Sustainability

About ARUHI’s Green RMBS

ARUHI’s Green RMBS

ARUHI issued the first Green RMBS (*1) in Japan, procuring funding for the execution of ARUHI Super Flat S (*2) mortgage loans for residential properties that satisfy certain standards on energy saving. ARUHI contributes to the reduction of CO2 emissions by promoting the spread of housing with excellent energy-saving performance through the issuance of Green RMBS.

  • *1 RMBS is an abbreviation of Residential Mortgage-Backed Securities. Refers to securities issued with the backing of residential loan claims. Green RMBS refer to those issued with residential loans for acquiring housing expected to have a high environmental improvement effect as the underlying assets.
  • *2 ARUHI Super Flat S is an original ARUHI product using the mortgage loan insurance (guarantee type) system (Flat 35 (for guarantee program)) in which “the Japan Housing Finance Agency paying an insurance claim to a private-sector financial institution when a customer is unable to repay a mortgage loan provided by a private-sector financial institution.” It refers to mortgage loans that use the Flat 35 S system for lowering the initial interest rate for a fixed period for properties that meet the criteria specified by the Japan Housing Finance Agency.

About the ARUHI Green Finance Framework

ARUHI has established the uses of funds procured through Green RMBS and mechanisms and management systems for procuring funds as the ARUHI Green Finance Framework. The framework was assessed by the Japan Credit Rating Agency as conforming to Green Bond Principles (2018), Green Bond Guidelines (2017) and Green Loan Principles, and received an overall evaluation of Green 1 (F), which is the highest evaluation.

Overview of Green RMBS

Overview of Green RMBS
  1. 1

    ARUHI executes the ARUHI Super Flat S loan for the customer, and obtains the mortgage loan claim.

  2. 2

    ARUHI entrusts mortgage loan claims that conform to the ARUHI Green Finance Framework (*3) to a trust bank, and the trust bank delivers the beneficial interest arising from the claims to ARUHI. This beneficial interest is the Green RMBS.

    *3 Mortgage loan claims are insured through an agreement between ARUHI and the Japan Housing Finance Agency in case of an unexpected accident occurring with the mortgage loan.

  3. 3

    ARUHI sells Green RMBS to investors through securities companies, etc. (*4)

    *4 Green RMBS may be sold using the trust ABL method.

  4. 4

    The funds obtained through the sale of Green RMBS are all allocated to the acquisition of mortgage loans that are the underlying assets of Green RMBS.

Use of Green RMBS funds

Green RMBS are for ARUHI Super Flat S loans for residential properties that satisfy the “technical standards on energy saving” and the funds are used for loans to acquire these properties.

Technical standards of environmental performance of housing covered by Green RMBS (*5)
Category Technical standard Applicability
Primary energy consumption grade Insulation grade
Interest Plan A
(Energy saving)
Approved low-carbon housing 5 4
Primary energy consumption grade 5 housing 5
Approved performance improvement plan housing 5 4
Interest Plan B
(Energy saving)
Housing with insulation grade 4 and primary energy consumption grade 4 or higher 4 or higher 4
Interest Plan A
(Durability and modifiability)
Long-life quality housing 4(*6)
  • *5 Flat 35 S technical standards apply.
  • *6 Conforming to insulation grade 4 is a requirement for approval of long-life quality housing.

SDGs goals and targets to which Green RMBS contributes

Green RMBS is a project classified under “energy saving” within the green projects defined in the Green Bond Principles, the Green Loan Principles and the Ministry of the Environment’s Green Bond Guidelines, and contribute to the following SDGs goals and targets.

Goal 7: AFFORDABLE AND CLEAN ENERGY

Target 7.3.

By 2030, double the global rate of improvement in energy efficiency

Goal 9: INDUSTRY, INNOVATION AND INFRASTRUCTURE

Target 9.4.

By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities

Goal 11: SUSTAINABLE CITIES AND COMMUNITIES

Target 11.6.

By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management

Management of funds procured with Green RMBS

All underlying assets of Green RMBS are eligible green assets, and the agreement with the trust bank stipulates that the agreed recovery and early recovery of eligible green assets are reflected in the redemption of principal of the corresponding RMBS by pass through. As a result, there are no unallocated assets, and no special management of funds is required for the balance of Green RMBS. For details, see “JCR Assigns Green 1 (F) to ARUHI Green Finance Framework of ARUHI Corporation” by the Japan Credit Rating Agency.

Green RMBS reporting

The Company intends to disclose the number and total amount of mortgage loans linked to Green RMBS once annually on its website. If any significant changes are made to the management of the procured funds, the status and response will be reported on the website. For details, see “JCR Assigns Green 1 (F) to ARUHI Green Finance Framework of ARUHI Corporation” by the Japan Credit Rating Agency.

Past issuances of Green RMBS

ARUHI has established the uses of funds procured through Green RMBS and mechanisms and management systems for procuring funds as the ARUHI Green Finance Framework. The framework was assessed by the Japan Credit Rating Agency as conforming to Green Bond Principles (2018), Green Bond Guidelines (2017) and Green Loan Principles, and received an overall evaluation of Green 1 (F), which is the highest evaluation.