JAPAN Trends and Developments Contributed by: Hiroshi Niinomi, Koki Hara, Naoto Yamamoto and Atsuo Kyoto, Nishimura & Asahi (Gaikokuho Kyodo Jigyo)
panies, manufacturers and service companies, hold large amounts of real estate with unrealised gains due to long-term holdings. In addition, there are many listed J-REITs with net asset values below 1.0, which may also become targets of activist campaigns, due to the apparent possibility to increase the value of investment units by using the real estate more effectively. Given the recent increase in this type of activism, there seems to be an increasing need to consider ways for Japanese companies to enhance the synergy between their real estate holdings and their other business endeavours and to make more sophisticated 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 sec - tors. To create a sustainable environment, it is gener - ally understood that real estate, as a basic com - ponent of society, should follow global policy, such as contributing to sustainable development goals (SDG). The real estate industry is thought to have significant potential to play an impor - tant role in meeting SDG targets, especially with respect to the environment. There have been developments of buildings that achieve high environmental performance to reduce energy consumption. Buildings with environmental performance certificates appear to attract more investments than those without these certifi - cates.
In line with the promotion of ESG, the number of Japanese participants in GRESB Real Estate Assessment has been increasing. GRESB Real Estate Assessment is the global ESG benchmark capturing information on ESG performance and sustainability best practices for real estate and gives rating results. It appears that more and more investors have referred to, or are consid - ering, GRESB Real Estate Assessment for their investment decisions. The Japanese government is also delivering positive signals regarding ESG/SDG and pub - lishing its policies related to this field, such as: • an SDG Action Plan; • financial administration and SDG; • the interim report for the promotion of ESG investment 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 Infor - mation Disclosure” in the real estate field. The idea of a green lease is part of the govern - ment’s strategy to improve environmental perfor - mance in the real estate sector, which the Japa - nese government is also suggesting through its Green Lease Guidelines. In a green lease, the owner and tenant share the costs of environ - mental improvements to the leased building. Public funds, together with private funds, have also been flowing into investments to redevel - op aged buildings and remodel them to have improved seismic capacity and environmen - tal efficiency. The green bonds market is also growing and collecting funds to be spent on eco-friendly businesses.
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