Philosophy on Sustainability

■ Message from Management

Since establishment, NAF has secured stable revenues and achieved steady growth based on its medium- to long-term strategy of maximizing unitholder value under its two basic policies of Investing in Accommodation Assets and Utilizing the Mitsui Fudosan Group.

Amidst environmental issues such as climate change and socio-structural changes such as a shrinking population due to a decline in the birthrate and an aging population, ESG initiatives have become essential to achieve sustainable growth.

NAF established its Sustainability Policy in April 2016 in line with the “Group Environmental Policy” and the “Policy for Social Contribution Initiatives” established by the Mitsui Fudosan Group, the sponsor, and has been implementing various initiatives with ESG considerations. However, with the adoption of the Sustainable Development Goals (SDGs) by the United Nations, NAF established a set of key ESG issues (“Materiality”) in February 2020 in order to proactively pursue initiatives that meet global standards. NAF takes the Materiality it has established seriously, and endeavors to contribute to a sustainable society by striving to deepen communication with our stakeholders through the appropriate disclosure of information.

■ Sustainability Policy

Mitsui Fudosan Accommodations Fund Management Co., Ltd., to which NAF entrusts management operations of its assets, has established the policy as follows.

1. Basic Policy

Mitsui Fudosan Accommodations Fund Management Co., Ltd. ("the Company"), as the asset management company for Nippon Accommodations Fund Inc., in recognition of the importance of initiatives for sustainability including environmental and social considerations for carrying out asset management activities, strives to achieve asset management activities giving consideration to reduction of environmental load and diversified affiliations and collaborations with various internal and external entities in line with the "Group Environmental Policy" and "Policy for Social Contribution Initiatives" established by the Mitsui Fudosan Group. Moreover, based on the recognition of the importance of corporate governance, the Company strives to ensure thorough compliance and establish a structure for risk management, as well as implement necessary measures.

2. Reduction of Environmental Load

(1) Promoting energy saving and reduction of CO2 emissions
By promoting efficient use of energy in asset management activities and pursuing introduction of energy-saving facilities, etc., the Company endeavors to reduce CO2 emissions through energy saving.

(2) Preserving the water environment and promoting resource saving and waste reduction
The Company aims to preserve the water environment through initiatives for saving water and introduction of water-saving devices. The Company also pursues efforts to promote reduction of harmful substances, resource saving, and waste reduction.

3. Diversified Affiliations and Collaborations with Various Internal and External Entities

(1) Unitholders and Investors
The Company strives to promote timely and appropriate information disclosure and dialogue with unitholders and investors to foster mutual understanding and trust through statutory disclosure materials such as securities reports, voluntary disclosure materials such as press releases, briefings for individual investors, and briefings for analysts, etc. In addition, the Company also makes efforts to disclose information on ESG management in response to environmental certification systems, etc.
* Please see Policies on Customer-Oriented Business Conduct established by the Company.

(2) Tenants
The Company strives to implement disaster prevention measures by improving response times during emergencies and strengthening preparedness during normal times at rental apartments, the major assets for which it manages investments, in an effort to enhance the safety and security of tenants. At the same time, the Company aims to improve customer satisfaction by enhancing the level of comfort of tenants and other users.

(3) Officers and employees
The Company recognizes that human resources are its most valuable assets and strives to create a friendly and healthy working environment in order for individual officers and employees to fully exert their capabilities as well as promote initiatives for human resource development through training support and other measures. In addition, the Company aims to improve the awareness of its officers and employees by continuously conducting educational activities such as training sessions on sustainability.

(4) Supply chains
In an effort to promote initiatives in its supply chains, the Company requires its property management companies and other business partners to understand and collaborate on its initiatives concerning sustainability and establish structures and implement measures for environmental and social considerations.

(5) Local community
As a member of the local community, the Company endeavors to contribute to the vitalization and development of local communities where the assets it manages are located.

4. Initiatives for Governance

(1) Thorough compliance
The Company has established an organizational structure that should secure compliance with laws and regulations and implement fair transactions at any time. At the same time, the Company works to ensure that its officers and employees will act based on high ethical values to win the trust of its stakeholders.

(2) Establishment of risk management structure
The Company has established a proper risk management structure to appropriately manage a variety of risks for the purpose of avoiding or minimizing risks in conducting asset management.

5. Information Disclosure to Stakeholders Such as Investors

The Company endeavors to proactively disclose this policy and its performance based on the policy, etc. to investors and other stakeholders.

■ In-House Structure for Promotion of Sustainability

The Asset Management Company has established the "Sustainability Promotion Office" (the "Office") in order to implement the "Sustainability Policy." The Office is comprised of four general managers from each team as well as personnel appointed by the general managers and holds regular meetings every quarter, in principle, to set objectives and formulate implementation plans concerning NAF's promotion of sustainability.
Objectives and implementation plans formulated by the Office are deliberated and decided upon at the Investment Committee, which includes the President & CEO of the Asset Management Company who is a member of the Committee and the ultimate decision maker, and the decided objectives and implementation plans are shared throughout the Office with all officers and employees.
Furthermore, the Office reports on the progress status of objectives and implementation plans at the Investment Committee twice a year, in principle, and receives a review on management.

■ Rules Concerning Structure for Promotion of Sustainability

With the purpose of enhancing the practicability of sustainability promotion, the Asset Management Company has established the “Rules Concerning Structure for Promotion of Sustainability” which outlines basic policies and specific procedures for the continuous monitoring and reduction of energy consumption, greenhouse gas emissions, water consumption, and waste quantities, as well as basic policies and specific procedures for cooperation (green procurement, etc.) with external parties.

■ Sustainability Risk Evaluation

The sustainability risks of our assets are periodically evaluated with the purpose of appropriately identifying and understanding the sustainability risks of our assets.
If significant sustainability risks are discovered based on the evaluation results, the Office will propose improvement measures aimed at reducing such risks.