• Summary
• No sustainable investment objective
• Environmental or social characteristics of the financial product
• Investment strategy
• Proportion of investments
• Monitoring of environmental or social characteristics
• Methodologies
• Data sources and processing
• Limitations to methodologies and data
• Due diligence
• Engagement policies
• Designated reference benchmark
• SFDR ARTICLE 5 DISCLOSURE
• SFDR ARTICLE 6 DISCLOSURE
• PAI Statement

Product name: SOSiLA Logistics REIT, Inc.

SOSiLA Logistics REIT, Inc. promotes environmental or social characteristics, but does not have as its objective a sustainable investment within the meaning of article 9(1) of Regulation (EU) 2019/2088 ("SFDR"). SOSiLA Logistics REIT, Inc. has no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan and relies on Sumisho Realty Management Co., Ltd. (the “Asset Manager”), to manage and operate the properties in SOSiLA Logistics REIT, Inc.’s portfolio. SOSiLA Logistics REIT, Inc. and the Asset Manager are hereinafter referred to collectively as “we,” “us” or “our” unless noted otherwise. References to “fiscal year” or “FY” are to the 12 months that began or beginning April 1 of the year specified in line with the fiscal year of the Asset Manager, unless noted otherwise.

Summary

No sustainable investment objective	The financial products offered by SOSiLA Logistics REIT, Inc. promotes environmental or social characteristics, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product	We face a variety of social issues in the course of conducting our businesses, and we believe strongly in our responsibility in contributing to the sustainable growth of society. We are a member of the Sumitomo Corporation Group (defined below), and we proactively promote ESG-related initiatives in the same manner as other members of the Sumitomo Corporation Group. Sumitomo Corporation Group has identified six material issues for achieving sustainable growth with society, of which the Sumitomo Corporation Group has made a commitment to work on two of such issues – (i) developing human resources and promoting diversity, and (ii) enhancing governance. Accordingly, working toward solving those issues is our high priority. In order to advance its ESG initiatives, the Asset Manager establishes ESG targets. We implement various environmental initiatives at our properties, as described below.
Investment strategy	We invest in logistics properties and industrial properties. We pursue maximizing unitholder value by leveraging the Sumitomo Corporation Group’s extensive knowledge and development capabilities with respect to real estate as well as our know-how accumulated through the management of private placement REITs and private funds. At the same time, the Asset Manager closely studies the impact of our portfolio on environmental factors such as CO2 emissions, energy consumption, water consumption, asbestos and soil contamination as well as social factors on tenants, including with respect to antisocial forces and the work environment, and on relationships with the community. Such factors are considered for every investment decision, along with the profitability of the property. In order to conduct ESG friendly management while maximizing the value of our properties, we have taken into consideration ESG factors in our investment and asset management processes. In particular, we have Green Finance Framework (defined below) that has been in effect since our IPO. We directly invest in real estate. Therefore, due diligence (including the assessment of good governance practices) in relation to investee companies is not applicable.
Proportion of investments	SOSiLA Logistics REIT, Inc. offers financial products which promote environmental or social characteristics, but does not have sustainable investments as its objective. The number of certified properties as a percentage of our portfolio was 95.3% as of June 30, 2024, and we are committed to maintaining such percentage at 70% or more on a gross floor space basis through the end of March 2030.
Monitoring of environmental or social characteristics	In order to measure the attainment of the E/S characteristics we promote, we use the indicators such as (i) acquiring external certifications and (ii) tracking and disclosing data related to CO2 emissions and energy consumption. Each is further described below.
Methodologies	In order to promote ESG initiatives, the Asset Manager’s President, persons responsible for fund operations and the ESG Promotion Team within the Business Planning Department convene the ESG Promotion Committee generally once every three months to review our ESG policy, goals and initiatives and how our investments are performing against the foregoing.
Data sources and processing	As further described below, the Asset Manager obtains certain ESG-related data from a third-party consulting firm. In addition, depending on the type of data, the Asset Manager ensures data accuracy and quality through a third-party organization’s external review.
Limitations to methodologies and data	As further described below, the primary limitation to methodologies and data is the necessity of reliance on tenants and building management companies for raw data at the property level. Data at the portfolio level is compiled internally at the Asset Manager. To ensure the accuracy of compiled data at the portfolio level, we have engaged an independent third-party accounting firm which has provided an assurance report regarding the accuracy and quality of certain parts of the compiled annual data at the portfolio level in accordance with our own criteria and methodologies. Limitations to the methodologies and data are not expected to affect the attainment of the environmental or social characteristics promoted by SOSiLA Logistics REIT, Inc. in any material way.
Due diligence	We do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances from our properties.
Engagement policies	We ensure that the properties that we invest in are environmentally-sound by acquiring third-party certifications to satisfy our Qualification Criteria under our Green Finance Framework, which are described in detail above. Each person responsible for fund operations reports to the ESG Promotion Committee acquisition of Green Qualified Assets and the status of ESG initiatives, and submits any proposal for amendment of rules related to ESG initiatives, new ESG initiatives or ESG targets. When investing in properties using our Green Finance Framework, we do not consider properties that do not meet the eligibility criteria for Green Qualified Assets. The Asset Manager tracks the funds raised under our Green Finance Framework to ensure that they are used only toward Green Qualified Assets and Renovations, and manages the total amount of funds procured through green finance so that it does not exceed the Qualified Green Liabilities. We conduct soil contamination surveys when acquiring properties, and do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances. In addition, we research on use and management status of hazardous substances such as asbestos, PCB and Freon.
Designated reference benchmark	SOSiLA Logistics REIT, Inc. has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by SOSiLA Logistics REIT, Inc.

No sustainable investment objective

The financial products offered by SOSiLA Logistics REIT, Inc. promotes environmental or social characteristics, but does not have as its objective sustainable investment.

Environmental or social characteristics of the financial product

We face a variety of social issues in the course of conducting our businesses, and we believe strongly in our responsibility in contributing to the sustainable growth of society. We are a member of the corporate group consisting of Sumitomo Corporation (our sponsor) and its affiliates (the “Sumitomo Corporation Group”), and we proactively promote ESG-related initiatives in the same manner as other members of the Sumitomo Corporation Group. Sumitomo Corporation Group has identified six material issues for achieving sustainable growth with society, of which the Sumitomo Corporation Group has made a commitment to work on two of such issues – (i) developing human resources and promoting diversity, and (ii) enhancing governance. Accordingly, working toward solving those issues is our high priority. In order to advance its ESG initiatives, the Asset Manager establishes ESG targets.

We focus on acquiring a “SOSiLA series” of properties developed based on concepts of sociability (i.e., ties to society), sustainability (i.e., eco-friendliness and sustainable growth) and individuality (consideration for people and the working environment) and provide ESG investment opportunities to a broad range of investors through our highly transparent framework. The Asset Manager has established an ESG policy and has formed a ESG Promotion Committee to promote ESG initiatives. Our ESG policy includes our basic policy on how we can contribute to the environment, improve our work environment, ensure effective compliance and governance, achieve transparent ESG disclosure and collaborate with each stakeholder on ESG matters.

We implement various environmental initiatives including the following.

• Measures for saving energy. 10 properties that constitute the SOSiLA series were recently built with pre-installed LED lights bulbs. In addition, we have installed solar panels at two properties. We promote the “greening” of buildings to help suppress temperature increases and improve the aesthetics of our properties.
• Effective utilization of water resources. At one of our properties, we endeavor to use water resources effectively by purifying domestic wastewater, collecting and filtering roof rainwater, and using rainwater for toilets and watering plants.
• Prevention of contamination. We conduct soil contamination surveys when acquiring properties and take measures to purify the soil as necessary. In addition, when renovating our properties, we comply with applicable laws concerning asbestos, and take appropriate measures such as notifying the government and preventing asbestos dispersion. We also promote the use of low formaldehyde building materials (e.g., parts and materials, glue and paint) to reduce formaldehyde and other substances that are known to cause sickness.

We implement various social initiatives at our properties including the following.

• Creating a healthy and pleasant working environment. In order to create a pleasant working environment, the Asset Manager offers counseling that enables employees to seek counseling both in and outside the company. Such counseling is aimed at taking care of employees’ mental health and workplace relationships. The Asset Manager has enhanced its benefits program for employees, including through the introduction of holiday/leave programs other than paid holidays (e.g. a leave program for nursing sick children) and provision of financial aid for their physical exams to support our employees’ health.
• Disaster response and safety of buildings. We and the Asset Manager regularly exchange disaster-related information with the tenants, property managers and building managers to ensure that tenants are prepared in an earthquake or typhoon. We also conduct disaster drills approximately once a year at each of our properties in order to assist tenants’ business continuity plans and achieve early return to normal operations in the event of a disaster, and to minimize the damage caused by disasters. The Asset Manager has established measures based on its business continuity plan, or BCP, to mitigate damage and other impacts of a disaster. As part of the BCP, we have a system in place to quickly establish a disaster response headquarters when faced with a serious emergency.
• Initiatives aimed at enhancing tenant satisfaction. In order to create a pleasant working environment for users of our properties, we have improved amenities at our properties, including by adding break rooms to six of our properties, and we regularly assess air-conditioning performance of all of our properties and make appropriate improvements.

We have no reference benchmark designated for the purposes of attaining the environmental or social characteristics promoted by our investment units.

Investment strategy

We invest in logistics properties and industrial properties. We pursue maximizing unitholder value by leveraging the Sumitomo Corporation Group’s extensive knowledge and development capabilities with respect to real estate as well as our know-how accumulated through the management of private placement REITs and private funds. At the same time, the Asset Manager closely studies the impact of our portfolio on environmental factors such as CO2 emissions, energy consumption, water consumption, asbestos and soil contamination as well as social factors on tenants, including with respect to antisocial forces and the work environment, and on relationships with the community. Such factors are considered for every investment decision, along with the profitability of the property.

In order to conduct ESG friendly management while maximizing the value of our properties, we have taken into consideration ESG factors in our investment and asset management processes. In particular, we have a green finance framework (“Green Finance Framework”) that has been in effect since our IPO.

Our Green Finance Framework has obtained Green 1 (F), the highest rank in the JCR Green Finance Framework Evaluation in November 2019, which is conducted by Japan Credit Rating Agency, Ltd. (JCR) for its policy for issuance of green bonds or green loans, based on the Green Bond Principles 2018, the Green Loan Principles, the Green Bond Guidelines 2020 and the Green Loan and Sustainability Linked Loan Guidelines 2020. In June 2024, our Green Finance Framework was reviewed by JCR with respect to its policy for issuance of green bonds or green loans, based on the Green Bond Principles 2021, the Green Loan Principles 2023, the Green Bond and Sustainability Linked Bond Guidelines 2022 and the Green Loan and Sustainability Linked Loan Guidelines.

• Use of procured funds: The funds procured through green finance will be used for the acquisition of assets (“Qualified Green Assets”) that meet qualification criteria specified below (the “Qualification Criteria”), renovations that meet certain criteria (“Renovations”), installation of energy-saving equipment or renewable energy power generation facilities that result in reduction in CO2 emission or other energy emission by 30% or more, compared to pre-installation, or for the repayment of borrowings (including green loans) or the redemption of investment corporation bonds (including green bonds) for the abovementioned purposes.
• Qualification Criteria
  
  • Qualified Green Assets
    Properties that have obtained or are expected to obtain any of the following certifications:
    
    • CASBEE for Buildings (New Construction), CASBEE for Real Estate: S rating to B+ rating
      municipal version of CASBEE (applicable only within three years from the date of completion): S rating to B+ rating
    • DBJ Green Building Certification: 5 stars, 4 stars or 3 stars
    • BELS Certification (FY2016 standard): 5 stars, 4 stars or 3 stars
      excluding logistics properties with BEI over 0.75
      BELS Certification (FY2024 standard, Non-residential): Level 6 to Level 4
    • LEED Certification: Platinum rank to Silver rank (for LEED BD+C, version 4.0 or later)
  • Renovations
    Renovations that meet either of the following criteria:
    
    (a) Renovation that is beneficial to the environment, including through reduction in consumption or emissions of CO2, energy or water (renovation expected to reduce consumption or emissions by 30% or more compared to before renovation)
    
    (b) Renovation that results in improvement of one or more levels of environmental certification that meets the eligibility criteria for Qualified Green Assets
  • Replacement of equipment with energy-saving equipment that results in reduction in CO2 emission or other energy emission by 30% or more, compared to pre-installation
    
    Replacement of air-conditioning equipment, LED lighting, introduction of power storage systems (which is expected to reduce energy consumption by 30% compared to before replacement)
  • Introduction of renewable energy
    
    Acquisition or installation of a renewable energy power generation facility (where the facility is installed on site of a property or on the roof of a building owned by us)
• Fund management: We set the maximum amount of green finance (the “Qualified Green Liabilities”) as the sum of the total acquisition price of Qualified Green Assets, the total expenditures for Renovations or the installation of energy-saving equipment or renewable energy power generation facilities, and manage the total amount of funds procured through green finance so that it does not exceed the Qualified Green Liabilities. If there are any funds procured through green finance that are not appropriated, the funds will be accounted for as cash or cash equivalents until they are appropriated for other projects that meet the Qualification Criteria.

We directly invest in real estate. Therefore, due diligence (including the assessment of good governance practices) in relation to investee companies is not applicable.

We, along with the Asset Manager, have introduced the following measures to assess and enhance our own governance systems:

• Additional reporting process (Speak-Up System). In addition to its existing reporting lines, the Asset Manager has introduced a “Speak-Up System” that enables officers and employees who become aware of issues to directly contact the Asset Manager’s Compliance & Risk Management Committee, outside legal counsel, or Sumitomo Corporation’s Compliance Committee. These reports are processed under the direction and supervision of the Asset Manager’s Compliance & Risk Management Committee.
• Prevention of conflict-of-interest transactions (Rotation Rule). In the event that the Asset Manager obtains information regarding the sale of a real estate-related asset by a third party, the Asset Manager follows the “Rotation Rule” that establishes priorities among the funds managed by the Asset Manager in determining which fund will consider the acquisition opportunity to prevent the Asset Manager from engaging in a conflict-of-interest transaction. As to the information on logistics properties and industrial properties, SOSiLA Logistics REIT, Inc. has the first priority to obtain such information and to discuss the acquisition.
• Risk Management System and Legal Compliance System. In accordance with its risk management rules, each department of the Asset Manager should identify, analyze, evaluate, and formulate measures to mitigate risks. More specifically, in the event that the head of a department identifies a major risk, that head should promptly report the details to the Head of Compliance and the President and CEO, as well as analyze the causes of the risk and formulate measures to mitigate the risk. With respect to legal compliance, the Asset Manager has established compliance rules and a compliance office and appointed the Head of Compliance to protect investors and ensure proper operation of the Asset Manager.

Proportion of investments

SOSiLA Logistics REIT, Inc. offers financial products which promote environmental or social characteristics, but does not have sustainable investments as its objective. The number of certified properties as a percentage of our portfolio was 95.3% as of June 30, 2024, and we are committed to maintaining such percentage at 70% or more on a gross floor space basis through the end of March 2030.

Monitoring of environmental or social characteristics

We use the following indicators to measure the attainment of the environmental or social characteristics we promote.

• Acquisition of environmental certifications. To track the environmental performance of our properties, we use certifications issued by third-party organizations such as the Comprehensive Assessment System for Built Environment Efficiency (“CASBEE”) certification, Development Bank of Japan’s Green Building Certification (“DBJ Certification”), Leadership in Energy and Environmental Design (“LEED”) certification, and Building Energy-efficiency Labeling System (“BELS”) certification (“BELS Certification”).
• CO2 emissions and energy consumption. We aim to reduce energy consumption by 35% compared to the FY 2019 on a per-unit basis (kWh/m2) by the end of FY 2030 and reduce CO2 emissions by 35% compared to the FY 2019 on a per-unit basis (t-CO2/ m2) by the end of FY 2030.

Methodologies

In order to promote ESG initiatives, the Asset Manager’s President, persons responsible for fund operations and the ESG Promotion Team within the Business Planning Department convene the ESG Promotion Committee generally once every three months to review our ESG policy, goals and initiatives and how our investments are performing against the foregoing.

• Acquisition of environmental certifications. The J-REIT Business Department of the Asset Manager formulates a plan for acquiring environmental certifications up to approximately one year in advance when the budget of SOSiLA Logistics REIT, Inc. is formulated. The J-REIT Business Department of the Asset Manager outsources the practical work of acquiring environmental certifications to an external consulting firm. When environmental certifications are obtained, they are reported to internal stakeholders of the Asset Manager at ESG Promotion Committee and weekly meetings of the J-REIT Business Department.
• CO2 emissions and energy consumption. The basic environmental data such as CO2 emissions and energy consumption are collected on an annual basis by an external consulting firm outsourced by the J-REIT Business Department of the Asset Manager. The data collected and compiled is reported to internal stakeholders of the Asset Manager at ESG Promotion Committee.

Data sources and processing

We use the following data sources:

• Acquisition of environmental certifications. Data sources for obtaining environmental certifications are collected by an outside consulting firm, and include the following four categories: energy consumption, GHG emissions, water consumption, and weight of waste output. The data is confirmed by the J-REIT Business Department of the Asset Manager and shared with the certifying organizations.
• CO2 emissions and energy consumption. Basic environmental data such as CO2 emissions and energy consumption are collected by an outside consulting firm and verified by a company specializing in data verification, which is separate from the consulting firm who collected such data. The accuracy of the data is guaranteed by a verification report issued by the company that verified the data.

Limitations to methodologies and data

The primary limitation to these methodologies and data is the necessity of reliance on tenants for raw data at the property level. Like many other real estate investment corporations and asset managers, we rely on raw data provided by the tenants, and independent verification of accuracy of such raw data provided by the tenants presents challenges. In addition, data at the property level provided by the tenants is generally updated on an annual basis. Accordingly, property-specific data will therefore not always be fully up-to-date.

Data at the portfolio level is compiled internally at the Asset Manager. To ensure the accuracy of compiled data at the portfolio level, we have engaged an independent third-party organization which has provided an assurance report regarding the accuracy and quality of certain parts of the compiled annual data at the portfolio level in accordance with our own criteria and methodologies. However, the assurance report does not provide independent verification of accuracy of raw data at the property level and the challenges associated with our reliance on the tenants for raw data at the property level remain.

Limitations to the methodologies and data are not expected to affect the attainment of the environmental or social characteristics promoted by SOSiLA Logistics REIT, Inc. in any material way.

Due diligence

We do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances from our properties.

Engagement policies

We ensure that the properties that we invest in are environmentally-sound by acquiring third-party certifications to satisfy our Qualification Criteria under our Green Finance Framework, which are described in detail above. Each person responsible for fund operations reports to the ESG Promotion Committee acquisition of Green Qualified Assets and the status of ESG initiatives, and submits any proposal for amendment of rules related to ESG initiatives, new ESG initiatives or ESG targets. The ESG Promotion Committee makes important decisions for ESG promotion, including amendment of ESG policy, rules on ESG Promotion Committee and rules on ESG operation practice as well as establishment of ESG targets. When we select assets for investment in connection with our Green Finance Framework, the relevant property or renovation must meet our Qualification Criteria explained above. When investing in properties using our Green Finance Framework, we do not consider properties that do not meet the eligibility criteria for Green Qualified Assets.

We ensure the investment strategy is implemented on a continuous basis by establishing and maintaining appropriate Qualification Criteria for Green Qualified Assets and Renovations. The Asset Manager tracks the funds raised under our Green Finance Framework to ensure that they are used only toward Green Qualified Assets and Renovations, and manages the total amount of funds procured through green finance so that it does not exceed the Qualified Green Liabilities.

We conduct soil contamination surveys when acquiring properties, and do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances. In addition, we research on use and management status of hazardous substances such as asbestos, PCB and Freon.

Designated reference benchmark

SOSiLA Logistics REIT, Inc. has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by SOSiLA Logistics REIT, Inc.

REMUNERATION AND SUSTAINABILITY RISKS
(SFDR ARTICLE 5 DISCLOSURE)

The Asset Manager has a remuneration policy in place which aims to support its strategy, values and long-term interest, including its interest in sustainability. The Asset Manager’s remuneration policy is consistent with the integration of sustainability risks as follows.

• Employees of the Asset Manager, which sets goals with respect to ESG matters, receive remuneration according to their relative contribution to and expectations for the achievement of management targets, including sustainability targets.
• Remuneration, methods of calculation and payment, timing of payment, and increases in remuneration are determined according to the Asset Manager’s compensation rules, which are established based on statutory requirements.
• Employees receive remuneration that consists of monthly base salary and bonuses. The monthly base salary consists of fixed base salary, allowances and payment for pension plan.
• Bonuses are calculated based on sales and performance, and are determined by the Asset Manager’s internal rules. Bonuses take into account issues including job content, performance, and attendance. Such evaluations take into consideration the employee’s contributions and conduct with respect to sustainability efforts and compliance requirements.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE IMPACT OF SUCH RISKS ON THE RETURNS OF SOSiLA LOGISTICS REIT, INC. (SFDR ARTICLE 6 DISCLOSURE)

We have established the ESG Promotion Committee, which generally meets once every three months. Each person responsible for fund operation reports to the ESG Promotion Committee acquisition of Green Qualified Assets and the status of ESG initiatives, and submits any proposal for amendment of rules related to ESG initiatives, new ESG initiatives or ESG targets. The ESG Promotion Committee makes important decisions for ESG promotion including amendment of ESG policy, rules on ESG Promotion Committee and rules on ESG operation practice, as well as establishment of ESG targets. When we select assets for investment in connection with our Green Finance Framework, the relevant property or renovation must meet our Qualification Criteria explained above.

Under this organizational structure, we have instituted a number of initiatives to promote E/S characteristics. Such initiatives include climate change initiatives, initiatives for saving/reducing energy consumption, local community initiatives, and initiatives for employees’/tenant’s initiatives.

In order to conduct sustainable asset management while maximizing the value of our properties, we have taken into consideration ESG factors in our investment and asset management processes. In particular, we have established a Green Finance Framework.

While sustainability issues will severely impact our business activities, we believe that such issues may also become potential business opportunities to create new value for sustainable growth. Accordingly, we position our commitment to sustainability as a top priority in our management strategies. We also believe that integrating sustainability factors alongside traditional financial and operational metrics in our investment decision process helps us make a more holistic assessment of a property’s risks and opportunities and is commensurate with the pursuit of superior risk-adjusted returns.

Earthquake risk: SOSiLA Logistics REIT, Inc. is exposed to an earthquake risk because some of our properties are located in areas that are sensitive to the impact of earthquakes. If a significant earthquake hits any of our properties, it will likely have a negative effect on its value. The Asset Manager addresses this risk by obtaining a PML (Probable Maximum Loss) report when acquiring a property and purchasing earthquake insurance for a property subject to a high PML. Overall, we believe that our exposure to an earthquake risk is low because our portfolio PML does not exceed 15%, which is the threshold we have established to for determining whether to obtain earthquake insurance.

STATEMENT ON PRINCIPAL ADVERSE IMPACTS OF INVESTMENT DECISIONS ON SUSTAINABILITY FACTORS

PAI Statement PDF