JAPAN Trends and Developments Contributed by: Hiroshi Niinomi, Koki Hara, Naoto Yamamoto and Serina Nakano, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
use of their long-term real estate holdings, based on the demands of shareholders, including activists. ESG ESG factors have gained attention in the real estate market, in line with other investment sectors. It is widely recognised that the real estate sector, as a fundamental part of society, should align with global initiatives like the Sustainable Development Goals (SDGs) to foster a sustainable environment. The industry is seen as having substantial potential to contribute meaningfully to achieving SDG objec - tives, particularly those related to environmental sus - tainability. There have been developments in buildings that achieve high environmental performance, reduc - ing energy consumption. Buildings with environmen - tal performance certificates appear to attract more investment than those without them. In line with the promotion of ESG, the number of Japa - nese participants in GRESB Real Estate Assessment has been increasing. GRESB Real Estate Assess - ment is the global ESG benchmark that captures ESG performance and sustainability best practices for real estate and provides rating results. It appears that more and more investors are referring to (or con - sidering) the GRESB Real Estate Assessment in their investment decisions. The Japanese government is also delivering positive signals regarding ESG/SDG and publishing its policies related to this field, such as:
• an SDG Action Plan; • financial administration and SDG; • the interim report for the promotion of ESG invest - ment in the real estate sector; • the interim report of the study group on real estate- specific joint ventures based on ESG investment; and • guidance for responding to “Proposals of Task Force on Climate-Related Financial Information Disclosure” in the real estate field. In addition, to promote and expand ESG finance, the Ministry of the Environment has been presenting awards since 2019 to financial institutions, investors and companies that have actively engaged in ESG finance and other environmental and social initiatives. The idea of a green lease is part of the government’s strategy to improve environmental performance in the real estate sector, a strategy the Japanese govern - ment also supports through its Green Lease Guide - lines. In a green lease, the owner and tenant share the costs of environmental improvements to the leased building. Public funds, together with private funds, have also been flowing into investments to redevelop aged buildings and remodel them to have improved seis - mic capacity and environmental efficiency. The green bonds market is also growing and collecting funds to finance eco-friendly businesses.
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