Close

Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.

Discover more
Close

Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.

Discover more
Close

Leader in systematic equities across market cap weighted indices, smart beta and active quantitative strategies

Discover more
Close

At Stewart Investors, we believe in putting people first. Our investment world-view is of a series of partnerships – with each other, with our clients, with the companies we invest in, the people who buy their goods and services, and with the wider society in which we all live and work.

Discover more

Tokyo towers: The secrets of Japan’s net zero leaders

Investors with an ESG focus can take a lot from leading and technologically resourceful real estate companies in the world’s largest office market as they move quickly on their renewable energy targets.

Moves by two of Japan’s larger landlord-developers to accelerate green and energy efficient operation and development shows the direction forward-thinking companies in the property sector are taking.

Mitsubishi Estate and Mitsui Fudosan, both listed companies actively engaged in development and as landlords, are examples of companies globally finding new pathways to carbon emissions reduction.

Mitsui Fudosan, for instance, is looking for ways to substitute timber for high carbon emitting concrete, drawing on plantations it owns in the north of Japan. The company is building condominiums and in some instances high rise office buildings with increasing amounts of timber in order to reduce concrete use, a major source of embodied carbon in the construction process.

  • Content duration: 4 Mins
  • Content type: Video
  • Content publish date:

Both Mitsui Fudosan and Mitsubishi Estate are undertaking initiatives to source renewable energy for all of their assets within central Tokyo to address operational carbon. 

Real estate’s carbon problem

Overall, it is estimated the real estate sector contributes almost 40% of global emissions comes from the real estate sector, according to the Global Status Report for Building and Construction1. This contribution is made up of both embodied as well as operational carbon.

So called ‘embodied’ carbon relates to the extended lifecycle of a real estate asset. That’s includes emissions right from the point of raw material extraction, through to construction and redevelopment activity, as well as post the active life of a building including demolition and through to landfill.

The operational side of emissions relates to the active life of a building and predominantly comes from the sourcing of energy for buildings during their active life spans.

Companies like Mitsui Fudosan and Mitsubishi Estate, along with other companies around the world, are finding new ways to address carbon emissions, as investor capital and tenant demand continues to find its way towards cleaner and greener operators and developers.

Green in Japan

The Japanese government has initiated a target to achieve net zero carbon emissions by 2050. The Japanese government has also undertaken to significantly increase the amount of renewable energy sources it’s looking to utilize.

By 2030 Japan is aiming to increase its renewable energy to close to 40% (excluding nuclear), according to IHS Market data2.

At the same time the country is looking to halve the amount of carbon emissions within its economy by the end of the decade, relative to a base year of 2013, according to Climate Scorecard data3.

It’s become even more imperative for Japan to look at green sources of energy given some of the geopolitical risks that have arisen, specifically, given the country has sourced coal, oil and gas from Russia. With the Ukrainian conflict playing out, Japan has decided to phase out the use of oil and coal, making it even more important for renewable and green energy to be sourced from within Japan going forward4.

Investor opportunity

ESG and in particular net zero is a big issue for developers and landlords to address, with many of the implications for laggards not yet fully priced in to market valuations.

Meanwhile, businesses accelerating their efforts towards net zero and broader ESG issues provide strong opportunities for investors.

Green initiatives can potentially reduce the asset redundancy risk related to developer and landlord portfolios in light of the increasing demand tenant have now for clean environmental office opportunities. It’s estimated that green certified buildings in Tokyo can command roughly a 6% “green rental premium” compared to non-certified peer offerings5.

Further, developers and landlords, like these two Japanese examples, are actually looking to build their own green energy sources, including wind, solar and even biomass facilities.

Access to clean environmental income sources means these companies – and others like them – can reduce and indeed offset emissions in their wider landlord portfolios.

Important Information

This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM), which forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website.

This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation. 

Any opinions expressed in this material are the opinions of the individual author at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individual authors within First Sentier Investors.

To the extent permitted by law, no liability is accepted by MUFG, FSI AIM nor their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that FSI AIM believes to be accurate and reliable, however neither MUFG, FSI AIM nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of FSI AIM.

Any performance information has been calculated using exit prices after taking into account all ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance.

Copyright © First Sentier Investors

All rights reserved.