Climate Change
Perceptions on Climate Change
MIRARTH HOLDINGS Group (hereinafter referred to as "the Group") recognizes that the progression of climate change is a scientific fact. So, it is essential to take measures to counter the increasing damage caused by natural disasters due to climate change, such as serious disaster which comes from typhoons and heavy rains, high frequency of heat waves and droughts, and rising sea levels worldwide. In addition, the Group regard climate change as a material issue that will cause major changes in the natural environment and social structure which will have a significant impact on our management and business as a whole. In anticipation of the transition to decarbonization of the social economy, including the establishment of frameworks to reduce greenhouse gas emissions and tighter emission regulations as part of global efforts to mitigate climate change, there is a growing social demand for reducing greenhouse gas emissions and enhancing resilience in the development and operational stages of real estate projects. On the other hand, in the energy business, demand for renewable energy is expected to grow, and our Group see this as an important opportunity.
Endorsement of TCFD Recommendations
MIRARTH HOLDINGS and its group companies, MIRARTH Asset Management (formerly Takara Asset Management) and MIRARTH Real Estate Advisory (formerly Takara PAG Real Estate Advisory), have expressed their support for the TCFD (Task Force on Climate-related Financial Disclosure)*1 recommendations established by the Financial Stability Board (FSB), and have joined the TCFD Consortium*2
Going forward, we will take this as a starting point for our group's analysis and response to the risks and opportunities that climate change poses to our business, and for strengthening and enhancing our information disclosure on climate change in line with the "governance," "strategy," "risk management," and "indicators and targets" stated in the TCFD recommendations.
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*1 TCFD (Task Force on Climate-related Financial Disclosures): An international initiative established by the Financial Stability Board (FSB) at the request of the G20 to examine how climate-related disclosures and financial institutions should be addressed, recommendations for companies and others to disclose their "governance," "strategy," "risk management," and "indicators and targets" related to climate change-related risks and opportunities.
TCFD Website -
*2 TCFD Consortium: A private-sector initiative established in 2019 to discuss effective disclosure of corporate information and efforts to link disclosed information to appropriate investment decisions by financial institutions and others.
TCFD Consortium Website
Governance
MIRARTH HOLDINGS has a governance structure, with oversight by the Board of Directors and the Sustainability Committee, to address the risks and opportunities of climate change.
The Chief Executive Officer for climate-related issues is the Representative Director, and the Executive Officer is the Director in charge of sustainability.
The Chief Operating Officer reports regularly to the Chief Executive Officer on matters related to climate change response, including identification and assessment of climate change impacts, management of risks and opportunities, progress of adaptation and mitigation efforts, and establishment of indicators and targets at the Sustainability Committee meetings. After deliberation and consideration of each agenda item by the attendees of the Sustainability Committee, decisions are made by the Chief Executive Officer.
Strategies
Scope of Analysis
The scenario analysis conducted this time covered two of the Group's major businesses, the real estate business and the energy business, which are relatively more affected by climate change.
Referenced External Scenarios
The TCFD recommendations advise explaining the resilience of the company's strategy based on multiple scenarios, including those below 2°C. To consider climate-related risks and opportunities, we conducted a scenario analysis of the Group's operations and the summary of the scenario analysis is provided below. The scenario analysis and our process for identifying and assessing risks and opportunities are described in the "Risk Management" section below.
| Source Organization | 1.5-2°C Scenario | 4°C Scenario |
|---|---|---|
| IEA (International Energy Agency) | NZE2050 | STEPS |
| IPCC (Intergovernmental Panel on Climate Change) | RCP4.5 | RCP8.5 |
Why this scenario was chosen
IEA NZE2050 (1.5-2°C scenario transition risk)
IEA was selected as a possible reference since the main source of greenhouse gas emissions is energy consumption.
IPCC RCP4.5 (1.5-2°C scenario physical risk)
IPCC reports were selected for physical risk analysis scenarios since it is considered as a standard reference document for meteorological conditions.
IEA STEPS (4°C scenario transition risk)
IPCC reports were selected for physical risk analysis scenarios since it is considered as a standard reference document for meteorological conditions.
IPCC RCP8.5 (4°C scenario physical risk)
IPCC reports were selected for physical risk analysis scenarios since it is considered as a standard reference document for meteorological conditions.
A possible worldview in each scenario
Each scenario assumes the following worldview
| 1.5-2°C scenario (Large transition risk, small physical risk) |
|---|
| This is a scenario which limits the rise in global temperatures at the end of the 21st century to 1.5°C to 2°C above pre-industrial levels, as social policies and emission regulations for decarbonization are strengthened and progress is made in addressing climate change to achieve the Paris Agreement targets. The trend toward decarbonization or low carbonization on all fronts, including policy, investors, and consumers, will become more pronounced and companies are expected to take even stronger measures towards climate change. If not, transition risk will increase, and competitive advantage will decrease. On the other hand, it is assumed that the high frequency and severity of climate disasters will be suppressed to a certain degree, and physical risks will be relatively low. |
| 4°C scenario (Small transition risk, large physical risk) |
| This is a scenario in which the global temperatures at the end of the 21st century will rise by 4°C above pre-industrial levels, since sufficient climate change mitigation measures are not realized, and greenhouse gas emissions continue to increase. Physical risks are expected to increase, with a marked increase in the severity of natural disasters, sea level rise, and extreme weather events. On the other hand, as efforts toward decarbonization stall in policy and in capital markets and consumers, transition risks will be relatively small. |
Identification of risks, opportunities and response measures, strategies
Based on the 1.5°C to 2°C scenario, in which policies and regulations are strengthened to move toward a decarbonized society, and the 4°C scenario, in which the physical impacts of climate change will occur due to more intense extreme weather events, we have identified risks and opportunities and assessed their impact on our business as follows. The financial impact was evaluated qualitatively, referring to each scenario as described previously. In response to the risks and opportunities identified, the Company will pursue the following initiatives.
| Classification | Major Risks and Opportunities | Financial Influence | Time span | Financial Impact | Response measures, Strategies | ||
|---|---|---|---|---|---|---|---|
| 4°C Scenario | 2/1.5°C Scenario | ||||||
| Transition Risk | Policy and Law | Strengthen taxation by introducing carbon tax | Decrease in sales volume due to higher selling prices | Short Term | Small | Medium | Targets for GHG emissions Settings and Management |
| Strengthening various regulations, etc. due to energy conservation policy | Increased development costs for regulatory compliance | Mid Term | Large | Large | Collaboration with suppliers to improve energy efficiency and strengthen sales strategies | ||
| Technology | Evolution and diffusion of renewable energy and energy-saving technologies | Increased costs for development and introduction of new technologies | Mid Term | Medium | Large | Gather information on new technologies and services, and develop and introduce new technologies as appropriate | |
| Increased response to transition to low emission technologies | Increased costs related to new measures and implementation | Mid Term | Small | Small | Securing professional human resources, building organization and internal systems | ||
| Market | Increase in service prices by relevant suppliers against a backdrop of growing decarbonization needs | Development and construction of properties with high environmental performance such as ZEB/ZEH, etc., and increase in renovation/repair costs | Mid Term | Medium | Medium | Price stabilization through collaboration with suppliers | |
| Reputation | Increasing scarcity of wind- and flood-resistant sites and intensifying competition in acquiring sites in favorable locations | Decrease in sales due to lost business opportunities | Long Term | Large | Large | Location selection and strengthening ties with other companies in the industry | |
| Reduced value of products and brands that do not address climate change | Decrease in sales due to lower property sales prices and rents resulting from decline in brand value | Mid Term | Small | Medium | Set energy conservation standards for new development projects and consider installing energy conservation standard equipment in existing properties | ||
| Physical Risk | Acute | Damage to properties under construction due to wind and flood damage, prolonged construction period | Increase in construction-related expenses | Short Term | Large | Medium | Adoption of construction methods resistant to wind and flood damage Enrollment in construction insurance |
| Chronic | Lower productivity at construction sites due to rising temperatures | Increased costs due to longer construction period | Mid Term | Medium | Medium | Thorough management of occupational safety considerations at construction sites | |
| Opportunity | Resource Efficiency | Promoting the use of renewable energy | Reduction of externally procured fuel and lighting expenses | Mid Term | Small | Small | On-site and off-site PPA implementation |
| Products and Services | Increase in demand for low emission facilities and ZEB/ZEH condominiums | Increase in sales | Mid Term | Small | Medium | Promote the introduction of low emission equipment and renewable electricity | |
| Market | Utilization of public support schemes | Reduction of cash outflows | Mid Term | Medium | Medium | Business expansion through urban redevelopment projects, etc. | |
| Creation of opportunities to change residence | Increase in sales | Mid Term | Medium | Small | Development and promotion of ZEH/ disaster-resistant condominiums | ||
| Improving market participants' assessment of climate change | Increase in procurement opportunities and amount raised due to higher corporate value | Mid Term | Medium | Medium | Enhancement of climate-related information disclosure | ||
| Classification | Major Risks andOpportunities | Financial Influence | Time span | Financial Impact | Response measures, Strategies | ||
|---|---|---|---|---|---|---|---|
| 4°C Senario | 2/1.5°C Senario | ||||||
| Transition Risk | Policy and Law | Strengthen taxation by introducing carbon tax | Decrease in sales volume due to higher selling prices | Short Term | Small | Medium | Promote business in accordance with various regulations |
| Technology | Evolution and diffusion of renewable energy and energy-saving technologies | Increased costs for introduction of new technologies | Mid Term | Small | Small | Strengthen information gathering on new technologies and systematic introduction of power generation equipment | |
| Market | Increasing difficulty in securing land due to intensifying competition for energy conservation | Shrinking revenue opportunities due to stagnation of new development | Short Term | Medium | Large | Selection of project areas where grid connection is possible | |
| Reputation | Reduced value of brands | Reduced revenues due to customer attrition and limited access to capital, etc. | Short Term | Small | Small | Maintain brand image by taking a firm response to climate change | |
| Physical Risk | Acute | Damage to operating power generation facilities due to natural disasters | Decrease in sales due to lower electricity sales and increase in repair and other costs | Short Term | Large | Large | Introduction of a resilient design concept, risk identification using hazard maps, profit insurance coverage, and accumulation of repair expenses |
| Chronic | Increased failure rate of in-service equipment due to constant extreme weather conditions | Increase in repair expenses | Long Term | Medium | Medium | Adopt a design concept that addresses climate change, selection of product standards | |
| Opportunity | Policy and Law | Establishment of legal systems to expand and promote the diffusion of renewable energy | Positive impact on speed and volume of development | Mid Term | Small | Large | Secure funding and reinforce personnel for asset expansion |
| Resource Efficiency | In-house use of renewable energy | Reduction of externally procured fuel and lighting expenses | Short Term | Small | Small | Selecting a development site and securing financing | |
| Products and Services | Development of technologies and products to address climate change | Decrease in capital expenditures and other expenses due to inexpensive technology development | Mid Term | Small | Medium | Strengthen information gathering on new technologies and systematic introduction of power generation equipment | |
| Expansion of O&M business | Increase in O&M sales | Mid Term | Small | Medium | Capital investment and securing engineers to expand O&M business | ||
| Market | Growing demand for renewable energy | Increase revenue opportunities through new development and business expansion | Mid Term | Small | Large | Market research and development of new business models | |
| Expand investment in renewable energy | Create sales and revenue synergies with the real estate business | Short Term | Small | Medium | Formation of a PJ team with personnel that has renewable energy and real estate knowledge | ||
| Utilization of Green Finance | Increase in stock price due to higher corporate value, reduction of financial costs | Short Term | Medium | Medium | Securing human resources related to green finance | ||
Risk management
Our process for managing climate change-related risks is as follows.
①Process for identifying and assessing risks and opportunities
Significant risks and opportunities related to climate-related issues are discussed in the Sustainability Committee, and the executive director for climate change response convenes internal personnel once a year to identify and assess climate-related risks and opportunities.
②Processes to manage risk and integration into a group-wide risk management program
The person with ultimate responsibility for climate-related issues will designate a person or department to oversee managing climate-related risks identified and assessed by the Sustainability Committee that are material to the business and financial plan, and will direct the development of countermeasures for these risks. In working toward risk mitigation management or realization of opportunities, we shall define relative KPIs (Key Performance Indicators) if possible and attempt to monitor and set targets. The person with ultimate responsibility for climate-related issues shall summarize the progress of each initiative and KPI at least once a year and report the status to the Sustainability Committee. The person in charge will also direct that existing group-wide risk management programs consider, to the extent possible, climate-related risks that are material to business and financial planning. The risk identification, assessment, and management process will then be integrated.
Indicators and Targets
We have established key performance indicators (KPIs) and targets to manage and monitor risks and opportunities. The indicators and targets we have set are as follows.
Greenhouse gas emissions
Target: Net zero greenhouse gas emissions (Scope 1, 2 and 3) from MIRARTH HOLDINGS Group's business activities by FY2050.
With 2022 as the base year, the mid-term target is 45% reduction (on a gross basis) by FY2030, and the long-term target is net zero (on a gross basis) by FY2050.
The medium- and long-term targets for greenhouse gas emissions reduction set in March 2023 have been revised by newly adding Scope3 to the greenhouse gas emissions reduction targets corresponding to the "Net Zero Standard"*1 of the SBTi (Science Based Targets initiative).
- Announced on March 28, 2023: 50% reduction by 2030 (compared to FY2020), net zero by 2050*2
- Announced on March 29, 2024: 45% reduction by 2030 (compared to FY2022), net zero by 2050*3
- *1 Standardized criteria published by the SBT Initiative in October 2021 to set targets for limiting global temperature increase from pre-industrial levels to within 1.5°C and achieving net zero by 2050.
- *2 Subject to Scope1 + Scope2
- *3 Revised by newly adding Scope3
Total scale of renewable energy generation
Target: To accumulate 420 MW of new capacity by the fiscal year ending March 31, 2030, bringing the total generation capacity to 780 MW.
- * MW based on solar conversion
In the energy business, the Group sees the transition to a decarbonized society as an important "opportunity" that is expected to increase demand for renewable energy. Our target is to increase the total scale of renewable energy generation by 420 MW to 780 MW by the fiscal year ending March 31, 2030. In addition to solar power, we will promote the development of wind and biomass power generation, aiming to build a stable renewable energy power supply system. The Group will also expand our energy business by strengthening the operation, maintenance, and management of power plants.
The results of various performance indicators will be disclosed on the Sustainability website as they become available.
- *1 Scope 1: Direct emissions of greenhouse gases by the business itself (combustion of fuels such as city gas)
Scope 2: Indirect emissions associated with the use of electricity, heat, and steam supplied by other companies
Scope 3: Indirect emissions other than Scope 1 and Scope 2 (emissions by other companies related to the activities of the business) - *2 Scope 1 and Scope 2 are to be reduced by 70% by FY2030.
- *3 Neutralize residual emissions by utilizing forest-derived absorption and carbon removal technologies outside the value chain.