Messages from the Director Responsible for Sustainability and an Outside Director

Contributing to solving social issues through business activities

As the world undergoes major changes due to the impact of the COVID-19 pandemic, the international situation, and other factors, the sense of urgency about social sustainability, including climate change and human rights, continues to escalate. It is expected of corporations that they promote a virtuous cycle between economy and the environment to drive the creation of a sustainable society. Today, it is no longer possible to increase corporate value without taking action to increase social value.

To respond appropriately to this situation and contribute to the realization of a sustainable society while engaging in business activities, we must consider the best options the Group should take based on identification of accurate information and dialogue with our stakeholders.

Working to realize the vision for 2050

The Mitsubishi Estate Group has set out the Mitsubishi Estate Group Sustainability Vision 2050, “Be the Ecosystem Engineers,” as our vision for 2050. We have been promoting urban development in a variety of locations, principally the Marunouchi area (the Otemachi, Marunouchi, Yurakucho districts), for over 130 years. Urban development involves working in partnership with various stakeholders to nurture the city together. The Group has promoted urban development while making it a goal to constantly provide society with new value by considering local communities and the natural environment, addressing the diverse social issues and responding to changes in the times, and designing plans based on a forward-looking perspective.

As the Ecosystem Engineers, the Mitsubishi Estate Group provides the spaces and infrastructure (ecosystems) in which diverse individuals and corporations are able to coexist sustainably and thrive together economically, environmentally, and socially. We believe doing this creates new value and innovation which leads to the development of our goal: a sustainable city and society. The Group also formulated the Mitsubishi Estate Group 2030 Goals for SDGs (“the 2030 Goals”) to serve as milestones for achieving this vision. We articulated specific action plans and KPIs in the four key themes — environment, diversity and inclusion, innovation, and resilience. The 2030 Goals serve as a key driver in increasing social value, one of the strategic goals of the Group’s Long-Term Management Plan. We strive to provide even greater value and help realize a sustainable society through our business activities for all of our stakeholders based on the 2030 Goals.

In my capacity as the director responsible for sustainability, I lead the Sustainability Management and Promotion Department in the planning and drafting of measures related to sustainability targets across the Group. We formulate measures following deliberations and reports at the Sustainability Committee, which is chaired by the President of Mitsubishi Estate. In addition, the Group has incorporated its annual targets and initiatives related to the four key themes of the 2030 Goals into annual plans for each business or functional group since fiscal 2020. The Sustainability Management and Promotion Department implements interviews timed with the establishment and review of these annual plans. The Sustainability Committee reports on the progress of the KPIs in the 2030 Goals and deliberates on the establishment of new targets and revisions. The details of the meetings of the Sustainability Committee are also reported to the Board of Directors. Achievement of the targets in annual plans has been positioned as one of the qualitative evaluation items for officer remuneration.

Initiatives toward the 2030 Goals

In the area of environment, as part of our efforts toward a decarbonized society, we established the Group’s GHG emission reduction targets and announced net-zero commitment in March 2022. As a result, we became the first Japanese company to gain certification in June 2022 for targets in line with the Net-Zero Standard from the SBT initiative. In terms of GHG emissions, in particular, in order to reduce Scope 2 emissions, we have been actively promoting the introduction of renewable power since fiscal 2021 and have significantly accelerated the timing for achievement of RE100, which we aim to do in 2025. In fiscal 2022, we achieved a renewable power ratio of more than 50% for the Group overall by switching all the electricity used in properties that the Group owns and operates^* in Tokyo and Yokohama to renewable energy sources, and expanding similar initiatives at properties in Sendai, Hiroshima and other cities where the Group has its branches.

We are also working to strengthen our governance and business strategies related to climate change, and we will continue to proactively disclose appropriate information based on frameworks such as TCFD and SASB. With regard to TCFD, we published a new scenario analysis based on risk analysis utilizing Carbon Risk Real Estate Monitor (CRREM), a risk assessment tool developed by research institutes in Europe, in May 2023.

In addition, in areas such as biodiversity and water resources, discussions have accelerated about the role expected of corporations and new information disclosures. In February 2023, Mitsubishi Estate concluded a three-way, ten-year collaboration agreement with Minakami-cho, Gunma Prefecture and the Nature Conservation Society of Japan (NACS-J) to undertake a “Nature Positive” initiative to halt the loss of biodiversity and restore nature. While closely monitoring these trends, Mitsubishi Estate will consider and address the issues it needs to work on to realize sustainable growth in recognition of the importance of addressing global-scale issues beyond those that relate specifically to the Group.

In the key theme of diversity and inclusion, we revised our targets for the percentage of female managers, while boosting recruitment of new graduates and experienced professionals to increase the percentage of female employees to over 40%. We are also promoting a variety of initiatives, including the enhancement of internal programs to support diverse workstyles, as well as education to ensure the appropriate mindset of our employees. In October 2022, the OMY SDGs ACT5 Executive Committee, composed of Mitsubishi Estate, The Norinchukin Bank and others, conducted a survey asking questions regarding the progress of diversity and inclusion (D&I) in fiscal 2021. We targeted the Marunouchi-area workers and people from companies, offices, and stores in charge of human resources and promoting D&I with the aim of “realizing development of urban spaces with a barrier-free mindset.” Based on the results of this questionnaire, we will further develop a variety of actions to realize a city where everyone embraces differences and can work with ease. We will aim to realize a society in which all people can live more safely and securely.

In the key theme of innovation, we are actively investing in start-ups and venture capital with the aim of discovering new business projects and creating synergies with existing businesses. In addition, we are developing and operating business incubators and also promote digital transformation (DX) in the real estate industry utilizing the latest technologies. In 2022, we also launched Bricks Fund Tokyo, a CVC that invests in start-ups attempting to create a mid-to-long term social impact through solving social challenges and industrial restructuring.

In the key theme of resilience, we consider being prepared for natural disasters, such as earthquakes and storms, one of the most important issues for urban development. We have already taken measures to counter earthquake and water damage and develop stable energy supplies for individual properties, and we have also promoted human aspects of resilience in collaboration with our external partners, including the development of an environment to enable business continuity in a disaster and the establishment of temporary accommodations for stranded commuters. We will continue to strengthen safe and secure urban development through a variety of initiatives.

Promoting urban development that creates value in partnership with diverse stakeholders

The Mitsubishi Estate Group must share common values and standards for conduct and make concerted efforts with diverse stakeholders in aiming to realize a sustainable society and the Group’s mission. Mitsubishi Estate has established the Sustainability-Minded Construction Architectural Design and Construction Policies for real estate development that outline the conditions required by type and scale in areas such as design specifications. This document is provided to contractors together with a written quote outline when we place orders. Moreover, in April 2022, we established the Mitsubishi Estate Group Supplier Code of Conduct in line with global standards and reinforced systems for verifying compliance of suppliers on human rights, the environment, and other areas. By doing so, the Group is working to build an even more sustainable supply chain.

The Mitsubishi Estate Group endorsed the UN Global Compact in April 2018. Since then, the Group has been working steadily to realize a sustainable society in accordance with the approach of international initiatives. Going forward, we will continue our work to engage in dialogue and collaboration with all stakeholders to solve diverse social issues and respond to the needs of society as well as the demands and expectations of the Mitsubishi Estate Group through our core business, thereby striving to maximize the value we provide to all stakeholders and further enhance our corporate value.

• Refers to buildings and commercial facilities of which the Company owns a 50% equity stake or higher, excluding buildings owned in the capital recycling business and buildings slated to be redeveloped.

Bringing a long-term approach to urban development
Supporting sustainable urban development and management exemplifying the Group’s identity

The Mitsubishi Estate Group has long established its identity as a corporate group dedicated to bringing a long-term view to urban development. I was strongly reminded of this after being appointed as an outside director in 2018.

I worked in the property development industry for over ten years and was also involved in developing office buildings during the 15 years I spent working in Germany before that. In Germany, sustainability is the focus of urban development, and the approach for both offices and housing is to create urban areas that are aligned with the environment and easy to live in for human beings. Based on this thinking, master plans are written by local governments and other entities in line with national policies and property developers engage in urban development in accordance with these master plans.

In Japan, while there are certain regulations imposed by the authorities, it can be said that businesses have a high degree of freedom on how they pursue urban development. This means that the approach of a real estate company toward urban development has great impact as well as coming with great responsibilities.

The Mitsubishi Estate Group operates based on a long-term view having drawn up a master plan on how to pursue urban development in an area. I believe this serves as the foundation of Mitsubishi’s approach because the experience of doing business in the Marunouchi area accumulated over many years.

The Group’s identity as a corporate group that values long-term views is indeed firmly embedded in minds of employees precisely because of the Group’s experience and foundation in the Marunouchi area, and each and every employee has a sense of mission, satisfaction, and pride about being involved in urban development. I feel that this is exactly where the Group’s strength lies.

As part of its Long-Term Management Plan 2030, Mitsubishi Estate pursues management focused on increasing both social and shareholder value in tandem. In order to enhance sustainability and corporate value into the future, we must constantly anticipate change and continue to make strategic investments. To accomplish this, it is essential to take a long-term view on value creation and solving social issues, as well as considering ESG. This is what the society of today demands, and I believe it is a key means of solving social issues.

Decarbonization is one of the key themes in sustainable urban development. The meaning of urban development is conceiving a vision for an area as a whole and, by extension, for society as a whole. I believe that the Mitsubishi Estate Group has the strength, the experience, and the will to carry this out.

One of the most important challenges for real estate companies in the approach to a decarbonized society is addressing so-called Scope 3 emissions (indirect emissions across the value chain). Promoting further initiatives in response to this challenge will increase the social value of the Mitsubishi Estate Group. In order for us to present our efforts in this area to shareholders and investors in a more convincing manner, it will be necessary to enhance discussions of the KPIs that will form the basis for the disclosure.

In the area of diversity and inclusion, Mitsubishi Estate is also showing significant progress, including the strengthening of supply chain management initiatives based on human rights and promotion of recruitment activities with an awareness of gender balance. I believe this will entail both the Board of Directors and the business execution team working together while pursuing diverse expertise and perspectives ourselves.

Although I think there are still many difficulties in terms of translating social value or non-financial value into financial value in Japan, Japanese companies need to consider this point strategically. I feel that the younger generation, the next generation, is moving closer to a more global standard of awareness. I believe that, by promoting initiatives to increase social value, we will become a company that is also highly valued by the next generation. I would like to share my experience with the younger generation as well as the management team while supporting Mitsubishi Estate in the enhancement of its corporate value.