Disclosures Based on the Proposals of the TaskForce on Nature-related Financial Disclosures (TNFD)

Awareness of Nature

The loss of nature and biodiversity is deteriorating globally, and there is growing concern about its impact on the world's natural environment. The World Economic Forum (WEF) estimates that more than half of the economic value of the total GDP generated in the world depends on natural capital, and the degradation of that natural capital is a clear risk to socioeconomic sustainability. The 15th Conference of the Parties to the Convention on Biological Diversity (COP15) held in December 2022 adopted the “Kunming-Montreal Biodiversity Framework” and set “Nature Positive” as its 2030 mission to “halt and reverse biodiversity loss” or “Nature Positive”.

In line with these trends, the Taskforce on Nature-related Financial Disclosures (TNFD) was established to present a common global framework that enables companies to properly assess nature-related risks and opportunities. The TNFD, a global organization, was conceptualized at the 2019 World Economic Forum Annual Meeting (Davos) and was established in June 2021 by the United Nations Environment Programme Finance Initiative (UNEP FI), the United Nations Development Programme (UNDP), the World Wildlife Fund (WWF), and the UK-based environmental NGO Global Canopy. TNFD released its final report in September 2023 and requires companies to disclose nature-related information.

The Group Policy

The Nomura Real Estate Group has selected “biodiversity” as one of its priority issues “materiality” for the period up to 2030, and is promoting various initiatives as well as supports the principles of the TNFD and joined the TNFD Forum in July 2022. Through our participation in the TNFD Forum, we will continue to assess the impact of all our business activities on biodiversity and promote initiatives for its conservation and restoration.

In addition, our sustainability policy, “Earth Pride” which sets forth our vision for the year 2050, states “Maintaining harmony with nature” as a theme that is important to us.

Approach and Policy on Natural Capital

The Group conducts its business activities using land and various natural capital and recognizes that the loss of biodiversity poses risks of harming the living and business environments of our stakeholders. In response to the risks, the Group's overall policy is to contribute to the conservation of the natural environment through urban greening and forest improvement that will restore forest cycles in Japan and provide habitats for a variety of living organisms.

In our business activities, we give due consideration to biodiversity throughout the Group and strive to develop our business with full awareness of biodiversity by appropriately complying with environmental laws and regulations. We consult with government agencies and other stakeholders from the planning stage as appropriate to mitigate impacts and restore the natural environment. In addition, considering our participation in the 30by30 Alliance for Biodiversity established by the Ministry of the Environment, we will work toward conserving at least 30% of our national lands and sea areas as natural environment zones by 2030.

Furthermore, we have established Nomura Real Estate Group Biodiversity Policy to promote business activities to realize Nature Positive.

Scope of Evaluation Subject through Analysis

The Group consists of the following business units: the Residential Development Business (development and sales of condominiums and houses, development, leasing, and sales of condominiums for rent, and development, leasing, and operation of hotels); the Commercial Real Estate Business (development, leasing, sales, and entrusted operation of office buildings, logistics facilities, commercial facilities, etc.); the Overseas Business (development, sales, and leasing of properties overseas); and the Investment Management Business (asset management for listed /private REITs and private placement funds), Property Brokerage & CRE Business (real estate brokerage, consulting, etc.), Property & Facility Management Business (operation, management, and construction contracting of condominiums and office buildings, etc.), and others. This is the first year of TNFD disclosure, and we have started our initial analysis by picking up few business units from the Group. We selected the Residential Development Business Unit and the Commercial Real Estate Business Unit for Evaluation Subject because those business units have the top two operating revenue and profit, and as those, involve development, considered to have a particularly large impact on nature. Those two units together account for more than 70% of operating revenue and profit.

In analyzing the analysis of specific business activities of the Residential Development Business and Commercial Real Estate Business, which are selected as the subject, we conducted a qualitative evaluation of the relationship between each business activity and natural capital, examined the stages that were considered to have a particularly large relationship, and included “acquisition of land and properties, and capital procurement,” “planning and designing products,” “management of construction,” and “ownership (operation and leasing)” in this analysis.

• Note:
  We will consider expanding scope of evaluation subject through analysis of the business units and value chains.

Analysis of Dependency/Impact

Using the “ENCORE^*1” tool for assessing dependencies and impacts on nature, we analyzed the dependency^*2 and impact^*3 relationships with nature for the business activities (“Acquiring Lands and Properties, Asset Procurement”, “Product planning and design”, “Business promotion”, and “Ownership”) evaluated in this analysis.

For “Business promotion” the analysis was divided into the three categories of “supervising construction, quality control, cost management, and briefings for local residents,” “raw material procurement,” and “construction,” from the perspective of how to relate to nature. Of these, “raw material procurement” was analyzed for iron ore, sand, limestone, and lumber, which are important raw materials for the Group. For these analysis targets, we referred to Sub-industries and Processes classified by ENCORE and analyzed natural dependency/impact relationships.

Through the analysis by ENCORE, the “dependency” aspect of the Group's business activities on “ground water”, “surface water” etc. for supply services, and the “impact” aspect of the Group's business activities on “ecosystem use”, “disturbances”, “water use”, “GHG emissions”, “pollutants”, “solid waste”, etc. were identified as having a wide range of impacts. Among these, the impact of the use of “terrestrial ecosystems” was found to have a particularly large impact.

Identification of Risks and Opportunities

Based on the results of the above dependency and impact analysis, we have evaluated the risks and opportunities that can be assumed from dependencies and impacts rated as “medium or higher” The TNFD recommendations categorize nature-related risks and opportunities into transition risks (policy, market, technology, reputation, liability), physical risks (acute and chronic), and opportunities. The Group has identified risks and opportunities according to this classification.

Analysis of points of contact with sensitive areas

As a result of the analysis of dependency and impact relationships, we identified the points of contact between sensitive areas in “terrestrial ecosystems” and our business areas. Based on the fact, the impact of “terrestrial ecosystem use” is significant. Specifically, we used IBAT (Integrated Biodiversity Assessment Tool), a biodiversity risk assessment tool, to check the existence of nature conservation areas etc.^* in each area where properties are located, targeting properties owned and sold by the Group (in FY2022).

IBAT provides map information showing the distribution of various nature conservation areas, and by using IBAT to determine the location of areas of ecological concern in relation to the locations of our business activities, we can determine where and how the Group's operations may be impacting the ecosystems in which we operate.

The map information referred to on IBAT is shown in the table below. (For details of each map information, refer to the descriptions of nature conservation areas in the Notes.)

We selected properties owned or sold by the Group in FY2022 which is the most recent available data, as the base year. 'Properties owned' refer to ones that the Group owned throughout Japan as of FY2022, and 'properties sold' refer to ones that the Group sold throughout Japan during FY2022. A total of about 700 properties (when counting detached properties one by one) fell under those categories.

As a result of the analysis using IBAT, majority of the nature conservation areas identified in the areas where the Group's properties are located were “National and Quasi-national park”, “IUCN Category IV/V”, and “KBA”. The existence of “World Natural Heritage” and “IUCN Category Ia/III” was not confirmed. The other nature conservation areas partially exist in areas where the Group's properties are not concentrated.
(Refer to the table “Existence of Nature Conservation Areas in areas where our group's properties are concentrated”)

In the areas where the Group's properties are concentrated, the existence of nature conservation areas such as “National and Quasi-national park)”, “IUCN Category IV/V”, and “KBA” was confirmed. The total gross floor area of properties located in the 10 areas listed in the table “Existence of Nature Conservation Areas in areas where our group properties are concentrated” accounts for more than 80% of the total gross floor area of the subject properties. Due to the nature of our business development, the Group believes that there is little new loss of nature in the city center and metropolitan area, as most of those developments are in areas where buildings have already existed.

In addition, some of the Group's properties are located within a radius of several dozens of kilometers of areas designated as important nature conservation areas, but a review of the development status of the relevant major properties and other information indicates that there is no business activity within the nature conservation areas. We currently have no new plans for additional development in these areas. In addition to complying with the Environmental Impact Assessment and other legal requirements, the Group check the contact with nature for each property when we conduct business activities that may have effects on nature conservation areas.

In areas where the properties developed and owned by the Group are concentrated, it is possible that the Group's operations will have an impact on nature, but at the same time, a positive cycle can be also expected as the Group takes initiatives to protect and restore nature. In these areas, the Group is also measuring the effects of the Group's activities and examining the possibility of creating new opportunities.

For this analysis, we focused on terrestrial ecosystems which have the highest degree of impact and analyzed the points of contact with sensitive areas. Since the Group also develops and owns properties bordering freshwater and coastal areas, we recognize that the impact on ecosystems in those areas is also significant. We are also considering analyzing the points of contact with areas requiring attention for freshwater and marine ecosystems in the future.

References:
Ministry of the Environment, “Status of Designation of 17 Biodiversity Protected Areas”
Ministry of the Environment, “World Natural Heritage in Japan”
Ministry of the Environment, “The Ramsar Convention and Convention Wetlands”
Ministry of Education, Culture, Sports, Science and Technology “Biosphere Reserve (UNESCO Eco-Park)”
Higashi, Hiroyuki (2019), “What is a protected area: An overview of IUCN protected area management categories”
IBAT “Species Threat Abatement and Restoration Metric (STAR)”
IBAT “Species Threat Abatement and Restoration (STAR) data layer Business User Guidance”
Conservation International Japan, “What is KBA?”

We will also consider analyzing “areas of rapid decline in ecosystem integrity,” “areas of high physical water risks,” and “areas of importance for ecosystem service provision, including benefits to Indigenous Peoples, Local Communities and stakeholders“.

• *
  This target shows the Group's KPIs in relation to the metric numbers listed in Annex 2: TNFD additional global disclosure metrics in the Recommendations of the Taskforce on Nature-related Financial Disclosures, issued in September 2023.

Formulation of Biodiversity Policy

In April 2024, the Group formulated Nomura Real Estate Group Biodiversity Policy to address biodiversity and nature-related issues throughout the Group through its business activities. The policy endorses the “Kunming-Montreal Biodiversity Framework,” an global goal, and commits the Group to promote actions to achieve “Nature Positive,” which aims to halt, reverse, and put biodiversity loss on a recovery track by 2030, and to apply the principle of “Mitigation Hierarchy,” which requires that measures to avoid, reduce, and compensate for negative impacts on biodiversity caused by business activities be implemented in this order of priority. In addition, Based on its main business areas, the Group aims to define priority areas and solve social issues through a “landscape approach*1 ” that integrally improves the health of ecosystems such as forests, rivers, towns, and oceans in priority areas, as well as the well-being of people. Furthermore, we are committed to maximizing the use of nature-based solutions (NbS) and promoting nature-positive initiatives through our business activities.

Our challenge for “Mori wo Tsunagu” TOKYO project (Integrated Forest Management Project in Tokyo)”

As a practical initiative to solve issues through the “landscape approach,” the Group has launched the “Mori wo Tsunagu TOKYO project (Integrated Forest Management Project in Tokyo)”, which aims to create a symbiotic relationship between nature and the city in Tokyo, one of the Group's main business areas. “Tsunagu Mori” owned by our group in Okutama Town has been recognized as a “Other Effective Area-based Conservation Measures (OECM)^*2” in recognition of its diverse habitats and ecosystem management. In addition to promoting efforts to conserve the ecosystem and important species, we are taking on the challenge of creating a model case that can be expanded to other business areas by contributing to nature positivity through the provision of ecosystem services and other activities.

The Tama River, which originates in Okutama, flows through the northern part of Tokyo, the southern part of Tokyo, and the southwestern part of 23 wards, flowing into Tokyo Bay. The Tama River watershed area is home to the Group's main business areas, and our main business bases, Shinjuku and Shibaura, are also located in the area.

In the future, in the port area and canal zone around Shibaura, we are considering various initiatives that will not have such a negative impact, since the area depends on the environment of the water area from the viewpoint of landscape and is considered to have an impact on the ecosystem of the water area due to wastewater and other factors.

Moreover, in our materiality determination process, the Group also identifies factors that are important to its stakeholders. We asked sustainability experts, institutional investors, business partners, customers, and others to evaluate us with the score of the twelve items that we identified as important to the Group from the perspective of what they expect andthe social issues we should address. We finally collected their opinions through the process. In order to respond to the comments we received as the dialogue process with our stakeholders, we live up to “expectations to ecosystems and select highly sustainable materials” and we have taken actions such as “acquiring biodiversity certification” and “promoting the use of domestic and certified wood products”.

For other initiatives, visit the website:Biodiversity