Business solutions spread from real estate certification

Require companies to disclose non-financial information

Non-financial disclosure is a very important topic for all industries. As of the end of March 2023, Japanese government required approximately 4,000 companies in Japan that submit financial reports to disclose non-financial information at the end of the fiscal year. Non-financial information contains a variety of information and covers a wide variety of environmental, social and governance aspects. Companies that respond to this requirement need to take effective actions.

Non-financial disclosure in real estate also becomes more important

A description of the impact of the use of real estate on the environment and society is also included in non-financial information. The environmental impact includes the status of green building certification, energy efficiency, carbon dioxide emissions, and water and waste usage. Social aspects requires the impact on and involvement in local communities and CSR (corporate social responsibility) activities. Governance part requires property ownership structures, organizational governance structures, and digital initiatives. Real estate is relevant not only to the real estate and construction industries, but also to companies that handle their own buildings, production sites, and raw material procurement points. As such, real estate is an extremely important part of any industry, and companies alike need to properly address non-financial disclosure requirements for real estate.

Progress of Relocation to Japan and Economic Importance of Real Estate ESG Certification

In recent years, there has been a growing trend of foreign companies choosing to move their bases to Japan. Several factors have influenced this move, notably geopolitical risks, rising labor costs overseas, and the ongoing depreciation of the yen. In this context, companies in Europe and the United States are increasingly seeking real estate certification with high-level ESG (Environment, society and governance) targets, not only at offices but also at production sites.

Moreover, the importance of real estate ESG certification is related to economic advantages such as improved asset value and higher rents. In fact, a number of studies have confirmed that obtaining ESG Real Estate Certification has these advantages^*1. This move shows the importance of ESG early on in the real estate sector and steady progress. A related survey is underway in Japan^*2, and ESG real estate certification is becoming established as the de facto standard for real estate quality and economic superiority.

Value maximization strategy using ESG-friendly real estate

ESG-friendly property ownership provides direct value to companies that handle real estate. This means increasing the value of real physical assets, leading to higher corporate earnings and shareholder value, while also enabling companies to use real estate as a way to address challenges.

By taking this approach, sustainability-minded companies can improve their brand image. By having an ESG-friendly attitude, you can attract customers, investors, employees, etc. The "green and clean" reputation of a company's portfolio contributes to building a positive brand image and increasing its value.

References

1. CBRE. 2022. Green Is Good: The Enduring Rent Premium of LEED-Certified U.S. Office Buildings.
   https://www.cbre.com/insights/viewpoints/green-is-good-the-endurance-of-the-rent-premium-in-leed-certified-us-office-buildings
2. CBRE Japan. 2023. Trends in Environmental Certification of Office Buildings.
   https://mktgdocs.cbre.com/2299/4cbfb059-39d1-4fee-9206-3cfaa99515c7-649105465/Japan_20Special_20Report_20Gre.pdf