Sustainability Policies -Responsible organization-
We ensure compliance and sound risk management in our entire business activities. We are committed to responsible property investment by a responsible organization by aligning with global ESG initiatives and proactively disclosing ESG information.
Compliance
Basic views
Strict compliance with laws, regulations and other guidelines is positioned as a vital element of the management of Kenedix based on the awareness that compliance problems are a significant risk regarding business operations.
We have a responsibility to use business operations to create the types of value that meet social requirements. We have extensive and constant compliance programs in order to achieve qualitative and quantitative improvements of the value of our business operations.
By implementing a rigorous compliance program, we are determined to contribute to economic and social advancement and, as a result, earn the admiration of investors and the trust of the public.
Compliance is one of our material issues and the entire group has a strong commitment to compliance.
Compliance system
A Compliance Officer who reports directly to the president of Kenedix is responsible for the establishment and operation of a compliance program. There is also a Corporate Compliance Committee for discussing matters involving compliance at Kenedix (except items involving business operations) and reaching decisions about specific actions. In addition, there is a Business Compliance Committee for discussions and approvals of matters involving compliance concerning business operations of Kenedix. Corporate Compliance Committee is composed of full-time directors, senior executive officers, and the Compliance Officer. The Business Compliance Committee consists of the director in charge of compliance, Compliance Officer, and outside committee members.
The Compliance Officer performs the following activities.
- Proposals for rules and other items and their implementation
Proposals, and subsequent implementation of, for rules and other items associated with compliance activities, including the Compliance Manual, Compliance Program and other guidelines for the proper conduct of executives and employees - Guidance and training
Periodic compliance guidance and training activities for executives and employees - Confirmation of the status of compliance
Activities to confirm that compliance programs are functioning properly - Handling of problems
When there is an incident involving financial instruments or any other problem related to compliance, the Compliance Officer immediately performs an investigation to determine what happened. After using this information to determine the cause, the Compliance Officer implements preventive measures and, as needed, submits a report to regulatory authorities and takes other actions.
Compliance manual
The Kenedix Compliance Manual gives executives and employees specific guidelines for what they should do concerning compliance activities. The manual explains corporate compliance programs and laws and regulations that must be understood and observed when conducting business operations. In addition, members of the Regal & Compliance Department use this manual to hold seminars in order so that everyone has a sound compliance understanding and commitment.
When a compliance problem occurs, executives and employees have a duty to submit a report containing the basic sequence of events. This includes the discovery of a violation of the Compliance Manual rules and guidelines or behavior that creates a compliance problem as well as the receipt of information from a customer or other source about a compliance problem. If it is not possible to submit this type of report for some reason, the whistleblowing system can be used.
Compliance as a company
- Compliance as a company Respect for human rights, refusal to allow discrimination, harassment, etc.
- No conflicts of interest and the protection of corporate assets
- Strict oversight of giving or receiving gifts, including meals and entertainment, involving customers
- Proper management of confidential information (personal information)
- No insider trading
- Rejection of anti-social forces
- Resolution of complaints
- Proper handling of clerical errors, etc.
Compliance program
Kenedix has a compliance program for the purpose of providing a specific action plan for compliance. As a rule, Kenedix establishes a compliance program every six months and uses the program to provide compliance guidance and training activities for employees.
Corporate ethics policy
Kenedix has the following Corporate ethics policy.
- We will contribute to the advancement of society as a responsible corporate citizen.
- We will maintain sincere relationships with all customers and business partners in the spirit of fair play.
- We will contribute to society in many ways, and operate in a manner that benefits investors.
- We will use our skills as real estate professionals to be a source of highly appealing products and services.
- We will provide the greatest possible protection and convenience for users of financial services.
Rejection of anti-social forces
Kenedix has prepared a Manual for Blocking Relationships with Anti-social Forces and Ensuring Appropriate Business Transactions. To reject relationships of any kind with anti-social forces, Kenedix has a resolute stance for refusing to deal with criminal and other anti-social forces.
Kenedix confirms that buyers and sellers of properties, tenants, business partners, and other transaction counterparties are not anti-social forces. In addition, Kenedix requires all contracts to include provisions for refusing to deal with anti-social forces and performing confirmations in accordance with the Act on Prevention of Transfer of Criminal Proceeds when conducting transactions. Consequently, Kenedix takes concrete actions for the purpose of preventing relationships with anti-social forces. In addition, the Kenedix Compliance Manual has specific policies concerning anti-social forces. Compliance and other training programs give employees a thorough understanding of these policies.
Measures against money laundering and terrorist financing
Kenedix has prepared a Manual for Blocking Relationships with Anti-social Forces and Ensuring Appropriate Business Transactions and properly performs confirmations in accordance with the Act on Prevention of Transfer of Criminal Proceeds when conducting transactions. These activities are used to confirm the identities of transaction counterparties as well as their attributes, business activities and purpose of the transaction. Risk identification, evaluation and reduction measures are implemented from the perspective of the risk-based approach specified in the Guidelines Concerning Money Laundering and Financing of Terrorism of the Financial Services Agency.
Anti-bribery and anti-corruption policy
Strict compliance with laws, regulations and other guidelines is positioned as a vital element of the management of Kenedix based on the awareness that compliance problems are significant risks regarding business operations. Kenedix strives to prevent corruption by establishing specific policies on “Prohibition of bribery,” “Prohibition of embezzlement, fraud, theft, and other criminal acts” and “Prohibition of insider trading” in our “Employment Regulations” and “Compliance Manual.” Any violation of these policies will be subject to disciplinary action in accordance with the “Employment Regulations.”
Furthermore, compliance awareness is raised by regular training on a wide range of legal and compliance issues through compliance training for new employees and for all officers and employees (including temporary employees.)
In fiscal year 2023, there were no cases of “Incidents related to fraud or corruption,” “Dismissals or termination related to fraud or corruption,” “Costs of fines, penalties, or settlements related to fraud or corruption” in the Kenedix group. Moreover, there were no record of political contributions.
Entertainment/hospitality and prohibition of bribery
Kenedix has set rules such as “Prohibition of entertaining clients and giving gifts to public service officials,” “Prohibition of requesting entertaining clients and giving gifts from business partners beyond a reasonable range,” and “Prior approval when providing entertaining clients or giving gifts.”
Kenedix is committed to prevent the corruption in accordance with the National Public Service Ethics Law, the National Public Service Ethics Code and regulations.
Kenedix regularly verifies that each entertainment and hospitality is properly conducted by internal rules, and the records of such activities are kept and monitored. The operation of these anti-corruption & bribery rules is subject to internal audit.
Due Diligence on new business partners and brokers
Kenedix conducts due diligence by checking the anti-social forces and information management systems for the “transactions with new business partners and brokers, others.” In addition, the Compliance Manual stipulates the rule of “prohibition of bribery, others at the time of selecting business partners, others.”
Response to violation occurrence
Employees are required to report to the department head or the compliance officer when one discovers a compliance problem such as bribery, or receives a suggestion from others of existence of a compliance problem, or is concerned regarding possible compliance violation. If the compliance officer deems it necessary in compliance with various laws, regulations and rules, the compliance officer reports to the President & CEO, the compliance committee, the board of directors, and appropriate action will be taken.
The employees (including directors, regular employees, contract employees, temporary employees, part-time employees, dispatched employees and workers stationed within our company on subcontracting, those who have made a report within one year from leaving the company) may also utilize the whistleblowing system, which allows anonymous reporting.
Whistleblowing system
Kenedix has a whistleblowing system for the prevention and rapid discovery of incidents caused by violations of laws and regulations and other improper conduct, the improvement of self-cleansing processes, the control of reputational risk exposure, and the retention of public trust. Our whistle-blowing policy applies to all the employees including directors, full-time employee, elderly employee, contact employee, part-time employee, assigned / temporary employee from the other company, and former employee left within 1 year of the termination date.
Reporting, investigation and disciplinary processes
If violation of law (including internal company policies) occurs or could occur and if the matter has not been satisfactorily resolved by ordinary procedures, the company accepts reports, declarations, and consultations from internal and external contacts. Anonymous reporting is also accepted.
The person in charge of handling whistleblowing shall conduct fair and impartial investigation. The respondent will be provided with the opportunity to present a defense and the fair hearing is held with relevant persons in compliance with the obligation of confidentiality.
The person in charge of handling whistleblowing reports all results from investigations to the director in charge of compliance and the president, as well as to the board of directors and the council of corporate auditors, including the results of notifications to the whistleblower. The head of the department to which the accused belongs take appropriate action such as immediate order to stop action in violation of law.
Based on the report, disciplinary action and all the other appropriate measures to correct such as criminal prosecution, claims for damages or measures to prevent recurrence shall be taken.
| Internal channel 1 (for all legal, personnel and labor problems) |
Compliance Officer |
|---|---|
| Internal channel 2 (for improper behavior by directors and other executives) |
Full-time corporate auditors |
| External channel (for all categories of problems) |
External attorney |
Prohibition of unfair treatment
Whistleblowers and those who cooperate with them, as well as those who cooperate with investigations based on the reports, are subject to protection under the whistleblowing system and the Whistleblower Protection Act, and any unfair treatment against the whistleblower are prohibited.
Managing conflicts of interests
Managing conflicts of interest is one of our material issues. The Compliance Manual has specific policies for the prevention of these conflicts and protection of the company's assets. Compliance and other training programs give employees a thorough understanding of conflicts of interest and how to prevent them. In addition, we have Related Party Transaction Rules that include processes for making decisions, basic views concerning these transactions and other guidelines. The objective is to prevent transactions between Kenedix and related parties (executives, major shareholders and others) and between these related parties from being detrimental to shareholder value.
Business compliance committee
The role of the Business Compliance Committee is separate from that of the Corporate Compliance Committee, which discusses matters involving compliance and reaches decisions. Discussing and making decisions involving business that contribute to revenue now or may contribute in the future is this committee's responsibility. These activities concern how business operations are conducted and how these businesses perform transactions with customers. The Business Compliance Committee ensures that business operations use extreme care to avoid conflicts of interest between different stakeholder categories.
Proper information management among group companies
Kenedix Group provides asset management services for a large number of investment corporations and funds on behalf of investors. Kenedix has signed a memorandum with Kenedix Real Estate Fund Management, Inc. and the investment corporations managed by this company and with Kenedix Investment Partners, Inc. concerning the provision of real estate and other information by Kenedix. The proper provision of information by Kenedix and group companies along with the determination of the types of support supplied by the Kenedix Group (and disclosure of this information) ensures the transparency and suitability of the operations of funds and other similar entities.
Rule concerning conflicts of interest among REITs
Since Kenedix Real Estate Fund Management, Inc. manages multiple REITs, it has established a pipeline committee and adopted internal guidelines in order to prevent the improper allocation of acquisition opportunities as well as prohibition of concurrent serve as several general managers of REIT management departments, and thus, managing conflicts of interests among the REITs.
By managing these rules appropriately and smoothly, it strives to implement appropriate measures for conflicts of interest, such as preventing arbitrary distribution of real estate sales information and preventing conflicts of interest among the investment corporation managed by the asset management company.
Risk Management
Basic views
Kenedix manages risk in accordance with its Risk Management Rules, which define risk factors as potential problems that could be detrimental to corporate value with respect to business processes or be an impediment to the ability to achieve sustained growth.
Risk management is one of the material issues of Kenedix. There are many activities for the proper oversight and control of risk factors.
Risk management system
In order to ensure sound management and to contribute to the protection and improvement of corporate value, Kenedix has prepared Risk Management Regulations, which stipulate policies, divisions and methods of risk management.
Risks to be managed are defined as potential factors that may damage corporate value or hinder sustainable growth in the process of business execution, and are classified into four categories: compliance risk, business country risk, financial risk and reputation risk.
The President & CEO is the chief risk management officer, and the General Administration & Human Resources Department is the risk management division, which is responsible for the development of the risk management system, overseeing company-wide risk management and providing advice and guidance to each division in the development, operation and reporting of its risk management system.
Each division implements risk management individually, and the head of each department has the necessary authority and responsibility for the development, operation, reporting of its risk management system.
The head of each department shall report the status of risk management managed by the department to the risk management division for each fiscal year. The risk management division shall report to the chief risk management officer for each fiscal year a summary of the reports from each department on a company-wide basis.
Regardless of the timing of the reports from each department, the risk management division may, if it deems necessary, check the status of risk management of each department voluntarily, and if, as a result of such check, it determines that risk management is insufficient, the risk management division may instruct each department to correct or improve the situation.
The Internal Audit Department performs audits to confirm that risk management activities of the General Administration and Human Resources Department comply with the Risk Management Rules.
Crisis and disaster response system
Kenedix has Crisis Management Rules and Disaster Response Rules for natural disasters, incidents, accidents and other problems that have a major impact on business activities or society overall and are detrimental to corporate value. The General Administration and Human Resources Department is responsible for crisis management and disaster response activities. This department establishes an emergency response headquarters to take actions as needed when problem occurs.
In accordance with the Kenedix Group Business Continuity Plan, disaster response drills are held periodically, there are measures in place to resume business operations quickly following a disaster or other problem, and other measures to be prepared for a crisis.
We periodically reexamine this plan and make revisions as needed.
Kenedix also uses the following measures to be prepared for a disaster.
- Storage of disaster response kits with food, water and other supplies for executives and employees at business sites
- A safety confirmation system for quickly determining the status of executives and employees after a disaster
- Back-up servers in several locations to protect data
Information security
Information security measures at Kenedix are based on an Information Management Policy that includes the following measures and is constantly seeking ways to improve security. These activities reflect the understanding that protecting and properly managing information, whether on paper of electronic media, is a key social responsibility.
- Kenedix obtains information as needed for business operations and by using legal and fair methods.
- Kenedix protects information from unauthorized access, loss, theft, damage, alteration, leaks, improper use and other problems.
- Kenedix has established rules and other guidelines based on the Information Management Policy and prescribed methods for handling information. In addition, the duties and responsibilities of executives and employees regarding information are clearly defined.
- When the handling of information is outsourced, Kenedix confirms that companies used for outsourcing have an information management system that is equivalent to its own system.
- Kenedix constantly reexamines and makes improvements as needed to its information management framework.
Kenedix has an Information Security Officer for the oversight of information security. This officer is an executive who supervises departments that perform information system operations and who has responsibilities and authority for the handling of information in all business units of Kenedix.
Kenedix executives and employees receive training as needed concerning the proper handling and protection of information. Audits of these activities are performed by designated auditors. In addition, Kenedix has a manual concerning the use of mobile devices, personal smartphones, social media, and other devices and media and uses other activities to ensure that employees manage information strictly in accordance with all rules and guidelines.
Protection of personal information
The Kenedix Compliance Manual contains specific policies for the proper management of confidential information (personal information). Kenedix also has a Personal Information Procedures Manual and conducts compliance and other training programs for employees to be certain that everyone has a strong commitment to protecting personal information.
For the protection and proper management of personal information, Kenedix has a Personal Information Protection Policy, Personal Information Protection Rules, Rules for Handling Specific Personal Information, and other rules and guidelines.
Information security
The Kenedix IT System Security Rules specifies the minimum level of measures that employees and others must use for the proper use of information and operation of IT systems. The objectives are preventing leaks, damage, losses and other problems involving information, operating IT systems properly, and minimizing any losses or other damage caused by some accidents.
Responding to cyber incident
Kenedix has prepared the Cyber Incident Response Standards and provided a system and procedures for responding to various incidents (including system downtime, malfunction, inadequacy, malware infection, information leakage, unauthorized use, etc.; hereinafter referred to as "Cyber Incident") where cyber security risks are manifested or realized in the cyber security field such as information security-related accidents and cyber-attacks. The following is the response system and procedures for cyber incidents.
the General Administration and Human Resources Department is designed as lead department for information systems, and oversees and manages operations related to cyber incident response. In addition, Kenedix has prepared cyber incident response procedures, and under the response system according to the cyber incident level, we strive to minimize damage in the event of cyber incidents, and to restore damaged operations quickly and efficiently.
Commitment to Responsible Investments
Basic views
A commitment to responsible investments is one of the Kenedix material issues. We are committed to building a stronger infrastructure for achieving both sustained growth and social responsibility.
Signing on to the PRI
The PRI is a set of principles established for the financial industry in 2006 under the leadership of the United Nations Secretary-General of the time, Kofi Annan. PRI comprises six principles.
The PRI encourages the incorporation of ESG issues (Environment, Social and Governance) into investment decision-making processes, with the aim to help companies enhance long-term investment performance and better fulfill their fiduciary duty.
Kenedix has signed on to the PRI and is ambitious to become a real estate asset management company that commit responsible investment through the practice of PRI.
Signing on to the PFA21
The PFA21 (Principles for Financial Action for the 21st Century) has been established by drafting committee with participation of various financial institutions in October 2011 as the action guidelines of financial institutions who seek to fulfill their responsibilities and roles required for the formation of a sustainable society. Signing financial institutions will implement initiatives based on the seven principles as much as possible based on their own businesses. It has been positioned as a starting point to collaborate without being restricted by business categories, scale or region.
Kenedix, Inc. and Kenedix Real Estate Fund Management, Inc., which is the asset management company for listed REITs and a private REIT, have signed on to the PFA 21 and are ambitious to become a real estate asset management company that commits to responsible investment through the practice of the PFA21.
GRESB membership
GRESB (Global Real Estate Sustainability Benchmark) is an annual benchmark system for assessing environmental, social and governance performance in the real estate sector. Many institutional investors use GRESB assessments when selecting investment targets and for engagement with companies where they have made investments.
KDX Realty Investment Corporation was the first J-REIT to participate in the "GRESB Real Estate Assessment" in 2011, an annual benchmarking assessment for real estate companies and funds. Since then, we have been awarded "Green Star" for 12 consecutive years by achieving high performance both in "Management Component," which evaluates policies and organizational structures for ESG promotion, and the "Performance Component," which assesses environmental performance and tenant engagement at properties owned. In the 2023 GRESB Real Estate Assessment, KDX Realty Investment Corporation earned the highest evaluation of “5 Stars” for second consecutive year. Moreover, KDX Realty Investment Corporation has received “A” rating, the highest level of ESG-related information disclosure.
Also, Kenedix Private Investment Corporation has been awarded "Green Star" and earned the evaluation of “3 stars.”
| KDX Realty Investment Corporation | Kenedix Private Investment Corporation |
|---|---|
 |
 |
Kenedix group's investment in group REITs
Kenedix holds a portion of the investment units of three listed REITs and a private REIT managed by Kenedix Real Estate Fund Management, Inc. This aligns Kenedix group’s interest with unitholders’ interests of each REIT.
Relevant data
| 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|
| Term of directors | 1yr | 1yr | 1yr | 1yr |
| Directors | 9 | 7 | 7 | 7 |
| Men | 8 | 7 | 7 | 7 |
| Women | 1 | 0 | 0 | 0 |
| Pct. of female directors | 11.1% | 0% | 0% | 0% |
| Average age of directors | 57.8 | 56.6 | 57.4 | 58.4 |
| Average years since election | 4.3yrs | 3.0yrs | 3.9yrs | 4.9yrs |
| Number of Board of Directors meetings(Note 1) | 25 | 9 | 13 | 17 |
| Average attendance of board meetings(Note 1) | 97.4% | 98.4% | 95.2% | 96.6% |
| Corporate auditors | 5 | 4 | 4 | 4 |
| Men | 4 | 4 | 4 | 4 |
| Women | 1 | 0 | 0 | 0 |
| Pct. of female corporate auditors | 0% | 0% | 0% | 0% |
| Total number of compliance training programs conducted(Note 2) | 118 | 321 | 455 | 208 |
(Note 1) Since there was a change in the organizational structure in March 2021 due to the delisting, the number of Board of Directors Meetings and Average attendance of board meetings in 2021 are the figures for the period from March 30, 2021 to December 31, 2021.
(Note 2) As some of the training was held via web-based training, the total number of participants is described after 2020.