day when they are procured, except in cases where there is a long period of time between the date of procurement of funds and the due date for repayment, such as cases of investment corporation bonds. In these cases, we will make the period as short as possible and will trace and manage the procured funds to ensure that the funds are used for payment for the projects for which they are planned to be used.
Until the procured funds are allocated to the projects for which they are planned to be used, they will be accounted for as cash and cash equivalents (certificates of deposits, etc.).

Handling method when projects applicable for fuds are sold

In principle, procured funds are used for project that is not assumed to be sold or etc.
If the Sustainability Qualified Asset or the Green Qualified Asset of the project, to which procured funds are allocated is sold or ceases to be Sustainability Qualified Asset or Green Qualified Asset under the qualification criteria, the procurement is deemed to remain Sustainability Finance or Green Finance in our fund management, if the balance of Sustainability Finance or Green Finance, is within the Upper Limit of Sustainability Finance Procurement or Green Finance Procurement calculated using the calculation logic below. The Sustainability Qualified Assets or the Green Qualified Assets are managed regularly until the due date for the related loans (or the date for the redemption of the related bonds).

Reporting

Method and frequency of disclosure of information on the use of funds

In principle, funds are allocated by the day immediately following the day of procurement, and disclosure is not necessary.
However, funds that are not allocated for a long time and uses of funds in the past are disclosed to lenders (or investors) once a year.

Method and frequency of disclosure in impact reporting

  • The Investment Corporation will make disclosure to the lenders (or the investors) at least once a year until the repayment date of green loans (or the redemption date of green bonds) or the repayment date of sustainability loans (or the redemption date of sustainability bonds) arrives.
  • The disclosure of sustainability finance is also used as a substitute for the disclosure of green finance.

KPIs in impact reporting

In accordance with the abovementioned method and frequency of disclosure, the following indicators are disclosed;

  1. a.List of properties certified by a third-party certification organization
  2. b.Consumption, etc. of the items below
    -Energy consumption (electricity, gas)
    -Greenhouse gas emissions
  3. c.Contents of construction work of projects selected based on the Green Qualification criteria 2 (green projects) and their assumed reduction rate
  4. d.Social projects which properties for the initial use of funds fall into based on the Sustainability Qualification criteria 2
  5. e.Total number of employees in properties subject to finance(in case of (1)(a) of Sustainability Qualification criteria 2)
  6. f.Of properties subject to finance, the percentage of facilities that conclude a disaster prevention agreement with a local government(in case of (2)(b) of Sustainability Qualification criteria 2)
  7. g.Of properties subject to finance, the total number of tenants with a childcare facility or medical or public function(in case of (2)(c),(d) of Sustainability Qualification criteria 2)
  8. h.Of properties subject to finance, the percentage of facilities that support barrier-free and gender-free(in case of (2)(e) of Sustainability Qualification crieria 2)

Impact reporting

  1. a.List of properties certified by a third-party certification organization
    https://www.aeon-jreit.co.jp/en/sustainability/external.html
  2. b.Consumption, etc. of the items below
    -Energy consumption (electricity, gas)
    -Greenhouse gas emissions
Qualified Assets
  Electricity
(kWh and kWh/m2)
Gas
(m3and m3/m2)
Greenhouse gas
(t-CO2and t-CO2/m2)
FY 2020 Number of properties 30 total amount 444,279,367 1,625,302 191,931
percentage 73.1% intensity 147 0.5 0.0634
FY 2021 Number of properties 33 total amount 487,399,867 1,836,834 213,054
percentage 73.3% intensity 145 0.5 0.0635
FY 2022 Number of properties 33 total amount 492,528,415 1,844,195 212,102
percentage 70.2% intensity 147 0.5 0.0632
Nonqualified Assets
  Electricity
(kWh and kWh/m2)
Gas
(m3 and m3/m2)
Greenhouse gas
(t-CO2 and t-CO2/m2)
FY 2020 Number of properties 11 total amount 96,207,047 2,789,791 47,564
percentage 26.9% intensity 182 5.3 0.0902
FY 2021 Number of properties 12 total amount 106,296,637 2,774,993 51,268
percentage 26.7% intensity 178 4.7 0.0860
FY 2022 Number of properties 14 total amount 106,182,204 2,329,673 48,857
percentage 29.8% intensity 136 3.0 0.0625
*1 Figures for "Electricity" , "Gas" and "Greenhouse gas" for FY2019 and FY2022 are not verified or certified by a third-party organization. *2 Figures newly acquired properties will be added from the month of acquisition.
  1. c.Contents of construction work of projects selected based on the Green Qualification criteria 2 (green projects) and their assumed reduction rate
    Not aplicable
  2. d.Social projects which properties for the initial use of funds fall into based on the Sustainability Qualification criteria 2
Properties subject for the finance Social project applicable for the finance
AEON MALL Ishinomaki
(1) (a)Facilities that are sufficiently creating local employment
(2) (b)Facilities that are able to supply necessary resources and evacuation space at the time of disaster by concluding a disaster prevention agreement with a local government
AEON MALL Mitouchihara
(1) (a)Facilities that are sufficiently creating local employment
(2) (b)Facilities that are able to supply necessary resources and evacuation space at the time of disaster by concluding a disaster prevention agreement with a local government
AEON MALL Shinkomatsu
(1) (a)Facilities that are sufficiently creating local employment
(2) (b)Facilities that are able to supply necessary resources and evacuation space at the time of disaster by concluding a disaster prevention agreement with a local government
  1. e.Total number of employees in properties subject to finance(in case of (1)(a) of Sustainability Qualification criteria 2)
Applicable properties Total number of employees
AEON MALL Ishinomaki approx. 1,480
AEON MALL Mitouchihara approx. 3,500
AEON MALL Shinkomatsu approx. 2,550
  1. f.Of properties subject to finance, the percentage of facilities that conclude a disaster prevention agreement with a local government(in case of (2)(b) of Sustainability Qualification criteria 2)
The point in time Percentage
As of the end of October 2023 100%
  1. g.Of properties subject to finance, the total number of tenants with a childcare facility or medical or public function(in case of (2)(c),(d) of Sustainability Qualification criteria 2)

 Not applicable

  1. h.Of properties subject to finance, the percentage of facilities that support barrier-free and gender-free(in case of (2)(e) of Sustainability Qualification criteria 2)

 Not applicable