Sustainable Equity
Overview of the Green Equity Framework
HRR has formulated a Green Equity Framework as a basic policy for green finance, compliant with the Green Bond Principles and other principles and guidelines. Rating and Investment Information, Inc (R&I) has evaluated the appropriateness of the framework. Please see JCR's evaluation report below.
[R&I Green Equity Framework Evaluation Report]
HRR conducts, evaluates, and manages green equity financing based on this framework. It aims to provide ESG investment opportunities to a wide range of investors interested in sustainability.
1. Use of procured funds
(Applicable at the time of implementation of the green equity offering)
HRR plans to use the proceeds raised through green equity to acquire green building that meet the following eligibility criteria and to implement construction work, or to refinance the funds.
2. Eligibility criteria
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| (1) Eligibility criteria for green building equity investments | (1) Green building/energy efficiency (buildings) and additional initiatives contributing to the environment (renewable energy, highly eco-efficient and environmentally adaptive products, environmentally friendly production technologies and processes, and initiatives that contribute to environmentally sustainable management of biological and natural resources and land use) Properties which have acquired or are scheduled to acquire certifications from third-party certification authorities by satisfying criteria ① to ④ below. If the initiatives specified in (i) to (v) are implemented for ① to ④, the entire property shall be considered a Green Eligible Property. <Additional Initiatives>
|
|---|---|
| (2) Energy Efficiency (Equipment) | Costs related to the introduction of energy-saving equipment, such as updating air conditioning systems, converting lighting fixtures to LED, or installing energy storage systems (with a projected reduction in usage or emissions of 30% or more compared to traditional methods). |
| (3) Renovation Works |
① Renovation works related to owned assets that enable beneficial environmental improvements, such as reductions in CO2, energy, water usage, or emissions (with a projected reduction in usage or emissions of 30% or more compared to traditional methods). ② Construction aimed at obtaining, renewing, or improving environmental certification by one level or more. |
| (4) Renewable energy | Acquisition or installation of renewable energy power generation facilities. |
3. Project evaluation and selection process
Projects that meet the eligibility criteria of the Green Equity Framework established by HRR and used for green equity fundraising are selected by the Chief Sustainability Officer (CSuO) and are evaluated and discussed by the ESG Committee, which is composed of the President & CEO of the Asset Management Company, the Chief Investment Officer, the CFO, the Chief Strategy Officer (CSO), the Compliance Officer, and the CSO. Following these evaluations and discussions, projects are decided on by the Board of Directors of the Asset Management Company and reported to the Board of Directors of HRR.
- The names of departments and positions are listed according to the current company structure.
4. Funding management method
(applicable at the time of implementation of the green equity offering)
(1) Plan for the allocation of procured funds
Funds procured through green equity, after being credited to the account, will be allocated without delay to fund the acquisition of eligibility criteria of the Green Equity Framework established by HRR, to fund the acquisition of existing properties that meet the eligibility criteria, and the implementation of construction work, or to refinance the borrowings required for the acquisition of eligibility criteria.
(2) Methods for tracking and managing procured funds
The Finance Department manages the allocation status of funds procured through green equity using internal electronic files and other media. The CFO conducts reviews and makes periodic reports to the Board of Directors of the Asset Management Company and the Board of Directors of HRR as necessary.
(3) Internal control and external audits regarding tracking management
Reports on the allocation of funds procured through green equity are made to the Board of Directors of the Asset Management Company and the Board of Directors of HRR as necessary, and internal audits are conducted by the Compliance Department and an audit corporation.
(4) Method of managing unallocated funds
Funds procured through green equity will be managed in the form of cash or cash equivalents until a decision is made regarding their allocation.
After all funds are allocated, the green equity amount and ratio will be calculated and managed.
5．Reporting
(1) Disclosure status regarding fund allocation
The following two points will be disclosed on HRR’s website for each accounting period.
- Any allocation plans for unallocated funds at the time of procurement through green equity
- Green equity amount and ratio
The acquisition balance of green-qualified assets, calculated based on the Green Finance Framework, subtracting the maximum amount of green eligible liabilities from the total acquisition amount of green-qualified assets, is considered to be green equity. The ratio of the total investment amount on the balance sheet is disclosed as the green equity ratio.
In addition, when implementing a green equity offering, the equity funds raised shall be managed and appropriated in accordance with the Green Finance Framework.
The remaining amount, obtained by deducting the maximum borrowing amount estimated based on the Green Finance Framework established by HRR from the total acquisition amount of properties that meet the eligibility criteria, is considered to be green equity (funds procured through capital increases that are allocated to targets that meet the eligibility criteria (2) to (4) are added to the green equity amount). It is divided by the total investment amount on HRR's balance sheet to indicate the sustainability equity ratio. However, funds procured based on the eligibility criteria (2) to (5) of the Green Finance Framework and assets that do not fall under the eligibility criteria of the Green Equity Framework are excluded.
Each HRR accounting period, the green equity amount and ratio is to be disclosed on its website or in disclosure materials such as financial results briefing materials.
(2) Method and frequency of disclosing impact reporting
The relevant items are to be disclosed annually on HRR's website or in disclosure materials such as financial results briefing materials (please refer to the relevant section for items disclosed based on the Green Finance Framework established by HRR).
(3) Key Performance Indicators (KPIs) in impact reporting
[Impact reporting related to green projects]
- Number and type of environmental certifications for acquisition assets
- (For renovation work) Energy and water usage amounts before and after renovation, and energy-saving effects of updating air-conditioning equipment, etc.
- (For renewable energy projects) Annual power generation and (estimated) CO2 reductions for the power generation equipment for which funds were allocated
- Annual power generated by EIMY (hydroelectric power, etc.)
- Energy-saving effects from the replacement of air conditioning equipment, etc.
- Amount of environmentally-friendly energy other than EIMY power that was procured
- Ongoing composting of food waste (from 2011)
- Reduction in amount of plastic container usage
- ① Ongoing switchover to use of pump bottles for shampoo, conditioner, and body soap (from 2019)
- ② Gradual switchover from mineral water in plastic drink bottles
- Number of toothbrushes recycled
- Overview of Nature Conservation Activities
Reporting based on the Green Equity Framework
(1) List of Green Equity Eligible Assets (as of May 1, 2025)
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| Green Building Certification（※1）（※2） | Property name | Acquisition Price (million yen)（※4） |
|
|---|---|---|---|
| CASBEE | BELS（※3） | ||
| Ｓ（★★★★★） | - | HOSHINOYA Karuizawa | 7,600 |
| ★★ | ANA Crowne Plaza Hiroshima | 17,784 | |
| - | ★★★★★ | KAI Beppu | 7,335 |
| - | KAI Kirishima | 3,913 | |
| - | KAI Kinugawa | 3,080 | |
| - | KAI Nagato | 2,750 | |
| - | the b asakusa | 5,630 | |
| - | OMO7 Osaka | 29,000 | |
| - | ★★★★ | KAI Alps | 3,060 |
| - | Candeo Hotels Sano | 1,260 | |
| - | Comfort Inn Kofu Isawa（※5） | 658 | |
| - | Comfort Inn Munakata（※5） | 504 | |
| - | ★★★ | Quintessa Hotel Osaka Shinsaibashi | 3,339 |
| - | HOSHINOYA Kyoto | 2,878 | |
| - | Comfort Inn Ichinoseki IC（※5） | 700 | |
| - | HOTEL VISTA MATSUYAMA | 1,904 | |
| - | ★★ | BEB5 Karuizawa | 2,170 |
| - | Comfort Hotel Takamatsu | 2,050 | |
| - | Comfort Inn Chiba Hamano R16（※5） | 798 | |
| - | Candeo Hotels Fukuyama | 1,075 | |
| - | Candeo Hotels Chino | 793 | |
| - | Candeo Hotels Handa | 620 | |
| - | Candeo Hotels Kameyama | 470 | |
| - | - | Total | 99,371 |
- The scope of evaluation for BELS certification or CASBEE certification may be only for part of the property. However, the total acquisition price for each property is used as the acquisition price.
- In cases where multiple buildings within the property were granted BELS certification or CASBEE certification, the highest rating awarded to the relevant property is used.
- With the revision and enforcement of the notification for the Buildings Energy-efficiency Labelling system in April 2024, the energy conservation performance labelling has become a seven-step system, but the ratings here are based on the five steps under the previous system. Due to the revision and enforcement of the notification, the eligible criteria for BELS certification (based on the FY2016 standards) have been changed from three stars or higher (i.e., two stars or higher plus additional initiatives) to five stars. However, given the nature of equity, which has no maturity (such as repayment), we have not retroactively applied the exclusion to properties that were already considered eligible green equity assets at the time of the Green Equity Framework update.
- Amounts are rounded down to the nearest unit.
- In regard to Comfort Inn properties, they are being sequentially rebranded from Chisun Inn since May 2, 2024, and the BELS ratings obtained at the time of Chisun Inn are shown.
(2) Reporting on the status of fund allocation (as of May 1, 2025)
- There are no unallocated funds at the time of procurement through sustainability equity.
- There has been no sale of assets that are subject to the use of funds.
(3) Green equity amount and ratio
| Green equity amount | Percentage of total investment |
|---|---|
| 56,183 million yen | 39.58% |
- LTV is based on the ratio of interest-bearing liabilities as of May 1, 2025 to the total acquisition price of properties owned by HRR.
- Monetary amounts are rounded down to the nearest unit and ratios are rounded to the nearest unit.
*Please see the Sustainability Finance page and the Green Finance page for more information on impact reporting.