Climate change is currently recognized as one of the most significant threats to the sustainable development of global society. The Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), released over the course of 2013 and 2014, states that human activities are extremely likely (at least 95%) to be the main cause of global warming and climate change. Subsequently, the IPCC Sixth Assessment Report, released in August 2021, states that it is unequivocal that human activities are the main cause of global warming and climate change.

Based on these scientific views, a debate on how to deal with climate change has raged across the world. At the Conference of the Parties (COP21) of the United Nations Framework Convention on Climate Change (UNFCCC) in 2015, the Paris Agreement was adopted to pursue efforts to limit global warming to well below 2, preferably to 1.5°C, compared to pre-industrial levels. Under the Paris Agreement, countries have set targets for reducing greenhouse gas (GHG) emissions and are implementing a variety of climate change-related measures. For example, in Japan, where our Group mainly operates, the government declared its goal in October 2020 to achieve carbon neutrality by 2050.

The impact of climate change on the global economy and corporate activities is becoming increasingly severe with each passing year. Accordingly, shareholders and investors are facing a growing urgency to assess how the businesses and plans of each company will be affected by climate change. Recognizing the need for a common global framework that facilitates an appropriate assessment of the risks and opportunities of climate change for each company, the TCFD was established to promote disclosure of information on climate change in response to requests from the G20 and national central banks. It released its final report in June 2017 and has been encouraging companies to disclose information on climate change.

Approach and Policies

In light of these circumstances, the Group established its sustainability policy “Earth Pride,” which describes its vision of 2050.
Under our Group vision “New Value, Real Value,” the Group has been promoting its business activities through the collaboration of real estate development and real estate-related services. The sustainability policy is our commitment to the Earth—to make it a planet we can be proud of toward the future, specifically 2050—when conducting our corporate activities.
The concept of Earth Pride is based on the three themes that the Group values: pursuing humanity, maintaining harmony with nature, and building the future together.

This sustainability policy verbalizes the Group’s vision of 2050 as a corporate group that realizes a sustainable society and corporate growth. Numerous people, including middle-level and younger employees, those in managerial positions, the management team of the Group, external institutional investors and financial institutions, our clients, and business partners and experts, provided input in formulating this policy.
To realize this vision of 2050, we have identified five priority issues (materiality) that should be addressed by 2030. These are diversity and inclusion, human rights, decarbonization, biodiversity, and circular design.

Targets

Climate Change and the Natural Environment

We contribute to address the global issue of climate change through urban development and the provision of products and services based on the collaboration of real estate development and real estate-related services. We also specified priority issues that could lead to the preservation of the natural environment. In addition, the Group has proactively participated in international initiatives such as obtaining approval from the SBT initiative (35% reduction from fiscal 2019), supporting the TCFD, and joining RE100.

Decarbonization

We reduce total CO₂ emissions in the properties developed by the Group through the promotion of energy saving, low carbon, and renewable energy.

Main initiatives:

We aim to further improve energy conservation performance ensuring the level of performance equivalent to the ZEH/ZEB oriented standards.

We conduct research and development to promote low-carbon materials through co-creation with construction companies and building materials makers.

We contribute to increasing renewable power generation that achieves additionality such as the installation of solar panels on the roofs of the buildings developed by the Group (e.g., logistics facilities).

We aim to respond to climate change through urban development. For instance, we will achieve carbon neutrality in the Shibaura 1-Chome Project (the south tower to be completed in fiscal 2024 and the north tower to be completed in fiscal 2030). We will also create a next-generation energy exchange facility in the project with the Research Center for Advanced Science and Technology, The University of Tokyo.

As mentioned above, the Nomura Real Estate Holdings president and Group CEO is responsible for promoting measures to address sustainability and climate change throughout the Group. The Group CEO is the chief executive officer of the Board of Directors and Executive Committee and is responsible for making the best decisions to achieve the sustainable growth of the Group as a company, including addressing sustainability and climate change, and for executing key related operations.

Sustainability Management System

Skill Matrix for Directors

In addition, our risk management system also manages climate change-related risks.

Each business unit closely monitors social trends related to climate change, such as changes in customers and markets and revised regulations. They also identify risks and opportunities in climate-related issues and examine and implement associated actions at the operational, business, and product levels. One example is the planning of Net Zero Energy Houses (ZEHs) and Net Zero Energy Buildings (ZEBs) based on changes in the market and customer needs, technology trends, and other factors. Of these initiatives undertaken by each business unit, those deemed particularly important to management are reported to the Sustainability Committee, Risk Management Committee, Management Committee, and Board of Directors as needed.

In addition, since fiscal 2019, the Group has been requiring that directors, including the CEO, maintain a strong awareness of the need to adapt to changes in society and the needs of the times under their selection criteria, and it has incorporated the sustainability and ESG perspectives, such as climate change, into decisions on director compensation. In our director compensation system, the degree of achievement of sustainability targets, including measures to respond to climate change, in the business areas under the control of each director, is incorporated into the evaluation criteria. Also, the system calculates variable compensation according to the degree of achievement of roles related to sustainability and ESG assigned to each director.

Starting in fiscal 2022, the policy for deciding on the details of the compensation, etc., for each individual director, excluding Audit & Supervisory Committee members, will be revised, and the details and calculation method for performance indicators and other considerations relating to bonuses as monetary compensation would retain a central emphasis on performance evaluation in terms of consolidated business profit and other factors, as well as including an evaluation based on non-financial indicators (e.g., sustainability factors). The reason for this is to raise director awareness of sustainability. For fiscal 2022, we plan to conduct an evaluation using non-financial indicators based on BEI^*.

The Building Energy-efficiency Index is an index that evaluates the energy-saving performance of buildings based on the energy-saving standards of the Act on the Improvement of Energy Consumption Performance of Buildings (Building Energy Efficiency Act). It indicates the level of primary energy consumption of a given building.

Directory Compensation System

Upon considering climate change strategies, the Group conducted a qualitative scenario analysis based on the IPCC Fifth Assessment Report^* and the details of the Paris Agreement. In the analysis, we examine the risks and opportunities that may be presented to the Group as a result of climate change and consider and implement strategies and policies that capture such risks and opportunities.

The Sixth Assessment Report of the IPCC released in August 2021 will also be used for analysis in future fiscal years.

The TCFD recommendations classify climate change risks into transition risks (policy and legal, technology, market, and reputation) and physical risks (acute and chronic). The Group has accordingly identified the impacts of these risks on the Group. This section describes the representative impacts of each risk category.

　

Category		Impact on the Group	Our understanding
Large	Small		Risks	Opportunities
Transition risks	Policy and regulatory risk	Implementation and/or strengthening of GHG emissions reduction regulations in business and property units (Scopes 1, 2) Expected cases ・Strengthening of regulations in Japan and abroad (Energy Saving Act, Tokyo Metropolitan Environmental Security Ordinance, emissions trading scheme, carbon tax, etc.) ・Enhancement of subsidy systems (for energy-saving technologies and ZEHs and ZEBs, etc.)	○	○
	Market risk	Delay in energy efficiency improvements for properties (buildings, housing, etc.) and in development or introduction of decarbonization technologies Expected cases ・Rise in real estate development costs ・Investments in decarbonization technologies and energy-efficient equipment ・Introduction of renewable energy	○	○
	Reputational risk	Rise in customer demand for functions related to the environment, energy saving, and disaster prevention Expected cases ・Changes in the needs of customers (tenants of buildings, buyers of housing, REITs, etc.) ・Rise in the customer rating of ZEHs and ZEBs ・Impact on appraisals of properties owned by the Company	○	○
	Technical risk	Risk of the Group’s initiatives and businesses not being appreciated by investors and consumers Expected cases ・A shift in trust and brand value of the Company’s businesses and products ・Impact on financing due to evaluations by shareholders, investors, and financial institutions	○	○
Physical risks	Acute physical risk	Damages due to natural disasters such as typhoons, floods, and torrential rain Expected cases ・Damage to or failure of properties owned by the Company due to a natural disaster ・Suspension or delay in construction work of real estate being developed by the Company, due to a natural disaster	○
	Chronic physical risk	Impact of a rise in the average temperature on business Impact on real estate appraisal due to the manifestation of a rise in sea levels Expected cases ・Health impact on customers, employees, and suppliers due to an increase in the number of very hot summer days ・Damage to real estate values in coastal areas, etc.	○

In addition to the qualitative analysis described above, the following quantitative analysis is underway. We intend to further strengthen our quantitative disclosures.

	Financial Impact (Cumulative) Expected up to 2030	Quantitative Impact (Maximum Figure)
Risk	Rise in non-life insurance premiums due to an increase in natural disasters	¥6.0 million
	Introduction of carbon pricing and/or carbon tax	¥1.5 billion
Opportunity	Decrease in financing costs due to the achievement of CO2 reduction targets	¥150 million
	Decrease in energy costs due to the greater environmental performance of buildings	¥0.9 billion

Matters related to climate change, including risk management, are overseen by the Board of Directors and the Management Committee and discussed in detail by the subordinate committees, Sustainability Committee, and Risk Management Committee. In addition, individual business matters, including business planning and product planning, are managed by each business unit.

The Sustainability Committee deliberates Group-wide policies and targets on climate change and discusses the risks and opportunities of climate change for the entire Group.

In addition, risks related to climate change are managed within the Group’s risk management system. To discuss various risks related to Group management, we have designated the Management Committee as the integrated risk management body, and we operate a system to regularly monitor, evaluate, and analyze the state of major risks while periodically reporting details to the Board of Directors.

Business units also individually investigate and address risks related to the market (client companies and consumers) and laws and regulations on construction and real estate, and they reflect the results of their investigations in the planning of businesses and products as needed. Of the matters examined, those that have a significant impact on the Group as a whole are reported to the Board of Directors, Management Committee, Sustainability Committee, and Risk Management Committee as appropriate, depending on specific content.

Sustainability Management System

Risk Management System

The Group has set the following three targets to promote its response to climate change and has also identified the indicators described below for greenhouse gases.

• Reduction of Greenhouse Gases (GHG and CO₂)

  Medium- to Long-term Targets Certified by the SBT (Science Based Targets) Initiative in November 2020
  Reduce the total amount of GHG emissions from Scopes 1, 2, and 3 (Categories 1 and 11) by 35% by 2030 compared to the fiscal 2019 level.

  Short-term Target
  Reduce the total amount of emissions from Scopes 1, 2, and 3 (Categories 1 and 11) by 15% by 2025 compared to the fiscal 2019 level.

  Scope 1: Direct emissions such as fuel combustion; Scope 2: Indirect emissions resulting from the use of electricity or heat purchased by the Company; Scope 3: Indirect emissions other than those in Scopes 1 and 2

  Scope 3 targets cover Categories 1 (products and services purchased) and 11 (use of products sold). The GHG emissions of Category 1 cover approximately 94% of the total emissions of Scope 3 (FY2019).

• Reduce Energy Use

Medium- to Long-term Targets
The power consumption of the entire Group will be 100% renewable electricity by 2050.
(Joined RE100 in January 2022)

Short-term Target
Switching electricity consumed by all leasing properties* owned by Nomura Real Estate Development to renewable electricity by fiscal 2023.

Excludes leasing properties (including the portion used by tenants) for which Nomura Real Estate Development has concluded direct electricity supply contracts with power companies, properties that Nomura Real Estate Development owns units in or are jointly owned with other parties, and properties planned to be sold or demolished, as well as the common use areas of some rental housing.

• Promote Solar Power Generation

The Group will in principle promote measures to respond to climate change by collecting data on GHG (CO₂) emissions for all properties owned and sold by the Group as a whole and reducing the GHG emissions of the entire Group by compiling and monitoring the results. We will also look into setting an ultra-long-term target to achieve carbon neutrality by 2050. For the results related to climate change, please refer to the following.

Third-party Assurance

We have asked Lloyd’s Register Quality Assurance Ltd. to provide assurance on the GHG emissions and energy use data for the entire Group.

Independent Assurance Statement