Our company might be going to support setting SBT for J-REIT and I would like you to tell me the reporting boundary.
The business structure of J-REITs is unique in the followings.
ALL J-REITs are managed by asset management (AM) companies
Most AM companies manage multiple REITs, funds
AM companies have shareholder company and they establish group.
-However, AM companies are virtually independent from shareholder company. They are not controlled financially detail > http://en.japan-reit.com/about_J-REIT/
What I would like to know is followings. 1 Whether J-REIT can set SBT at REIT-level 2 Whether J-REIT should set SBT at AM company-level. If so, whether AM company must include all REITs and funds they manage in the reporting boundary 3 Whether J-REIT must set SBT at shareholder company-level(group-level)
If there is not enough information to judge, please let me know.
I have not told you that the company I work provides consulting service for Japanese real estate sector.
Recently, the inquiries for SBTi have been increasing and a lot of our clients are considering setting SBT.
Our company is hoping to support setting SBT to our clients(Japanese REIT and so on) and meet their expectations.
I would like to know if you had a chance to review my question.
Sincere apologies for the delay. To respond to your questions:
If the J-REIT is an independent company(for instance, if it’s a subsidiary), it can follow SBTi’s corporate criteria to set SBTs.
If the AM would like to set targets, it needs to follow Table 5.2 in the FI guidance to cover all required asset classes, including investments in real estate investment trusts (REITs), listed real estate companies, and real estate mutual funds.
To establish SBTs at the shareholder company level might be more complex and it depends on what other companies are held and if they are regular corporations or financial institutions.
On the premise, J-REITs are not a company, only the vehicle. J-REITs can not manage their assets by themselves. detail of J-REIT structure>About J-REIT | J-REIT.jp （Jリート） | Jリート（不動産投資信託）の総合情報サイト >structure
(I am sorry that I could not share enough information)
Furthermore, I think that J-REITs are Equity REITs and out of Financial sector scope.
I thought that there is a possibility that we are able to set targets by J-REIT level.
Thank you for your reply and I am sorry for the late reply.
I am sorry that I did not seem to be able to explain what I am trying to tell you.
I would like to change the direction of the discussion slightly.
If J-REITs set SBT by J-REIT level, could you advise me which target setting root(normal, SME) J-REITs should choose?
I think that the followings are key points:
1 J-REITs are only vehicle and they are out of the scope of their parent/group level target boundary.
2 J-REITs are not able to have employees because of Investment Trust Act.
detail of J-REIT structure> About J-REIT | J-REIT.jp （Jリート） | Jリート（不動産投資信託）の総合情報サイト
3 Since they do not have employees, they seem to be SME.
4 However, their economic scale seem too big to be regarded SME. For example, some of their operating income(semiannual) exceed 8,000 million JPY(about 70 million USD).
Examples of J-REITs economic scale:
Japan Prime Realty https://www.jpr-reit.co.jp/ir/library/210816-c90cd3915b.pdf
Thank you for your reply and I am sorry for the late reply.
I am sorry that I did not seem to be able to explain what I am trying to tell you.
I would like to change the direction of the discussion slightly.
If J-REITs set SBT by J-REIT level, could you advise me which target setting root(normal, SME) J-REITs should choose?
I think that the followings are key points:
1 J-REITs are only vehicle and they are out of the scope of their parent/group level target boundary.
2 J-REITs are not able to have employees because of Investment Trust Act.
3 Since they do not have employees, they seem to be SME.
4 However, their economic scale seems too big to be regarded SME. For example, some of their operating income(semiannual) exceed 8,000 million JPY(about 70 million USD).
Examples of J-REITs economic scale:
Japan Prime Realty https://www.jpr-reit.co.jp/ir/library/210816-c90cd3915b.pdf
Hi @ShingoKuniwake,
The company managing the REITs or J-REITs shall set targets for these investment vehicles, just like an asset manager shall set targets for any equity or corporate bond funds they manage. They are in scope. Investors in REITs and J-REITs should also set targets for these investments, again, just like for any other pooled investment vehicles including e.g. equity, corporate bonds and real estate assets.
Dear Donald,
I really appreciate for your quick reply.
I am so sorry that I am not better at explanation.
Then, some our clients(they belong asset managing(=AM) company) recently hope to set SBT as J-REIT level.
Some parent companies of AM company already set SBT. The AM company is in the scope of parent company’s SBT, however, assets that are managed by AMJ-REITs are not in the scope of parent company’s SBT. So, I thought that there is a possibility that we are able to set targets by J-REIT level.
Following is one background I think there is a possibility that J-REITs can set SBT by normal validation route(not SME route).
For example, one of the largest J-REIT, Japan Real Estate Investment Corporation, discloses that its Scope1+2 CO2 emission exceed 40 thousands of t-CO2/year. Since a lot of J-REITs emit more than 10 thousands of t-CO2, they have really big impact for environment.