In line with the LEAP Approach outlined in TNFD recommendations, we have identified our business’s dependence, impacts, risks and opportunities regarding nature across the short-, medium-, and long-term time horizons*1.
Process for Identifying, Assessing, and Prioritizing Dependencies, Impacts, Risks and Opportunities regarding Nature
The Hulic Group's business segments consist of Real Estate, Insurance Agency, Hotels/Ryokans, and Others. This TNFD disclosure focuses on the Real Estate segment, which constitutes the Group's core businesses and is considered to have a significant impact on nature. This segment includes the real estate leasing, real estate development, and value-added businesses. For the real estate development and value-added businesses, we also included the building construction upstream in the value chain within the scope of this assessment of dependencies and impacts on nature. As a result of the analysis, we identified the risks and opportunities based on dependencies and impacts that were rated as “Very high/Very large” or “High/Large.” From these, we identified and prioritized the risks and opportunities that are particularly high priority based on their relevance to our business.
Dependence Heat Map
Using the ENCORE*2 analysis tool, we created a heat map to visualize our dependence on each natural service.
- Real estate development/value-added businesses:
Highly dependent on "soil erosion control," and moderately dependent on "climate regulation" and "Disaster mitigation (flood and storm mitigation)," among other factors. - Real estate leasing business:
Very highly dependent on cultural services (provision of sensory comfort).
| Ecosystem Services | Real Estate Development and Value-added Businesses (Direct Operations / Upstream) |
Real Estate Leasing Business (Direct Operations) |
|
|---|---|---|---|
| Provisioning Services*3 |
Water resources | ||
| Regulating and Maintenance Services*4 |
Climate regulation | ||
| Rainfall pattern regulation | |||
| Air filtration | |||
| Soil erosion control | |||
| Water purification | |||
| Water flow regulation | |||
| Flood mitigation | |||
| Storm mitigation | |||
| Noise attenuation | |||
| Cultural Services*5 |
Provision of sensory comfort*6 | ||
Degree of dependence on each ecosystem service
| Very high |
| High |
| Medium |
| Low / Very low |
-
*1Time horizons: Our time horizons for addressing environmental issues are linked to our Long-term Vision for the Environment and greenhouse gas emission reduction targets. If we expand our analysis of nature-related matters in the future, we will consider revising the time horizons.
(Related Page: Information Disclosure Based on TCFD Recommendations: Strategy) - *2ENCORE: A tool developed by The Natural Capital Finance Alliance that assesses dependencies and impacts on nature by industry.
- *3Provisioning services: Ecosystem functions that provide food, water, and other resources to humankind.
- *4Regulating and maintenance services: Ecosystem functions that support environmental stability, such as climate regulation and disaster mitigation.
- *5Cultural services: Ecosystem functions that provide psychological and recreational benefits through human interaction with nature.
- *6Provision of sensory comfort: Building users' enjoyment of sensory comfort provided by the natural environment.
Impact Heat Map
Using the ENCORE*1 analysis tool, we created a heat map showing which elements of nature are impacted by our business.
- Real estate development/value-added businesses: Our business has a very large impact on "Noise, light, etc." and a large impact on "Soil and water pollution," and there is a risk of adverse effects if business is not conducted in an environmentally responsible manner.
- Real estate leasing/development/value-added businesses (shared): In the "greenhouse gas (GHG) emissions" category, our business has large impact on nature.
| Impact Driver | Real Estate Development and Value-added Businesses (Direct Operations / Upstream) |
Real Estate Leasing Business (Direct Operations) |
|---|---|---|
| GHG emissions | ||
| Non-GHG air pollution | ||
| Solid waste | ||
| Land use (agricultural land, factory land) | ||
| Soil / water pollution | ||
| Water use | ||
| Noise, light, etc. |
Degree of impact on nature
| Very large |
| Large |
| Medium |
| Small / Very small |
- *1In addition to the ENCORE analysis results, we have also created a heatmap illustrating our real estate business’s impact on each of the identified impact drivers.
Identifying and Prioritizing Risks and Opportunities
Based on the above analysis of dependencies and impacts, we identified risks and opportunities associated with dependencies and impacts rated as "Very high/Very large" or "High/Large." TNFD recommendations categorize nature-related risks and opportunities into physical risks (acute and chronic), transition risks (policy, markets, technology, and reputational/liability), and opportunities (markets, capital flow and financing, resource efficiency, products and services, reputational capital, sustainable use of natural capital, and ecosystem protection, restoration, and regeneration). Following this categorization, we have identified priority risks and opportunities based on their significance to our business, as outlined below.
Identified Risks
| Major Category | Risk Type | Risk Description |
|---|---|---|
| Physical Risks | Acute Risk | Increase in risk of natural disasters such as landslides and earthquakes |
| Chronic Risk | Decline in asset value due to deterioration of the natural environment and landscape in the area surrounding the company's development facilities | |
| Transition Risks | Policy | Need for further action to comply with regulations to reduce greenhouse gas emissions and strengthen nature conservation |
| Markets | Decrease in investor confidence due to delays in responding to natural environmental issues | |
| Technology | Increase in costs due to introduction of environmentally friendly technologies | |
| Reputational / liability | Damage to reputation and the risk of liability in the event of ecological destruction of areas around properties |
Identified Opportunities
| Category | Opportunity Description |
|---|---|
| Markets | Growth in demand for environmentally friendly buildings and increased use of wooden construction that supports sustainable forest cycles |
| Capital flow and financing | Expansion of financing instruments and subsidies for environmental initiatives |
| Resource efficiency | Advancements in building environmental performance and waste reduction technologies |
| Products and services | Growth in awareness of nature conservation among building users, leading to greater recognition and high valuation of environmentally certified buildings |
| Reputational capital | Increase in corporate value through sustainable management |
| Sustainable use of natural capital | Advancements in the sustainable procurement of building materials |
| Ecosystem protection, restoration, and regeneration | Contributions to the conservation of ecosystems through greening and tree-planting activities at developed properties |
Identification and Evaluation of Priority Areas
Hulic owns 245 properties (as of December 31, 2024), approximately 70% of which are concentrated in Tokyo’s 23 wards, which we have designated as our priority area. We used IBAT*1 to assess the status of nature conservation areas in Tokyo’s southwestern, northwestern, and eastern*2 wards. This analysis identified some nature conservation areas including nationally designated areas*3 and KBAs*4. Since no significant differences were observed in the distribution of nature conservation areas across these three areas, we designated the entire Tokyo’s 23 wards as the priority area rather than selecting specific subregions. In addition, the majority of our properties in the priority area are not located near nationally designated areas or KBAs, but are in existing developed areas where buildings have already been constructed and are in operation. Furthermore, to assess environmental risks, we analyzed water-related risks using Aqueduct*5, which confirmed that our operating areas, including the priority area, do not fall within high water stress*6 areas.
Based on these findings, we concluded that the impact of our business on nature in the priority area is extremely small. Looking ahead, we will continue our commitment to operate in a way that is mindful of the natural environment through enhancing green spacing in our development projects, utilizing the JHEP certification system*7, and actively implementing other environmentally friendly technologies.
Nature Conservation Areas in Tokyo's 23 Wards
Using IBAT, we assessed nature conservation areas*8 across Tokyo’s southwestern, northwestern, and eastern wards, and obtained the following results.
| Nature Conservation Area Types | |||
|---|---|---|---|
| Nationally designated areas | KBAs | UNESCO MAB*9 areas | |
| Southwestern Tokyo wards | - | ||
| Northwestern Tokyo wards | - | ||
| Eastern Tokyo wards | - | ||
| Area present | |
| Area not present | - |
- *1IBAT: A tool developed by four organizations, including the International Union for Conservation of Nature (IUCN), that allows users to assess nature-related information around a target site.
-
*2Southwestern wards: Minato, Shibuya, Setagaya, Chiyoda, Ota, Chuo, Shinagawa, and Meguro
Northwestern wards: Shinjuku, Suginami, Nakano, Itabashi, Bunkyo, Toshima, Kita, and Nerima
Eastern wards: Katsushika, Edogawa, Koto, Arakawa, Adachi, Taito, and Sumida - *3Nationally designated area: A protected area, such as a national park, where certain activities, such as development and hunting are legally restricted.
- *4KBA (Key Biodiversity Area): An area of critical importance for the biodiversity conservation. More than 200 locations across Japan are registered as KBAs.
- *5Aqueduct: A tool provided by the World Resources Institute that assesses water-related risks by area.
- *6Water stress: The degree to which water resources in an area are under stress due to demand.
- *7JHEP certification: A certification system operated by the Ecosystem Conservation Society-Japan that quantitatively evaluates efforts to conserve and restore biodiversity.
- *8Nature conservation area distribution was assessed through sampling of properties in each area.
- *9Model area: A region with a rich ecosystem where sustainable economic activities are integrated with the use of natural resources.