SFDR Sustainability-Related Disclosure

Statement on principal adverse impacts of investment decisions on sustainability factors（261KB）

Promotion of environmental and/or social characteristics – SFDR Article 8 Pre-contractual Disclosure（445KB）

Sustainability-related disclosure（412KB）

Product name: Japan Logistics Fund, Inc.

Legal entity identifier: 3538004KZWISCQO70151

Japan Logistics Fund, Inc. (“JLF”) promotes environmental or social characteristics, but does not have as its objective a sustainable investment within the meaning of Article 9(1) of Regulation (EU) 2019/2088 (“SFDR”). JLF has no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan and relies on. Mitsui & Co., Logistics Partners Ltd. (the “Asset Manager”), to manage and operate the properties in JLF’s portfolio. JLF and the Asset Manager are hereinafter referred to collectively as “we,” “us” or “our” unless noted otherwise. References to “fiscal year” or “FY” are to the 12 months began or beginning April 1 of the year specified in line with the fiscal year of the Asset Manager, unless noted otherwise.

Summary

No sustainable investment objective	The financial products offered by JLF promote environmental or social characteristics, but do not have as their objective sustainable investment.
Environmental or social characteristics of the financial product	JLF invests primarily in logistics properties and aspire to achieve stability and growth in dividends over the mid-to-long-term. At the same time, the Asset Manager closely studies the impact of our portfolio on environmental factors such as CO2 emissions, energy consumption, water consumption, asbestos and soil contamination as well as social factors on tenants, including with respect to antisocial forces and the work environment, and on relationships with the community. Such factors are considered for every investment decision, along with the profitability of the property. Accordingly, we implement various environmental or social initiatives, as described below.
Investment strategy	JLF invests directly or indirectly through trust beneficiary interests in real estate. Therefore, due diligence (including the assessment of good governance practices) in relation to investee companies is not applicable. In order to conduct sustainable asset management while maximizing the value of JLF’s properties, we have taken into consideration ESG factors in our investment and asset management processes. In particular, we have established a green finance framework (see below for details). In order to promote ESG initiatives, the Asset Manager’s President & CEO and the Managing director of each department convene a Sustainability Promotion Liaison Meeting generally once every three months to review our sustainability policy, goals and initiatives and how our investments are performing against the foregoing, as described below.
Proportion of investments	JLF offers financial products which promote environmental or social characteristics, but does not have sustainable investments as its objective. As of January 31, 2025, 98.6% of JLF’s properties qualified as Green Eligible Assets (defined below), and 1.4% did not qualify as Green Eligible Assets, in each case based on based on total floor area under the Building Standards Act of Japan. We aim to maintain the percentage of JLF’s properties with green building certifications of at least 95% until the end of FY2025 as our short-term target KPI and until the end of FY2030 as our mid-term target KPI, in each case based on total floor area under the Building Standards Act of Japan.
Monitoring of environmental or social characteristics	In order to periodically monitor and track our performance on environmental or social characteristics, we use the initiatives and indicators such as (i) acquiring external certifications and assessments for sustainability performance such as GRESB (as defined below); (ii) ratifying and participating in PRI (as defined below); (iii) obtaining SBT (as defined below) certification for our target KPI for greenhouse gas emissions reduction; (iv) acquiring green building certification (as defined below) for the individual properties in JLF’s portfolio; (v) tracking and disclosing data on greenhouse gas emissions, energy consumption and water consumption; and (vi) implanting green leases (as defined below), each as further described below.
Methodologies	The Asset Manager has established a Sustainability Policy and has formed a Sustainability Promotion Liaison Meeting (“SPLM”), which promotes ESG initiatives. The SPLM pursues ESG initiatives in accordance with the Sustainability Policy and is comprised of the President and CEO, and Department Managing Director of the Asset Manager. The Managing Director of the Finance & IR Department of the Asset Manager is responsible for managing sustainability targets. Regular meetings are held approximately once every three months where sustainability policies, at which ESG targets and initiatives are studied and discussed in light of circumstances in society and the state of operations at JLF. Moreover, SPLM identifies ESG materialities, establishes and manages KPIs (action plans and targets), and reports to the Board of Directors. The Asset Manager uses the methodologies as described below to monitor and track our ESG key performance indicators.
Data sources and processing	As further described below, the Asset Manager obtains certain ESG-related data from tenants, property management companies, third-party consulting firms and issuers of green building certifications, depending on the type of data. In addition, the Asset Manager seeks to ensure data accuracy and quality by coordinating with relevant departments within the Asset Manager and obtaining a verification report regarding certain ESG data from an independent third party.
Limitations to methodologies and data	As further described below, the primary limitation to the methodology or data source is the necessity of our reliance on the tenants and property management companies for raw data at the property level. Data at the portfolio level are compiled internally at the Asset Manager. To ensure the accuracy of compiled data at the portfolio level, we have engaged an independent third party which has provided a verification report regarding the accuracy and quality of compiled data at the portfolio level, but the verification report does not provide independent verification of accuracy of raw data at the property level and the challenges associated with our reliance on the tenant and property management companies for raw data at the property level remain. Limitations to the methodology and data are not expected to affect the attainment of the environmental or social characteristics promoted by JLF in any material way.
Due diligence	Prior to our investment in a property, the Asset Manager conducts due diligence on the property, including ESG due diligence, building review and regulatory environmental due diligence. Such due diligence process encompasses various studies of climate-related risks as a basis for deliberations at the Investment Committee and eventual investment decision at the Board of Directors. Specifically, water submersion levels according to various hazard maps are investigated in connection with the possibility of flooding or water submersion at the target property.
Engagement policies	JLF does not generally consider investing in properties that are designated as contaminated areas that require government notification under the Soil Contamination Countermeasures Act of Japan or that do not otherwise meet our environmental standards based on their history of land usage and soil contamination assessment by experts and examination of presence of harmful substances. When investing in properties using proceeds from financing under our green finance framework, JLF does not consider properties that do not meet the criteria under our green finance framework and do not qualify as Green Eligible Assets for investment.
Designated reference benchmark	JLF has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by JLF.

No sustainable investment objective

The financial products offered by JLF promote environmental or social characteristics, but do not have as their objective sustainable investment.

Environmental or social characteristics of the financial product

JLF invests primarily in logistics properties and aspire to achieve stability and growth in dividends over the mid-to-long-term. At the same time, the Asset Manager closely studies the impact of our portfolio on environmental factors such as CO2 emissions, energy consumption, water consumption, asbestos and soil contamination as well as social factors on tenants, including with respect to antisocial forces and the work environment, and on relationships with the community. Such factors are considered for every investment decision, along with the profitability of the property.

We believe that an investment corporation should conduct its business toward achieving sustainable society from a long-term perspective by making contributions to people, local communities, and the natural environment. The Asset Manager makes efforts to reduce our environmental burden and earn the trust of our stakeholders through its asset management. In addition, the Asset Manager ensures that we are in compliance with applicable laws, conducts risk management and makes timely and appropriate disclosures to investors and other parties. The Asset Manager has established a Sustainability Policy and has formed a Sustainability Promotion Liaison Meeting (“SPLM”), which promotes ESG initiatives. Our Sustainability Policy includes our basic policy on how we can contribute to the environment, improve the work environment, ensure compliance, and collaborate with each stake holder. In order to advance its ESG initiatives, the Asset Manager has established and operates an environmental management system (“EMS”) to formulate (Plan), implement and operate (Do), inspect and correct (Check), and evaluate and review (Act) sustainability management policies and material ESG targets.

JLF does not have a specific index designated as a reference benchmark to determine whether JLF is aligned with the environmental or social characteristics that it promotes.

We implement various environmental initiatives including the following.

Addressing climate change. We contribute to the creation of low-carbon society through our initiatives including greenhouse gas reductions (e.g. installation of LED light bulbs and solar panels), and we also make efforts to adapt to climate hazards and natural disasters (e.g. obtaining and reviewing updated engineering reports). Our target KPI is to reduce Scope 1 and 2 GHG emissions by 42% by FY2030 compared to the levels in FY2021 and to achieve carbon neutrality by FY2050.
Consent with and support of TCFD. In July 2021, the Asset Manager announced its support of the June 2017 recommendations by the Task Force on Climate-related Financial Disclosures (“TCFD”), which was established by the Financial Stability Board in December 2015 to develop recommendations for more effective climate-related disclosures. The Asset Manager has participated in the TCFD Consortium, a group of Japanese companies that support TCFD recommendations. The TCFD Consortium meets from time to time to discuss how to disclose and use climate-related information effectively to support informed decisions by investors.
Responding to transitional risks – improving facilities to save energy and conducting ESG efforts with tenants. We are prepared to address what we call the “transitional risks”, the policy, regulatory, market and reputational risks associated with climate change. In order to save energy, we replace old lighting equipment with LED lighting equipment, and track the estimated yearly reduction of electronic power consumption from LED conversion. We aim to increase the percentage of JLF’s properties with LED lightning equipment (based on total floor area under the Building Standards Act of Japan) to 80% by FY2030. We renew air-conditioning equipment and install photovoltaic panels on the rooftop of some of our properties. In addition, we cooperate with tenants on environmental efforts, including by providing ESG training sessions for tenants. We enter into “green leases” with some tenants, which require tenants to cooperate with us on implementing environmentally-friendly initiatives. We also implement “greening”, the process of selection and planting of plants, initiatives at JLF’s properties such as installing green roofs, greening of walls, setting up of green zones and protection of native species, which we believe would help suppress temperature rise at the properties caused by heat-island phenomena and improve visual aesthetics. We contribute to biodiversity conservation by planting indigenous plant species.
Responding to physical risks – greenification and countermeasures against disasters. We promote greenification of rooftops and the grounds surrounding all of our properties to mitigate the urban heat island effect, which describes the higher temperatures experienced in urban areas due to buildings because they absorb and re-emit heat more than natural landscapes. Additionally, we take countermeasures to protect buildings from disasters, including raising the level of building foundations to help avoid electrical system failures in our properties.
Promote resource circulation. We strive to minimize water use in our business activities by improving efficiency and reducing consumption. We promote greening of buildings to help suppress temperature increases caused by the urban heat island effect and improve the aesthetics of our logistics properties. We also contribute to biodiversity conservation by planting indigenous plants. In addition, we endeavor to minimize waste from our properties by monitoring and conducting appropriate management.
Conducting soil contamination surveys. We conduct soil contamination surveys when acquiring properties and require the seller to ensure that all chemical substances are removed before the acquisition, and do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances, unless the underlying lands meet our voluntary standards for evaluation and determination of soil contamination.

We implement various social initiatives at our properties including the following.

Disaster response and building safety. We and the Asset Manager examine the safety of buildings, including whether they comply with applicable laws, and earthquake risks associated with buildings at the time of acquiring properties by obtaining engineering reports. In addition, the Asset Manager reviews the safety of our buildings on an ongoing basis by obtaining updated engineering reports about every five years for all of our properties. The Asset Manager has established disaster policies and procedures to ensure that damages are minimized, ensure business operation continues, and achieve fast recovery in a time of disaster. We have installed on-site power generators at some of our portfolio properties that can be used during a power outage, and toilets that are available even during a disaster at some properties.
Initiatives to stimulate local communities. We redevelop our properties and engage in joint efforts with partners to develop modern, large-scale logistics properties so that these properties can contribute to revitalization of the local economy. Additionally, we recruit mobile phone companies to install their antennas at our properties, which has improved cellular coverage in the community surrounding our properties. We regularly conduct technical evaluations of environmental and social risks of our all of our properties, not only to conduct risk management, but also evaluate environmental initiatives.
Connection with local community. We have improved channels of communication with tenants and local residents through various initiatives, including cleaning activities in cooperation with property managers, building managers and tenants. We also help to keep tenants and local residents safe by installing security cameras at some of our properties to monitor areas surrounding the property and on vending machines inside our properties.
Initiatives aimed at enhancing tenant satisfaction. In order to create a pleasant working environment for users of our properties, we have enhanced amenities at some of our properties, by adding break rooms and kiosks and regularly assessing and improving air-conditioning.
Creating a healthy and pleasant working environment. The Asset Manager conducts an employee satisfaction survey on an annual basis for all employees. The survey results and proposals based on such results are reported annually by the CEO. The Asset Manager has a family leave program, a special paid leave program and a flexible working hour program. The Asset Manager supports our employees’ health and safety by providing financial aid for their health exams. The Asset Manager has a hotline for employees which allow them to consult an attorney anonymously to report harassment or other workplace issues, either inside or outside the Asset Manager.

Investment strategy

JLF invests directly or indirectly through trust beneficiary interests in real estate. Therefore, due diligence (including the assessment of good governance practices) in relation to investee companies is not applicable. The investment and due diligence policies as described below are related to real estate and real estate-related assets.

In order to conduct sustainable asset management while maximizing the value of JLF’s properties, we have taken into consideration ESG factors in our investment and asset management processes. In particular, we have established a green finance framework (“Green Finance Framework”) in accordance with the Green Bond Principles 2021 by the International Capital Market Association, the Green Bond Guidelines 2022 by the Ministry of the Environment of Japan, the Green Loan Principles 2023 by the Loan Market Association and the Asia Pacific Loan Market Association, and the Green Loan Guidelines 2022 by the Ministry of the Environment of Japan:

Green Finance Framework. Our Green Finance Framework meets the four requirements set forth in the Green Bond Principles 2021 with respect to (1) use of procured funds, (2) project selection criteria and process, (3) fund management methods, and (4) reporting. Our Green Finance Framework was given the Green 1(F) rating, the highest rank under the JCR Green Finance Evaluation, which is conducted by Japan Credit Rating Agency, Ltd. (JCR) on the policy for issuance of green bonds or green loans based on the Green Bond Principles 2021, the Green Loan Principles 2023, the Green Bond Guidelines 2022 and the Green Loan Guidelines 2022.

Use of procured funds: Net proceeds from borrowings or investment corporation bonds issued under our Green Finance Framework are used for the acquisition of Green Eligible Assets (defined below), Green Eligible Renovations (defined below) or repayment or redemption of loans or investment corporation bonds required for Green Eligible Assets.

Green Eligible Assets are defined as follows,:

Green buildings
Assets that have obtained or will obtain one of the following certifications as of the payment date of the bond or the date of the loan, as the case may be, or the reporting date described in (4) below under our Green Finance Framework:
- 3 to 5 stars in DBJ Green Building certification
- B+ to S ranks in CASBEE Building (new construction)
- B+ to S rank in CASBEE Real Estate
- 3 stars to 5 stars in BELS certification (FY2016 standard) (*1)
  *1: Excluding logistics facilities with BEI = 0.75 or more
- The following levels BELS certification (FY2024 standard)
  Non-residential: Level 4 to Level 6 (*2)
  *2: New acquisitions of existing buildings built before 2016 must be Level 3 or above and excluding buildings with outdated legality (factories, etc. (including logistics facilities): BEI = over 0.75)
- Silver rank to Platinum rank in LEED certification (v4.0 or later for BD+C)
Energy-saving performance
Properties with an energy reduction rate (“ERR”) of 30% or higher

Green Eligible Renovations are defined as follows:
Green Eligible Renovations are renovations that have been completed within the past 36 months from the date of payment of the bond or date of the loan or will be completed, and that meet any of the following criteria.

Improvement in the number of stars or rank by one or more levels Green Eligible Assets.
Reduction of GHG emissions, energy consumption, or water consumption by 30% or more at the property where the renovation is performed.
Other environmentally beneficial improvements (expected to reduce usage or emissions by 30% or more compared to previous levels at the property where the renovation is performed.
Installation or acquisition of equipment related to renewable energy

Project selection criteria and process: A representative of the Finance & IR Department of the Asset Manager selects projects that meet the eligibility criteria, and the final decision is made by the President and CEO of the Asset Manager.
Fund management methods: Funds raised under our Green Finance Framework are used to pay for Green Eligible Assets and are tracked and managed by the Finance & IR Department, and we ensure that, as of each fiscal period-end, the total amount of green loans and bonds outstanding does not exceed the maximum amount of green-eligible liabilities, which are calculated as the total amount of assets that meet the eligibility criteria multiplied by loan-to-value (“LTV”) ratio, calculated as inter-bearing liabilities, divided by total assets.
Reporting: If there are unappropriated funds at the time of issuance of the bond or borrowing of the loan, we will disclose the appropriation plan. In the event that assets subject to the use of funds are sold before the redemption or repayment period, the balance of such bond or loan and the maximum amount of green-eligible liabilities will be disclosed. Relevant information will be disclosed on an annual basis until the corresponding bond or loan balance is reduced to zero.

We ensure the investment strategy is implemented on a continuous basis by establishing and maintaining appropriate eligibility criteria for Green Eligible Assets and Green Eligible Renovations. The Asset Manager’s Finance & IR Department tracks the funds raised under our Green Finance Framework to ensure that they are used only toward Green Eligible Assets and Green Eligible Renovations, and we confirm the total amount of green loans and bonds outstanding does not exceed the total amount of assets that meet the eligibility criteria multiplied by LTV ratio based on total assets.

In order to promote ESG initiatives, the Asset Manager’s President & CEO and the Managing Director of each department convene a SPLM generally once every three months to review our sustainability policy, goals and initiatives and how our investments are performing against the foregoing.

We also make the following annual disclosures:

Green building certification for acquired assets (e.g., number, type, etc.)
Use metrics
・Energy consumption

・Greenhouse gas (GHG) emissions

・Amount of water used

・Total weight of waste
Renovations
In addition to the content and subject of the renovation work, quantitative indicators of any of the following before and after the renovation work

・Status of acquisition of Green building certification (types and grade of certification)

・Amount of renewable energy generated and estimated reduction in greenhouse gas (GHG) emissions

・Energy consumption, greenhouse gas (GHG) emissions and water consumption, as applicable

JLF does not invest in investee companies and have therefore opted to provide information on the governance policies adopted by JLF and the Asset Manager. JLF, along with the Asset Manager, has introduced the following measures to assess and enhance our own governance systems:

Additional reporting process from the Asset Manager. Under the asset management agreement, we have the right to receive a variety of reports from the Asset Manager and the right to inspect the Asset Manager’s book and records, to be able to supervise the Asset Manager’s operations.
Prevention of insider trading and conflict-of-interest transactions. We have set established insider trading controls to prevent insider trading by directors. We also have established rules on conflict-of-interest transactions. We are not allowed to carry out related-party transactions without the approval of the Asset Manager’s Internal Controls Committee and Board of Directors.
Transparent and appropriate information disclosure. We have a policy of disclosing information in an appropriate and timely manner, in accordance to the requirements established by the Investment Trusts Act, the Financial Instruments and Exchange Act of Japan, the Tokyo Stock Exchange. The Asset Manager’s Finance & IR Department has responsibility to manage information disclosure. Each relevant department is required to immediately report to Finance & IR Department material information on asset management, accounting, compliance and other matters that may require disclosure. As necessary, a disclosure committee is convened. In general, approval from the President and CEO is required for all disclosure.

Proportion of investments

JLF offers financial products which promote environmental or social characteristics, but does not have sustainable investments as its objective. As of January 31, 2025, 98.6% of JLF’s properties qualified as Green Eligible Assets, and 1.4% did not qualify as Green Eligible Assets, in each case based on total floor area under the Building Standards Act of Japan. We aim to maintain the percentage of JLF’s properties with green building certifications of at least 95% until the end of FY2025 as our short-term target KPI and until the end of FY2030 as our mid-term target KPI, in each case based on total floor area under the Building Standards Act of Japan.

Monitoring of environmental or social characteristics

We use the following indicators to measure the attainment of the E/S characteristics we promote.

Policy on acquiring external certifications. We are evaluated under the GRESB Real Estate Assessment, which is an annual benchmarking assessment to measure the level of ESG integration achieved by real estate companies and funds. In 2024, we have received the 5 Stars rating, the highest rank in GRESB Rating, based on GRESB’s overall evaluation. In addition, we have received the Green Star designation by GRESB in 2024 for the seventh consecutive year reflecting our high performance in areas of management and policy, and implementation and measurement, with respect to environmental, social and sustainability-related activities.
Principles for Responsible Investment (“PRI”). Mitsui & Co. Asset Management Holdings Ltd., a parent company of the Asset Manager, became a ratifying institution of PRI in 2024 and adopted PRI’s six core principles.
Science Based Targets (SBT) certification. The SBT Initiative is an international initiative that encourages companies to set science-based GHG emissions reduction targets to achieve the Paris Agreement that “aims to keep the global average temperature well below 2°C above pre-industrial levels and pursue efforts to limit global warming to 1.5°C,” and certifies companies’ GHG emissions reduction targets that are scientifically consistent with the goals set forth in the Paris Agreement. In 2022, we have received the SBT certification from the SBT Initiative for our target KPI of reducing Scope 1 and 2 GHG emissions by 42% by FY2030 compared to the levels in FY2021 and achieving carbon neutrality by FY2050.
Policy on the acquisition of green building certifications. To track the environmental performance of our properties, we use environmental certifications issued by third-party organizations such as the Development Bank of Japan’s Green Building Certification (“DBJ Certification”), Building Energy-efficiency Labeling System certification (“BELS Certification”), SMBC Sustainable Building Assessment Loan Program, Certification for Comprehensive Assessment System for Built Environment Efficiency (“CASBEE”) for Real Estate and Certification for CASBEE for New Construction. With respect to DBJ Certification, we consider a property to have sufficient environmental certification if it received a 3-star ranking or higher out of DBJ Certification’s 5-star ranking system. With respect to BELS Certification, we consider a property to have sufficient environmental certification if it received a 3-star ranking or higher out of BELS Certification’ 5-star ranking system and after April 2024, Levels 4 or higher out of BELS Certification’ seven levels (levels 0-6) system. With respect to CASBEE, we consider a property to have sufficient environmental certification if it received a Rank B+ or higher out of the CASBEE ranking system for Real Estate or New Construction featuring Rank S (excellent), Rank A (very good), Rank B+ (good), Rank B- (slightly inferior) and Rank C (inferior). We refer DBJ Certification, BELS Certification, CASBEE and other environmental certifications collectively as “green building certifications”, and we consider our properties that receive any such sufficient level of green building certifications or equivalent level of environmental certifications as “Green Eligible Assets”. We aim to maintain the percentage of JLF’s properties with green building certifications of at least 95% until the end of FY2025 as our short-term target KPI and until the end of FY2030 as our mid-term target KPI, in each case based on total floor area under the Building Standards Act of Japan.
Greenhouse gas emissions and energy consumption. The Asset Manager tracks and monitors greenhouse (“GHG”) gas emissions (Scope 1, Scope 2 and Scope 3), energy consumption (electricity and fuel) and water consumption (public drinking water and recycled water) and related data of JLF’s properties. Our target KPI is to reduce Scope 1 and 2 GHG emissions by 42% by FY2030 compared to the levels in FY2021 and to achieve carbon neutrality by FY2050.
ESG efforts with tenants and the conclusion of green leases. We cooperate with tenants on environmental efforts, including by providing ESG training sessions for tenants. In addition, we have concluded “green leases” with some tenants, which stipulate the tenants to cooperate with us on implementing environmentally friendly initiatives. We aim to increase the proportion of JLF’s properties covered by green leases to 75% by the end of FY2025 as the short-term target KPI and by the end of FY2030 as the mid-term target KPI, in each case based on leasable area.

Methodologies

The Asset Manager has established a Sustainability Policy and has formed a Sustainability Promotion Liaison Meeting (“SPLM”), which promotes ESG initiatives. The SPLM pursues ESG initiatives in accordance with the Sustainability Policy and is comprised of the President and CEO, and Department Managing Director of the Asset Manager. The Director who is in charge of the Finance & IR Department of the Asset Manager is responsible for managing sustainability targets. Regular meetings are held approximately once every three months where sustainability policies, at which ESG targets and initiatives are studied and discussed in light of circumstances in society and the state of operations at JLF. Moreover, SPLM identifies ESG materialities, establishes and manages KPIs (action plans and targets), and reports to the Board of Directors.

Policy on acquiring external certifications. The Finance & IR Department of the Asset Manager oversees the assessment process for the GRESB Real Estate Assessment in coordination with the Asset Management Department of the Asset Manager. The assessment process for the GRESB Real Estate Assessment involves submission of questionnaires by GRESB by July 1 of each year. The final results of the GRESB Real Estate Assessment are announced in October of the same year. The Finance & IR Department oversees preparation of our responses to GRESB by engaging a third-party consulting firm and collating applicable data and responses from other departments within the Asset Manager. Based on the final results, the public disclosure report and other reports regarding the GRESB Real Estate Assessment issued by the GRESB secretariat, the Asset Manager analyzes the details of the final results, evaluates any room for future upgrade and other data with the assistance of a third-party consulting firm, and formulates action plans for progressing sustainability and ESG targets. In addition, JLF’s GRESB rating and final results are reported to the Board of Directors of the Asset Manager and disclosed on the website.
Principles for Responsible Investment (“PRI”). PRI has regular meetings, which we attend and report on our latest activities. The Finance & IR Department monitors the status of implementation of relevant initiatives by JLF and reports the status to SPLMs. PRI has regular meetings, which we attend and discuss the latest trends and issues related to ESG and sustainability.
Policy on the acquisition of green building certifications. We have positioned green building certification as a materiality and conduct SPLMs every three months to report on our progress and future prospects of obtaining green building certifications for JLF’s properties. This initiative is managed by the Asset Management Department of the Asset Manager. To further aid in obtaining green building certifications, we have engaged a third-party environmental certification consulting firm to advise on actions to be taken after conducting preliminary assessments of relevant properties in order to improve or obtain the relevant green building certification.
Tracking and disclosing environmental performance. The Asset Management Department of the Asset Manager annually compiles and tracks data on environmental performance of JLF’s properties, such as greenhouse gas emissions, energy consumption (including gas/fuel consumption and electricity consumption), water usage, and waste obtained via the property management companies of JLF’s properties. The compiled annual data is disclosed on the website and financial results-related documents. With respect to the SBT certification, the Finance & IR Department of the Asset Manager has set our target KPI of reducing Scope 1 and 2 GHG emissions by 42% by FY2030 compared to the levels in FY2021 and achieving carbon neutrality by FY2050, and submitted our target KPI to the SBT Initiative. Although the SBT Initiative does not require any reports or monitoring after the issuance of the SBT certification, the Finance & IR Department and the Asset Management Department track our progress of achieving this target KPI of reducing greenhouse gas emissions and implement related initiatives and action plans. Once a year, the Asset Management department compiles and reports green gas emissions, energy consumption, greenhouse gas emissions, and water consumption for each property through the PM company.
ESG efforts with tenants and the conclusion of green leases. We track the cooperation of tenants on implementing environmentally friendly initiatives through the status of green leases with tenants. The Asset Management Department of the Asset Manager is responsible for implementing green leases with tenants. The relevant green lease provisions are included in our standard lease agreements for new leases and renewal or existing leases. The Asset Management Department collects the number of green leases and compiles related data internally. The status of green leases is disclosed on the website and financial results-related document, and is also used as a factor in the GRESB Real Estate Assessment.

Data sources and processing

We use the following data sources:

Policy on acquiring external certifications. Before JLF submits the responses to the questionnaires of the GRESB Real Estate Assessment, the property management companies initially collect the environmental performance data and supporting materials used for the responses at the property level and the Asset Management Department of the Asset Manager reviews and compiles the relevant data and materials at the portfolio level. To ensure data quality, the Asset Manager obtains a verification report regarding environmental performance data used for the GRESB Real Estate Assessment, from an independent third party.
Principles for Responsible Investment (“PRI”). The Asset Management Department of the Asset Manager collects and compiles relevant ESG-related data at the property level and the Corporate Administration Department of the Asset Manager collects and compiles relevant employee and human resources-related data. The Finance & IR Department reviews the compiled data along with the supporting documents and confirms the accuracy of the compiled data internally.
Policy on the acquisition of green building certifications. The Asset Manager collects the relevant data required by the established third-party organizations that issue green building certifications for the properties in JLF’s portfolio with the assistance from the third-party environmental certification consulting firm. In principle, the consulting firm compiles and submits the relevant data required and the supporting materials to the issuing organizations, and the Asset Management Department of the Asset Manager reviews and confirms the accuracy of the compiled data before submission. The consulting firm also advises the Asset Manager on assessing and formulating prospects and action plans for future improvements at the property level.
Greenhouse gas emissions and energy consumption. At the property level, the property management companies annually collects and reports data on green gas emissions, energy consumption and water consumption to the Asset Management Department of the Asset Manager, which in turn confirms the accuracy of the reported data internally in cooperation with the property management companies. At the portfolio level, the Asset Management Department annually compiles and discloses the data on greenhouse gas emissions, energy consumption and water consumption. To ensure the accuracy of the compiled data, the Asset Manager obtains a verification report regarding the annually compiled data on green gas emissions, energy consumption and water consumption from an independent third party.
ESG efforts with tenants and the conclusion of green leases. At the property level and the portfolio level, the Asset Management Department of the Asset Manager collects and compiles the green lease related data and confirm the accuracy of the data internally.

Limitations to methodologies and data

The primary limitation to the methodology or data source is the necessity of our reliance on the tenants and property management companies for raw data at the property level. Like many other real estate investment corporations and asset managers, we rely on raw data provided by the tenants and property management companies, and independent verification of accuracy of such raw data provided by the tenants and property management companies presents challenges. In addition, data at the property level provided by the tenants and property managers is generally updated on an annual basis. Accordingly, property-specific data will therefore not always be fully up to date.

Data at the portfolio level are compiled internally at the Asset Manager. To ensure the accuracy of compiled data at the portfolio level, we have engaged an independent third party which has provided a verification report regarding the accuracy and quality of compiled data at the portfolio level in accordance with our own criteria and methodologies. However, the verification report does not provide independent verification of accuracy of raw data at the property level and the challenges associated with our reliance on the tenant and property management companies for raw data at the property level remain.

Limitations to the methodology and data are not expected to affect the attainment of the environmental or social characteristics promoted by JLF in any material way.

Due diligence

Prior to our investment in a property, the Asset Manager conducts due diligence on the property, including ESG due diligence, building review and regulatory environmental due diligence. Such due diligence process encompasses various studies of climate-related risks as a basis for deliberations at the Investment Committee and eventual investment decision at the Board of Directors. Specifically, water submersion levels according to various hazard maps are investigated in connection with the possibility of flooding or water submersion at the target property. Also, the Sustainability Promotion Liaison Meeting manages and monitors overall risks related to sustainability, including climate change risks, post-acquisition. Based on the risk management rules overseen by the Board of Directors, the Asset Manager annually identifies, monitors and evaluates risks in each workflow of each department and reports status thereof to the Board of Directors as appropriate. In connection with climate-related risks, risk categories are selected and evaluated in accordance with the workflows of each department, and risk mitigation measures are studied as necessary.

Engagement policies

JLF does not generally consider investing in properties that are designated as contaminated areas that require government notification under the Soil Contamination Countermeasures Act of Japan or that do not otherwise meet our environmental standards based on their history of land usage and soil contamination assessment by experts and examination of presence of harmful substances, unless appropriate measures are taken under the Soil Contamination Countermeasures Act or we conclude, after appropriate due diligence review, that any health or other ESG risk is limited. We also review whether the property we may acquire is compliant with applicable law.

In situations where JLF performs an Owner's Rebuild (OBR) of a portfolio asset, JLF intends to pursue all green building certifications for the redeveloped property.

When investing in properties using proceeds from financing under our Green Finance Framework, JLF does not consider properties that do not meet the criteria under our Green Finance Framework and do not qualify as Green Eligible Assets for investment. We have set a KPI of acquiring and maintaining green building certifications for at least 95% of the properties in JLF’s portfolio until the end of FY2025 as the short-term target KPI and until the end of FY2030 as the mid-term target KPI, in each case based on total floor area under the Building Standards Act of Japan.

In addition, we include certain information-sharing and cooperation clauses in the lease contracts with our tenants in order to monitor energy consumption of our tenants and to facilitate and improve ESG certification of the logistics facility buildings in JLF’s portfolio, which we call “green leases”. We plan to propose to its tenants that all future leases are green leases. We aim to increase the proportion of JLF’s properties covered by green leases to 75% by the end of FY2025 as the short-term target KPI and by the end of FY2030 as the mid-term target KPI, in each case based on leasable area.

Designated reference benchmark

JLF has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by JLF.

REMUNERATION AND SUSTAINABILITY RISKS (SFDR ARTICLE 5 DISCLOSURE)

The Asset Manager has a remuneration policy in place which aims to support its strategy, values and long-term interest, including its interest in sustainability. The Asset Manager’s remuneration policy is consistent with the integration of sustainability risks as follows.

Employees of the Asset Manager receive remuneration according to their relative contribution to and expectations for the achievement of management targets, including, in some cases, sustainability targets.
Remuneration, methods of calculation and payment, timing of payment, and increases in remuneration are determined according to the Asset Manager’s compensation rules, which are established based on statutory requirements.
Monthly remuneration is base salary, fixed extra payments, position allowances, merit-based allowances and other adjustments.
Bonuses are calculated based on sales and performance, and are determined by the Asset Manager’s internal rules. Bonuses take into account issues including job content, performance, and attendance. Such evaluations take into consideration the employee’s contributions and conduct with respect to sustainability efforts and compliance requirements.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE IMPACT OF SUCH RISKS ON THE RETURNS OF JAPAN LOGISTICS FUND, INC. (SFDR ARTICLE 6 DISCLOSURE)

We have established the Sustainability Promotion Liaison Meeting, which generally meets at least once every three months to review the sustainability policy, goals and various sustainability initiatives. We have also established an environmental management system, or EMS, to promote sustainability management policies and improve on ESG matters. Based on the EMS, the Asset Manager executes a PDCA cycle, formulating (Plan), implementing and operating (Do), inspecting and correcting (Check), and evaluating and reviewing (Act), of the sustainability management policies, targets, and plans, per instructions from the President and CEO. The progress on ESG KPIs is monitored and reported at least once a year to the Sustainability Promotion Liaison Meeting, the President and CEO, Representative Director and the Board of Directors of the Asset Manager, and the PDCA cycle is used to make continuous improvement. More information regarding EMS can be found on the website: https://8967.jp/en/esg/index.html.

Under this organizational structure, we have instituted a number of initiatives to promote E/S characteristics. Such initiatives include climate change initiatives, initiatives for saving/reducing energy consumption, local community initiatives, and initiatives for employees’/tenant’s initiatives.

In order to conduct sustainable asset management while maximizing the value of our properties, we have taken into consideration ESG factors in our investment and asset management processes. In addition, we have established a Green Finance Framework in related to fund procurement.

While sustainability issues will severely impact our business activities, we believe that such issues may also become potential business opportunities to create new value for sustainable growth. Accordingly, we position our commitment to sustainability as one of the top priority in our management strategies. We also believe that integrating sustainability factors alongside traditional financial and operational metrics in our investment decision process helps us make a more holistic assessment of a property’s risks and opportunities and is commensurate with the pursuit of superior risk-adjusted returns. In other words, we believe that if we fail to consider ESG factors enough in the investment decision-making process, it may cause the increase of capital cost and even reduce investors’ returns. If our ESG initiatives are not sufficient, our investment units may be excluded from ESG stock indices or may be excluded from investment by investors who use the status of ESG initiatives as one of their investment criteria. As a result, the investment unit price may be adversely affected.

We identify risks and opportunities accompanying climate change, build an organization capable of conducting scenario-based analysis and reviews risks and opportunities annually. In doing so, we have divided the analysis into scenarios assuming a 1.5℃ temperature rise and a 4℃ temperature rise to incorporate uncertainties arising from the progression of climate change into business strategies.

Details of the scenario analysis conducted by JLF in March 2025 can be found below.

Scenarios considered

	Publishing institution or organization	1.5℃ Scenario	4℃ Scenario
Transition risks	IEA (International Energy Agency)	IEA World Energy Outlook2024 NZE	IEA World Energy Outlook2024 STEPS
Physical risks	IPCC	IPCC AR6 SSP1-1.9	IPCC AR6 SSP5-8.5

Physical risks

The assets in which JLF invests are exposure to physical climate risks. These can manifest themselves through, for example, floods, storms, heatwaves and limited access to natural resources. This can potentially lead to reduction in value of the assets in which JLF invests. Specifically for JLF, the following risks are particularly relevant. More information can be found on the website: https://8967.jp/en/esg/environment.html

Drivers related to real estate operations	Financial impact on JLF (JLF’s challenges)	Timeline	Risk management, measures and initiatives (Strategy: Opportunities and direction)	KPI／KPIs and Targets	Financial Impact 4℃/1.5℃
Risk of damage from intensifying typhoons and flooding	Higher repair and maintenance costs and insurance premiums Increased rental opportunity losses due to building destruction or damage	Short term	Strengthen BCP support to enhance property competitiveness	Implement 1 initiative related to business continuity planning (BCP)	Large impact	Middle impact
Risk of damages from changes to meteorological patterns and rising sea levels, etc.	Occurrence of large-scale renovation costs Higher repair and maintenance costs resulting from increased operational burden from HVAC equipment	Medium term	Implement planned repairs and maintenance at properties in response to changing meteorological patterns to enhance property competitiveness	Implement 1 initiative related to business continuity planning (BCP)	Middle impact	Middle impact

Transition risks

The assets in which JLF invests are exposed to transition risks. These can manifest themselves through, for example, changes in regulations, technical developments and/or social developments. Such developments may result in reduction in value of the assets in which JLF invests. Specifically, the following transition risks are relevant for JLF and its assets. More information can be found on the website: https://8967.jp/en/esg/environment.html.

Drivers related to real estate operations	Financial impact on JLF (JLF’s challenges)	Timeline	Risk management, measures and initiatives (Strategy: Opportunities and direction)	KPI／KPIs and Targets	Financial Impact 4℃/1.5℃
Strengthened energy regulations (including reporting mandates) Possible introduction of carbon tax (carbon pricing)	Increased business expenses from introduction of facilities to support reporting, payments to third-party vendors, etc. Increased costs from complying with future regulations, including renovation work and the introduction of renewable energy Increased tax burden in connection to property greenhouse gas emissions	Medium term	Strengthen engagement with tenants and PM companies to support compliance with energy regulations Study matters such as energy conservation, power generation and switching power sources to reduce greenhouse gas emissions	Scope 1 and 2 GHG emissions reduction targets: 42% reduction by FY2030 (compared to FY2021) Net zero by FY2050 Conducted 1 ESG study session for 100% of tenants (once each year) Conducted 1 ESG study session for all PM companies (once each year)	Small impact	Large impact
Delays in responding to the evolution in and adoption of renewable-energy and energy-conservation technologies and resulting loss of property competitiveness	Declining rental revenue due to relative underperformance in rent pricing and increased vacancy rates	Medium term	Study introduction of high environmental-performance facilities to bolster property competitiveness	Consideration of energy conservation measures utilizing external certification	Small impact	Large impact
Lower tenant demand and asset values at facilities with low environmental performance	Lower rental revenue, NOI and asset values due to falling rents and rising vacancy rates at facilities with low environmental performance	Short term	Promote the introduction of green leases from the perspective of both operations and facility improvement to contribute to the environment through collaboration with tenants.	Implement green leases in 75% of portfolio by FY2025 as the short-term target KPI. Implement green leases in 75% of portfolio by FY2030 as the mid-term target KPI. Exchange opinions on ESG with 100% of tenants (once each year)	Middle impact	Large impact
Deterioration in procurement terms for market participants that have not responded to climate change risks	Increased fund-raising costs due to climate risks	Short term	Study green finance and the like to leverage increased investment opportunities from institutional investors who focus on ESG investing	Acquire green building certifications to maintain at least 95% of portfolio until the end of FY2025 as the short-term target KPI. Acquire green building certifications to maintain at least 95% of portfolio until the end of FY2030 as the mid-term target KPI.	Middle impact	Large impact

Social and governance risks

Risk associated with social license to operate: In order to continue its business, JLF needs to acquire and maintain the trust of the local communities where its properties are located and various other stakeholders. The Asset Manager engages in activities that are socially meaningful, such as clean-up activities around the assets under management and donations to socially important causes.