Sustainability Management

JHR's Sustainability Approach

Executive Director
Kaname Masuda

Japan Hotel REIT
Investment Corporation

President & CEO
Hiroyuki Aoki

Japan Hotel REIT
Advisors Co., Ltd.

Japan Hotel REIT Investment Corporation (JHR) and Japan Hotel REIT Advisors (JHRA) believe that sound management, which fosters harmonious coexistence with society and the environment, contributes to the medium- to long-term enhancement of unitholder value. With that in mind, we are committed to promoting sustainability by incorporating considerations for Environment, Social and Governance (ESG) into our operations.
JHR and JHRA established a Sustainability Policy in December 2017 and have been pursuing a series of measures related to ESG, including reduction of our environmental impact, consideration of all our stakeholders, etc.
In December 2021, in order to further enhance our ESG initiatives, we defined our materiality and have been promoting measures to address various issues. Moreover, we believe that appropriate disclosure of these initiatives and building a relationship of trust with our stakeholders will lead to JHR's growth over the medium to long term.

Sustainability Policy

●Monitoring and enhancing environmental performance in our portfolio

We actively monitor environmental performance of our portfolio, including energy consumption, and share these goals with hotel lessees and operators. Together, we work to continuously improve environmental performance through operational and management optimization, as well as facility renovation and other initiatives. We also seek third-party evaluations where appropriate.
In addition, we consider environmental risks when making investment decisions and monitoring our portfolio's operations.

●Promotion of comfortable, healthy, secure and safe hotels

We prioritize the safety, health and accessibility (including barrier-free access) of our hotels and promote initiatives to strengthen resilience against natural disasters and other risks.
In making investment decisions and monitoring portfolio operations, we give careful considerations to the health, safety and welfare aspects of the hotels.

●Promotion of ESG in value chains

We encourage the hotels we invest in to understand and cooperate with sustainability initiatives. At the same time, we promote the procurement of products and services with environmental and social considerations.

●Consideration for and contribution to local communities

We work with hotel lessees and operators to contribute to the sustainable development of local communities by communicating and collaborating with local residents and municipalities around the hotels we invest in.

●Initiatives for our officers and employees

We establish a work environment that allows diverse ways of working, considering work-life balance. We also consistently provide opportunities for professional education and training, aiming to improve our employees' abilities and skills and raise awareness of sustainability.

●Compliance as corporate citizens

We comply with laws, regulations and social norms, promoting ethical and honest business activities. Additionally, we strive to reduce governance risks by respecting fundamental human rights in our business and by establishing an effective compliance system.

●Improvement of transparency and engagement with our stakeholders

We disclose financial information as well as ESG related information in a timely and appropriate manner. We will sincerely listen to voices and opinions from our stakeholders through interactive communication and utilize them to improve our initiatives.

Sustainability Promotion System

To implement initiatives based on the Sustainability Policy in a continuous and organized manner, JHRA has established the ESG Promotion Committee and developed the system outlined below.
The ESG Promotion Committee consists of management members, officers and employees selected from various groups involved in promoting ESG. The President & CEO serves as the Chief Executive, and the Board Director & the Head of Finance and Planning Division serves as the Operating Officer.

System Overview

ESG Promotion Committee		Decision-making and execution based on JHRA's approving authorities	Reporting	JHR Board of Directors
Contents Setting specific targets, considering measures Assessing status of progress Holding sustainability training Frequency In principle, held once on quarterly basis	Members Chief Executive: President & CEO Operating Officer: Board Director & Head of Finance and Planning Division Management members ESG team members

ESG Team Meetings			Sharing	All Officers and Employees
Contents Proposing targets, considering measures Verification of implementation status Frequency As needed	Members Operating Officer: Board Director & Head of Finance and Planning Division Compliance Office Personnel & Administration Group Planning Group Public REIT Group Finance Group Accounting Group

Annual Schedule

	Jan.–Mar.	Apr.–Jun.	Jul.–Sep.	Oct.–Dec.
Measures	Implementation
ESG Promotion Committee	Check Progress	Check Progress	Check Progress	Evaluating implementation/ Setting targets for next year

Frequency of Meetings and Trainings

	FY2021	FY2022	FY2023	FY2024
ESG Promotion Committee	4	4	2	2
Trainings for Officers and Employees	3	3	1	1

ESG Assessment by Third-party Institutions

Acquisition of GRESB Real Estate Assessment

The GRESB is an annual benchmarking program to evaluate Environment, Social and Governance (ESG) considerations of property companies and real estate funds, established in 2009 primarily by major European pension fund groups which took the lead in Principles for Responsible Investment (PRI). The GRESB Real Estate Assessment is distinguished by its comprehensive evaluation of initiatives for sustainability of property companies, REITs and real estate funds, not of individual properties.
JHR has participated in the GRESB Real Estate Assessment since 2018 and has obtained the "Green Star" for seven consecutive years.
JHR has also been selected as the "Sector Leader" in the Listed Asian Hotel Sector for five consecutive years since 2020, achieving the highest results among participants.

Acquisition of SMBC Environmental Assessment

The SMBC Environmental Assessment Loan is a financing program in which Sumitomo Mitsui Banking Corporation (SMBC), in collaboration with The Japan Research Institute, Limited., evaluates a company's environmental practices using its own environmental assessment criteria. Based on the evaluation's results, SMBC sets the loan conditions accordingly.
Under this assessment, JHR has received an "A" grade for its outstanding environmental initiatives in asset management.

In the recent assessment, the following points were particularly commended:

JHR and JHRA have formulated a Sustainability Policy that explicitly states their commitment to environmental considerations and stakeholders, including local communities, through asset management.
JHR has been promoting environmental sustainability in its major hotels by converting to LED lightings, installing water-saving devices, and collaborating with lessees to enhance eco-friendly practices, such as incorporating Green Lease clauses into the fixed-term lease contracts with the HMJ Group hotels; JHR's major hotel group.
JHR actively seeks to acquire third-party certifications such as Building-Housing Energy-efficiency Labeling System (BELS), enhancing the credibility and objectivity of its efforts to reduce environmental impact in the properties it owns.

Timeline of Achievements

2017

December Establishment of Sustainability Policy

2018

Hotel Nikko Alivila
Mercure Okinawa Naha

February Two properties—Hotel Nikko Alivila and Mercure Okinawa Naha—became the first J-REIT-owned hotels^(*1) to acquire BELS^(*2) evaluation
March Received an "A" rating indicating excellent environmentally friendly management, in the SMBC Environmental Assessment Loan^(*3)
September Participated in GRESB Real Estate Assessment for the first time
Acquired "4-star" in GRESB rating

2019

Oriental Hotel
Fukuoka Hakata
Station
Okinawa Marriott
Resort & Spa^(*4)

July Issued Hotel Green Bonds (nickname) and used the procured funds to carry out construction works to save energy at the hotels shown to the right
September Acquired "3-star" in GRESB rating

2020

Hilton Tokyo Odaiba

April The Hilton Tokyo Odaiba became the first existing hotel to acquire a CASBEE^(*5) "B+: Good" building certification
November Acquired "4-star" in GRESB rating
Selected as "Sector Leader" of Asian Hotel Sector

2021

Oriental Hotel
Fukuoka Hakata Station

June As a result of construction works to save energy which carried out by using procured funds through the issuing of green bonds, the Oriental Hotel Fukuoka Hakata Station acquired CASBEE "B+ (good)" building certification
October Acquired "4-star" in GRESB rating
Selected as "Sector Leader" of Asian Hotel Sector
November JHRA stated its expression of support for the TCFD^(*6) recommendations
December Identified JHR's materialities (key issues)

2022

August Released Initiatives for four disclosure themes recommended by TCFD
October Acquired "4-star" in GRESB rating
Selected as "Sector Leader" of Asian Hotel Sector

2023

February Formulated GHG reduction target^(*7)
(30% reduction by 2050 compared to FY2017^(*8))
March Released the ESG Report^(*9)
October Acquired "4-star" in GRESB rating
Selected as "Sector Leader" of Asian Hotel Sector

2024

UAN kanazawa

Hilton Tokyo Narita Airport

International Garden Hotel Narita
Hotel Nikko Nara

Hilton Tokyo Odaiba

January Formulated the Green Finance Framework: Overall Evaluation of Green 1 (F)
February UAN kanazawa acquired BELS evaluation
March Borrowed Green Loans under the Green Finance Framework
October Acquired the DBJ Green Building Certification^(*10) for three properties:
Hilton Tokyo Narita Airport, International Garden Hotel Narita and Hotel Nikko Nara
Acquired "4-star" in GRESB rating
Selected as "Sector Leader" of Listed Asian Hotel Sector
December Hilton Tokyo Odaiba reacquired the CASBEE Certification (B+: Good)

2025

Kobe Meriken Park Oriental Hotel
Oriental Hotel Tokyo Bay

January Acquired the DBJ Green Building Certification for two properties: Kobe Meriken Park Oriental Hotel and Oriental Hotel Tokyo Bay

(*1)	Based on research by JHRA based on public information.
(*2)	BELS (Building-Housing Energy-Efficiency Labeling System) is a display system of energy conservation performance of a building set by Ministry of Land, Infrastructure, Transport and Tourism.
(*3)	"SMBC Environmental Assessment Loan" is a loan which SMBC set condition of loan based on assessment on status of environmental considerations by the corporation based on environmental assessment standards developed independently by SMBC and the Japan Research Institute, Limited.
(*4)	Name of proerty is as of the date when the construction work was implemented.
(*5)	CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a method for evaluating and rating the environmental performance of buildings. It is a system that comprehensively evaluates the quality of a building, including environmental considerations such as energy conservation, use of materials and equipment with low environmental impact, as well as indoor comfort and landscaping.
(*6)	TCFD is an abbreviation for Task Force on Climate-related Financial Disclosures.
(*7)	Properties owned by JHR are managed by hotel lessees, etc. GHG emissions of JHR fall under Scope 3, Category 13, Leased Assets (Downstream).
(*8)	The GHG emissions (GHG emissions intensity) for FY2017 (Baseline fiscal year, April 2017 to March 2018) is 0.135 (t-CO₂/㎡).
(*9)	JHR published its first ESG Report in March 2023 and plans to release subsequent reports annually every March.
(*10)	The DBJ Green Building Certification is a system established by the Development Bank of Japan Inc. (DBJ) to support environmentally and socially conscious real estate ("Green Buildings").