Second Opinion
October 8, 2020 Nagoya Expressway Public Corporation ESG Dept., Credit Rating Social Finance Framework Planning and Research Office Chief Analyst: Takeshi Usami
Rating and Investment Information, Inc. (R&I) has confirmed the alignment of the Social Finance Framework of Nagoya Expressway Public Corporation dated September 10, 2020 with the Social Bond Principles (SBP) 2020. This opinion is based on the following views.
■ Overview of the Opinion
(1) Use of Proceeds Proceeds will be allocated to the public corporation’s expressway projects (eligible projects) to finance or refinance the cost of new construction and renovation of expressways. As an agency that executes policies of Aichi Prefecture and Nagoya City, the public corporation not only contributes to solving social issues relating to road traffic in the Nagoya metropolitan area, but addresses social issues in the country, such as aging infrastructure. Eligible projects will deliver direct benefits, including eliminating traffic jams and securing emergency transport routes in the event of disasters, and indirect benefits, such as facilitating logistics and interaction of people in a wider area through a road network. In the implementation of eligible projects, appropriate steps are taken for local requests and expressway tolls. Although there may be an environmental impact over an extensive area, proper measures are in place, such as a prior environmental impact assessment and environmental measures in project implementation. R&I has evaluated that eligible projects will provide positive outcomes for the society as a whole. Eligible projects correspond to the project category of “Affordable basic infrastructure” illustrated in SBP2020, which targets the “General public” primarily in the Nagoya metropolitan area, but targets “Vulnerable groups, including as a result of natural disasters” in particular when a disaster occurs.
(2) Process for Project Evaluation and Selection The public corporation’s expressway projects are designed based on the basic plan and development plan it formulates following the decision on city planning by Aichi Prefecture or Nagoya City. For the basic plan and development plan, the public corporation obtains the approval of the assemblies of Aichi Prefecture and Nagoya City, the consent of the road management authorities and the approval of the Minister of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). With an evaluation approach and criteria determined and eligible projects selected through appropriate processes, both third-party characteristics and expertise are ensured.
(3) Management of Proceeds Proceeds will be managed appropriately using the public corporation’s accounting system and allocated to projects for road construction, etc. that are separated from other projects according to laws and regulations. Until allocated, proceeds will be held as cash or cash equivalents. Financial statements and reports, including the allocation of proceeds, will be audited by the auditor and submitted to the Governor of Aichi Prefecture and the Mayor of Nagoya City. Consequently, R&I considers that proceeds will be managed appropriately.
(4) Reporting The public corporation will disclose the allocation of proceeds and the allocation method (financing or refinancing) to investors on its website annually. With regard to impact reporting, it will disclose output indicators and outcome indicators, including the progress of expressway projects, on an item-by-item basis annually or as needed. R&I considers the public corporation’s reporting to be appropriate.
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Outline of the Issuer
The public corporation was founded by Aichi Prefecture and Nagoya City on September 24, 1970 as the first local road public corporation in Japan under the Local Road Public Corporation Act, to construct and manage urban expressways in and around Nagoya City.
The public corporation constructs and manages an 81.2km expressway network consisting of nine routes, which are designated urban expressways1 stipulated in the Act on Special Measures concerning Road Construction and Improvement. The expressway network contributes to smoother automobile traffic in and around Nagoya City, and also serves as a part of Japan’s expressway network by connecting to major routes managed by other expressway companies, such as the Tomei Expressway, Chuo Expressway, Meishin Expressway, Higashi-Meihan Expressway and Isewangan Expressway.
The public corporation has a management philosophy comprised of the basic philosophy and basic policy shown below. It intends to provide safety, security and comfort through its expressway projects and support the Nagoya metropolitan area, which is vigorously evolving toward the formation of a super mega region in the future.
[Management Philosophy]
Basic Philosophy
We aim to support the local community by providing safe, secure and comfortable road services at any time.
Basic Policy
I We play a role as an urban transportation infrastructure and contribute to the creation of a vibrant Nagoya metropolitan area.
II We put our customers first and offer a safe, secure and comfortable environment to road users.
III We strive for efficient and transparent business operations and keep evolving with ingenuity and self-improvement.
The expressway network around Nagoya City will be completed with the opening of the section between Nagoya Nishi JCT and Tobishima JCT on the Mei-Nikan Expressway2 in FY2020. In addition, the construction of the Tokai-Kanjo Expressway3 is well underway, which upgrades a road network around the Nagoya Expressway. These developments, along with the 20th Asian Games in 2026 and the opening of the Linear Chuo Shinkansen in 2027, are expected to extend economic activities in the Nagoya metropolitan area into a wider area and increase the non-resident population. The public corporation is making various efforts to spread the benefits across the Nagoya metropolitan area.
The public corporation is engaged in a wide array of initiatives, such as conserving the roadside environment by reducing car traffic noise, and saving energy by installing solar power generation facilities. Another example is the quantification of environmental burdens, including differences in CO2 emissions between cars driving on its expressways and local roads.
1 A designated urban expressway network consists of only roads that meet the following two requirements (Article 12, Paragraph 1 of the Act on Special Measures concerning Road Construction and Improvement): - Roads that exist in and around an ordinance-designated city with a population of 500,000 or more - Roads that are used for automobile-only general traffic as designated under the provisions of Article 48-2, Paragraph 1 of the Road Act and are specified in city planning 2 Managed by Central Nippon Expressway Co., Ltd. 3 Managed by Central Nippon Expressway Co., Ltd.
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1. Use of Proceeds
(1) Eligible Projects
Eligible projects
Eligible projects are expressway projects consisting of new construction, renovation, maintenance and repair of the designated urban expressways set out in the basic plan for road development as part of the articles of incorporation, and disaster recovery and other management stipulated in Article 13, Paragraph 1 of the Road Act. Proceeds will be allocated to finance or refinance new construction and renovation of expressways.
Unlike expressway companies4, which construct, maintain and manage expressways under a two-tiered system 5 , the public corporation is responsible for the entire process from borrowing debts and constructing expressways to maintaining and managing expressways and repaying debts using toll revenues. Bond proceeds will be used only for new construction and renovation of expressways, and maintenance and management activities will be funded by toll revenues. Expressways do not produce social benefits just by being constructed or renovated, and must be maintained and managed. Eligible projects are expressway projects that encompass all of these activities.
Objectives of eligible projects
The public corporation was founded by Aichi Prefecture and Nagoya City under the Local Road Public Corporation Act to contribute to promoting residents’ welfare and developing the industrial economy by achieving smoother traffic in and around Nagoya City.
When it was founded in 1970, deterioration in automobile traffic conditions was a problem in Nagoya City and surrounding cities, where the population and the number of automobiles owned were increasing. In particular, rising traffic between Nagoya City and the suburbs caused severe traffic jams. The main reason was the road ratio6 in Nagoya City, which remained at about 11% in 1968, the same level as in Tokyo’s 23 wards and Osaka City. To solve this problem, urban expressways were constructed.
Currently, the urban expressway network consisting of a ring road and radially extending routes not only plays an important role in Nagoya City and surrounding areas, but serves as a part of Japan’s expressway network by connecting to the Tomei Expressway, Chuo Expressway, Meishin Expressway, Higashi-Meihan Expressway and Isewangan Expressway, for example.
See the table on the next page for the social issues recognized by the public corporation, its initiatives and positive social outcomes.
Recognition of social issues
The public corporation’s expressway projects are conducted in accordance with the basic plan and development plan that require the consent of Aichi Prefecture and Nagoya City and the approval of the MLIT Minister, as well as city planning by Aichi Prefecture or Nagoya City. City planning is made or revised to respond to issues such as economic activities in the Nagoya metropolitan area expanding into a wider area and the growing non-resident population. Aging road structures, a heightened risk of massive earthquakes, and intensifying meteorological disasters are among issues that can be identified in the Basic Plan for Extending Service Life of Infrastructure, the Basic Plan for National Resilience and
4 Expressway companies refer to East Nippon Expressway Co., Ltd., Metropolitan Expressway Co., Ltd., Central Nippon Expressway Co., Ltd., West Nippon Expressway Co., Ltd., Hanshin Expressway Co., Ltd. and Honshu-Shikoku Bridge Expressway Co., Ltd. 5 This is an expressway business scheme of Japan Expressway Holding and Debt Repayment Agency (hereinafter referred to as JEHDRA) and expressway companies. Under this scheme, expressway companies are responsible for the construction, maintenance and management of expressways and JEHDRA repays debts using fees from leasing expressway assets. 6 Road area / administrative area ×100
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the Fundamental Traffic Safety Program formulated by the national government. The objectives of eligible projects are to address social issues recognized by the national, prefectural and municipal governments.
■ Social issues surrounding the public corporation, initiatives and positive social outcomes
Management and social issues The public Positive social surrounding the corporation's Summary of initiatives outcomes public initiatives corporation
New construction Provide better access by adding and Better and renovation of improving expressway entrances and convenience and expressways exits and construct and improve regional routes to demonstrate expressway revitalization network functions, as indicated in the (Development of Nagoya Station Area Transportation infrastructure for Expansion of Infrastructure Development Policy logistics and economic (formulated by Nagoya City) interaction of activities into a – Further enhance the expressway people to wider area and an network revitalize the increase in the . Provide better access to other region) non-resident public transportation systems population such as Nagoya Station and Chubu International Airport . Ease traffic jams on the Ring Route, etc. . Secure alternative routes . Enhance expressway network functions around Nagoya City
Measures to Longer life of extend the life of infrastructure Aging of road expressways Carry out projects based on a (Structures structures large-scale repair plan remaining sound over the long term)
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Maintenance and Achieve more advanced and efficient Maintain management of maintenance and management and expressway expressways ensure steady inspections and repairs functions – Make maintenance and (Structures management activities more remaining safe advanced and efficient using new and sound over technologies the long term) – Ensure steady inspections and increase accuracy – Implement maintenance and repair works in a planned manner – Conduct well-planned, intensive works to repair pavement, expansion devices and lights and improve road structures, etc.
Better responses Maintain functions to natural at the time of disasters caused Improve disaster preparedness facilities disasters Heightened risk of by climate to ensure business continuity during (Ensure massive change, etc. disasters customersʼ safety earthquakes and – Renovate the public corporationʼs and roadsʼ intensifying buildings for repair works emergency meteorological – Install power generators at transport disasters disaster preparedness facilities functions in the event of disasters)
Implementation Take well-planned measures to ensure Ensure traffic of further traffic traffic safety on sections with many safety and safety measures accidents increase the and expansion of Prevent wrong-way driving and comfort of driving road traffic pedestrians entering expressways (Strengthen Diversifying and information Increase the visibility of road traffic safety evolving customer provision information boards measures and the needs provision of information in the face of the graying society and diverse users, etc.)
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(2) Goals of Eligible Projects Are Positive Social Outcomes
The benefits and impacts of eligible projects are summarized below.
Benefits and impacts of eligible projects
Direct7 Traffic jams will be eased on the Ring Road, etc. benefits Alternative routes and emergency transport functions will be secured in the event of disasters. Renovation of disaster preparedness facilities will ensure business continuity during disasters. Expressway network functions will be enhanced around Nagoya City. Expressway structures will have a longer life and remain safe and sound. Traffic safety measures will be strengthened in the face of diverse users.
Indirect The expressway network will facilitate logistics and interaction of people not benefits only in the Nagoya metropolitan area but in a wider area, which will revitalize the regional economy.
Longer life of expressway structures will limit disaster damage to users and local residents and reduce local governmentsʼ burden.
Indirect Local governments and residents in the area where the project takes place may impacts and not have their opinions reflected.
responses ⇒ When formulating plans, the public corporation holds hearings for related local governments and informational meetings for local residents. Unreasonable tolls may prevent fair use.
⇒ The Act on Special Measures concerning Road Construction and Improvement is based on the principle of full cost recovery, which requires expressway companies to fund all construction, maintenance and repair costs and interest payments, etc. with the tolls they receive during the toll collection period, and the principle of fairness and reasonableness, which calls for reasonable toll levels compared to fares for other transportation modes and consumer prices. These principles ensure that appropriate tolls will be set. Furthermore, to set or revise tolls, the public corporation needs to prepare a proposal that reflects the results of examination and discussion by a toll issue study panel
7 “Direct” relates to the users of eligible projects, “indirect” relates to the society in which eligible projects are conducted, and “extensive” relates to the society that extends beyond the society in which eligible projects are conducted. For details, see “Second Opinions for Social Finance Frameworks” at https://www.r-i.co.jp/rating/products/esg/so_social_jpn.pdf.
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composed of academic experts, etc. and obtain the consent of road management authorities Aichi Prefecture and Nagoya City and the approval of the MLIT Minister. The public corporationʼs failure to conduct appropriate business management may affect prefectural and city finances. ⇒ The public corporation established a Nagoya Expressway Public Corporation Management Council8 to discuss important matters concerning the management of the public corporation and thereby promote proper and efficient project implementation. The chairman of the council is the Governor of Aichi Prefecture, and its members are the Mayor of Nagoya City, the Director-General of the Tokai Local Finance Bureau, the Director-General of the Chubu Regional Development Bureau, the Chairman of the Nagoya Chamber of Commerce & Industry, the Chairman of the Nagoya Bankers
Association and the President of Nagoya Expressway Public Corporation.
Extensive Project implementation may impose environmental burdens. impacts and ⇒ Besides an environmental assessment at the stage of city planning, the
responses public corporation implements various initiatives. Specifically, it installs sound insulation walls, equips the back of elevated roads with sound absorbing boards and lays high-performance pavement that reduces noise. Other
examples are energy saving measures, such as partial coverage of power consumption at toll booths by renewable energy and switching to LED road lighting, and contribution to securing biodiversity by adopting road lighting
that helps protect Luciola parvula (himebotaru) around the expressway.
In addition, the public corporation contributes to CO2 emission reductions by, for instance, increasing traffic speed through less traffic jams and promoting eco-driving based on the evaluation of the road network including local roads in the Nagoya metropolitan area.
8 The meetings held and meeting materials are available at https://www.nagoya-expressway.or.jp/kousin/topics/uneikaigi.html.
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Social outcomes are positive
As shown in the process of expressway projects on the next page, a project is evaluated at each stage. Before a new project is adopted, the MLIT evaluates it. The prefecture or the city decides city planning after conducting an environmental impact assessment to consider the environmental impact of the project. A basic plan and a development plan are formulated by the public corporation and approved by the MLIT Minister. After the project is started, the public corporation conducts re-evaluation based on the MLIT’s re-evaluation guidelines and ex-post evaluation based on the MLIT’s ex-post evaluation guidelines.
In the evaluation, benefits and costs of a project are calculated to verify that benefits exceed costs. Routes are compared and examined, including the utilization of the existing roads. In doing so, evaluation items, such as the nature of routes, structural issues, social conditions and economic efficiency, are used. The evaluation confirms that the project contributes to positive social outcomes.
Eligible projects will not only provide direct benefits, such as easing traffic jams, securing emergency transport functions in the event of disasters and strengthening traffic safety measures in the Nagoya metropolitan area, but deliver indirect benefits in a wider area, including facilitating logistics and interaction of people and reducing personal and property damage and local governments’ burden caused by a disaster. The implementation of eligible projects may have indirect impacts such as failure to reflect opinions of local governments and residents, unreasonable tolls to be set and implications for prefectural and city finances. Even so, appropriate steps are taken for these possibilities. As regards environmental burdens that may be imposed by project implementation, sufficient measures are in place, including a prior environmental impact assessment and various environmental measures. Addressing eligible projects is considered to help solve social issues, and R&I has evaluated that they will provide positive outcomes for the society as a whole.
Checks against project categories illustrated in SBP2020
Eligible projects correspond to the project category of “Affordable basic infrastructure” illustrated in SBP2020, which targets the “General public” primarily in the Nagoya metropolitan area, but targets “Vulnerable groups, including as a result of natural disasters” in particular when a disaster occurs.
Proceeds will be allocated to the public corporation’s expressway projects (eligible projects) to finance or refinance the cost of new construction and renovation of expressways. As an agency that executes policies of Aichi Prefecture and Nagoya City, the public corporation not only contributes to solving social issues relating to road traffic in the Nagoya metropolitan area, but addresses social issues in the country, such as aging infrastructure. Eligible projects will deliver direct benefits, including eliminating traffic jams and securing emergency transport routes in the event of disasters, and indirect benefits, such as facilitating logistics and interaction of people in a wider area through a road network. In the implementation of eligible projects, appropriate steps are taken for local requests and expressway tolls. Although there may be an environmental impact over an extensive area, proper measures are in place, such as a prior environmental impact assessment and environmental measures in project implementation. R&I has evaluated that eligible projects will provide positive outcomes for the society as a whole. Eligible projects correspond to the project category of “Affordable basic infrastructure” illustrated in SBP2020, which targets the “General public” primarily in the Nagoya metropolitan area, but targets “Vulnerable groups, including as a result of natural disasters” in particular when a disaster occurs.
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■ Process overview of expressway projects Entity Project flows Evaluation and others at each stage
National, City planning Environmental impact assessment prefectural (by local governments) (by local governments) & municipal govern- Evaluation at adoption of a new ments project (by national government)
Basic plan
Development plan
Start of the project
Issuer
Re-evaluation
Commencement of service
Ex-post evaluation
Administration
Inspection including repair
[Source: Prepared by R&I from disclosed documents of the MLIT and the public corporation]
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2. Process for Project Evaluation and Selection
(1) Incorporation into Comprehensive Objectives, Strategies and so on
As stated in the articles of incorporation, the public corporation was founded to contribute to the promotion of local residents’ welfare and the growth of the industrial economy. To this end, it aims to achieve smoother traffic by facilitating the development of arterial roads in this region through the comprehensive and efficient execution of new construction, renovation, maintenance, repair and other management of designated urban expressways.
The public corporation’s medium-term management plan for the implementation of expressway projects is formulated based on its objectives, management philosophy and a long-term (10-year) outlook.
The long-term outlook encompasses (1) economic activities expanding into a wider area and the growing non-resident population, (2) diversifying and evolving customer needs, (3) aging road structures and (4) a heightened risk of massive earthquakes and intensifying meteorological disasters. Goals for each of these factors are shown in the medium-term management plan.
(2) Criteria for Project Evaluation and Selection
The public corporation’s expressway projects are carried out based on expressway-related laws, such as the Local Road Public Corporation Act and the Act on Special Measures concerning Road Construction and Improvement, city planning decided by Aichi Prefecture or Nagoya City, and the Traffic Policy Basic Plan and the Basic Plan for Extending Service Life of Infrastructure formulated as national policies. When city planning is decided, it is necessary to pay due consideration to negative impacts on the natural environment and the living environment in accordance with the Environmental Impact Assessment Act.
For a new project to be selected, the MLIT evaluates it from the perspectives of costs and benefits, investment efficiency and the project’s impacts, etc. based on the Cost-Benefit Analysis Manual and other materials under the Guideline for Implementing Evaluation When Adopting New Projects. These are designed to conduct comprehensive evaluation, taking account of impacts on the area along the route and surrounding areas, with quantitative evaluation to be made on social benefits where possible. In individual project management after the start of the project, if there is a subsequent negative impact on the area along the route or others, measures will be taken such as explanation to residents and change of the construction method, while the project will be re-evaluated. In both stages of adopting and implementing projects, there is a framework to examine impacts of eligible projects on the environment and society.
Regarding the repair of expressways, the public corporation formulated a Nagoya Expressway Public Corporation’s Plan for Extending Service Life of Infrastructure (Action Plan), which clarifies the direction of medium to long-term initiatives to ensure the maintenance and management of its expressways, and the Nagoya Expressway Public Corporation’s Plan for Individual Facilities, which is used to inspect and repair each facility, based on the national government’s Basic Plan for Extending Service Life of Infrastructure. It also laid out a Large-scale Repair Plan to keep aging structures in a healthy condition into the future. With these plans, the public corporation carries out a maintenance and management cycle, where it inspects and repairs facilities in a well-planned and reliable manner and reflects the results in its next inspection and repair plans. With respect to inspections, the revised Enforcement Regulations for the Road Act in July 2014 require conducting close visual inspections of road structures once every five years.
(3) Process for Project Evaluation and Selection
When expressway projects are designed, city planning, a basic plan and a development plan are formulated based on expressway-related laws.
Nagoya City or Aichi Prefecture conducts an environmental impact assessment in accordance with the Environmental Impact Assessment Act and prepares a city planning proposal as set forth in the City
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Planning Act. After the hearing of related municipalities’ opinions, the city planning proposal is announced and inspected. The proposal is then submitted to and deliberated at the city planning councils of Aichi Prefecture and Nagoya City, which are composed of academic experts, etc., and the city planning is decided. The city planning project starts when the MLIT Minister approves the project. This process, which includes discussion and public hearings by a special committee consisting of academic experts, etc. and hearings from related municipalities, is applied to subsequent revisions of the city planning as well.
The basic plan is stipulated in the public corporation’s articles of incorporation as a “basic plan for road development” in accordance with the Local Road Public Corporation Act. The plan sets forth the routes for which the public corporation, as a principal entity, newly constructs designated urban expressways to collects tolls and specifies the sections it manages. The basic plan is decided with the approval of the assemblies of Aichi Prefecture and Nagoya City, the consent of the road management authorities9 and the approval of the MLIT Minister.
In accordance with the Act on Special Measures concerning Road Construction and Improvement, the development plan specifies (1) route names and sections to be constructed or renovated, (2) the number of lanes, (3) design speed, (4) locations and facilities for connection and (5) cost estimates for new construction or renovation. To construct or renovate designated urban expressways and collect tolls, the public corporation obtains the approval of the assemblies of Aichi Prefecture and Nagoya City and the consent of the road management authorities. It then submits an application form that includes a development plan to the MLIT Minister and obtains the Minister’s approval.
The MLIT adopts a new project after examining the project’s costs and benefits, impacts and the environment where the project will take place. The public corporation is responsible for re-evaluation after the start of the project. A committee consisting of academic experts, etc. discusses re-evaluation including changes in project details responding to subsequent events.
To implement an expressway project, the public corporation prepares a project plan and a budget and financing plan based on each of the above-mentioned plans, with its management philosophy in mind. The prepared plans are approved by the Governor of Aichi Prefecture and the Mayor of Nagoya City.
What to repair in expressway projects is selected based on the results of inspections conducted in accordance with the Nagoya Expressway Public Corporation’s Plan for Individual Facilities. The inspections are outsourced, but the expertise is ensured by requiring qualifications and similar experience for each inspection target.
The public corporation’s expressway projects are designed based on the basic plan and development plan it formulates following the decision on city planning by Aichi Prefecture or Nagoya City. For the basic plan and development plan, the public corporation obtains the approval of the assemblies of Aichi Prefecture and Nagoya City, the consent of the road management authorities and the approval of the MLIT Minister. With an evaluation approach and criteria determined and eligible projects selected through appropriate processes, both third-party characteristics and expertise are ensured.
3. Management of Proceeds
Proceeds will be allocated to projects for road construction and others as classified under the Local Road Public Corporation Act. The planning division of the public corporation’ corporate planning department manages proceeds appropriately using the accounting system of the general affairs department’s accounting division. Proceeds will be allocated within one year of bond issuance.
Financial statements and reports, including the allocation of proceeds, will be audited by the auditor and submitted to the Governor of Aichi Prefecture and the Mayor of Nagoya City.
9 Aichi Prefecture and Nagoya City for expressways managed and controlled by the public corporation
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A material change, if any, in the allocation of proceeds after all proceeds have been allocated will be disclosed on the public corporation’s website as needed.
Until all proceeds are allocated, unallocated proceeds will be held as cash or cash equivalents or invested as specified in the articles of incorporation (e.g., Japanese government bonds, local government bonds, and other securities designated by the MLIT Minister; deposits with banks, as well as with other financial institutions designated by the MLIT Minister).
Proceeds will be managed appropriately using the public corporation’s accounting system and allocated to projects for road construction, etc. that are separated from other projects according to laws and regulations. Until allocated, proceeds will be held as cash or cash equivalents. Financial statements and reports, including the allocation of proceeds, will be audited by the auditor and submitted to the Governor of Aichi Prefecture and the Mayor of Nagoya City. Consequently, R&I considers that proceeds will be managed appropriately.
4. Reporting
(1) Overview of Disclosure
Reporting will be made as follows: Items Timing Method
Allocation of proceeds Amounts allocated and unallocated Annual The public For financing or refinancing corporation’s website
Those relating to overall activities As needed The public The public corporation’s profile corporation’s website
Regular reporting The public corporation’s initiatives Medium-term management plan
Those relating to financial conditions Annual Financial information and investor relations
Impact reporting Annual and as needed
Disclosures should be made promptly when a significant change is made to the proceeds allocation plan or when a significant change occurs in the allocation status after proceeds are allocated.
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(2) Impact Reporting
With regard to the positive social outcomes of expressway projects, the public corporation will disclose information on the outputs and outcomes shown in the table below on its website.
The disclosure consists of output indicators, which show that the progress in expressway construction, maintenance and management has allowed the expressway network to be formed and maintained, and outcome indicators that can primarily be found in reports from the members of the Nagoya Expressway Public Corporation Management Council, including traffic volumes and traffic jam conditions relating to the use of the expressway network and the number of traffic accidents associated with safety measures. Accordingly, the public corporation discloses information on the positive social outcomes of expressway projects.
The public corporation established a Nagoya Expressway Public Corporation Management Council to report important matters concerning the management of the public corporation and thereby promote proper and efficient business operations. Reports that include positive social outcomes are disclosed on its website. https://www.nagoya-expressway.or.jp/kousin/topics/uneikaigi.html
Management The public and social corporation's issues initiatives Information reported surrounding the public corporation
Expansion of Progress of new construction and renovation economic Routes opened activities into a New construction https://www.nagoya-expressway.or.jp/kosya/kosya/history.ht wider area and and renovation of ml an increase in expressways Route names and a map for the development plan the https://www.nagoya-expressway.or.jp/kosya/jigyo/corp/plan. non-resident html population
Progress of large-scale repairs Large-scale repair plan for the Nagoya Expressway Measures to https://www.nagoya-expressway.or.jp/news/detail/513 extend the life of Implementation of the large-scale repair plan (extended use Aging of road expressways through completion of large-scale repairs) structures https://www.nagoya-expressway.or.jp/kousin/topics/pdf/siryo 2020.pdf
Maintenance and Progress of maintenance and management management of Initiatives to maintain and manage structures expressways https://www.nagoya-expressway.or.jp/kosya/ijikanri/index.ht
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ml More advanced and efficient maintenance and management activities and steady inspections and repairs https://www.nagoya-expressway.or.jp/kousin/topics/pdf/siryo 2020.pdf (The percentages of inspected bridges, secure road structures and roads enabling comfortable driving)
Better responses to natural disasters such as a Nankai Trough Heightened earthquake risk of massive Better responses Improvement in disaster preparedness facilities to ensure earthquakes to natural business continuity during disasters and disasters caused Renovation of the public corporationʼs buildings for repair intensifying by climate works and installation of power generators at disaster meteorological change, etc. preparedness facilities disasters https://www.nagoya-expressway.or.jp/kousin/topics/pdf/siryo 2020.pdf
Implementation of further traffic safety measures Continuous implementation of traffic safety measures The total number of accidents and the percentage of fatal and injury accidents Implementation Prevention of wrong-way driving and pedestrians entering of further traffic Diversifying expressways safety measures and evolving The number of points where measures have been taken and expansion of customer https://www.nagoya-expressway.or.jp/kousin/topics/pdf/siryo road traffic needs 2020.pdf information Expansion of road traffic information provision provision Better visibility of road information boards Promotion of ETC2.0 https://www.nagoya-expressway.or.jp/kousin/topics/pdf/siryo 2020.pdf
The public corporation will disclose the allocation of proceeds and the allocation method (financing or refinancing) to investors on its website annually. With regard to impact reporting, it will disclose output indicators and outcome indicators, including the progress of expressway projects, on an item-by-item basis annually or as needed. R&I considers the public corporation’s reporting to be appropriate.
14/15 Second Opinion
[Disclaimer] Second Opinion is not the Credit Rating Business, but one of the Ancillary Businesses (businesses excluding Credit Rating Service but are ancillary to Credit Rating Activities) as set forth in Article 299, paragraph (1), item (xxviii) of the Cabinet Office Ordinance on Financial Instruments Business, etc. With respect to such business, relevant laws and regulations require measures to be implemented so that activities pertaining to such business would not unreasonably affect the Credit Rating Activities, as well as measures to prevent such business from being misperceived as the Credit Rating Business. Second Opinions are R&I's opinions on the alignment of a framework, formulated by companies etc. to raise funds for the purpose of environmental conservation and social contribution, with the principles etc. compiled by public organizations or private organizations related to the relevant financing as of the date of assessment. Second Opinions do not address any matters other than the alignment (including but not limited to the alignment of a bond issue with the framework and the implementation status of the project subject to financing). Second Opinions do not certify the outcomes and other qualities of the projects subject to the financing. Hence, R&I will not be held responsible for the effectiveness of the projects, including their outcomes. Second Opinions are not, in any sense, statements of current, future, or historical fact and should not be interpreted as such, and Second Opinions are not a recommendation to purchase, sell, or hold any particular securities and do not constitute any form of advice regarding investment decisions or financial matters. Second Opinions do not address the suitability of an investment for any particular investor. R&I issues Second Opinions based on the assumption that each investor will investigate and evaluate the securities which they plan to purchase, sell, or hold for themselves. All investment decisions shall be made at the responsibility of the individual investor. The information used when R&I issues Second Opinions is information that R&I has determined, at its own discretion, to be reliable. However, R&I does not undertake any independent verification of the accuracy or other aspects of that information. R&I makes no representation or warranty, express or implied, as to the accuracy, timeliness, adequacy, completeness, merchantability, fitness for any particular purpose, or any other matter with respect to any such information. R&I is not responsible or liable in any way to any party, for all or any damage, loss, or expenses arising out of or in relation to errors, omissions, inappropriateness of, or insufficiencies in the information used when issuing Second Opinions, or opinions in Second Opinions, or arising out of or in relation to the use of such information or Second Opinions (regardless of the nature of the damage, including direct, indirect, ordinary, special, consequential, compensatory, or incidental damage, lost profits, non-monetary damage, and any other damage, and including expenses for attorneys and other specialists), whether in contract, tort, for unreasonable profit or otherwise, irrespective of negligence or fault of R&I. All rights and interests (including patent rights, copyrights, other intellectual property rights, and know-how) regarding Second Opinions belong to R&I. Use of Second Opinions, in whole or in part, for purposes beyond personal use (including reproducing, amending, sending, distributing, transferring, lending, translating, or adapting the information), and storing Second Opinions for subsequent use, is prohibited without R&I's prior written permission. As a general rule, R&I issues a Second Opinion for a fee paid by the issuer. Japanese is the official language of this material and if there are any inconsistencies or discrepancies between the information written in Japanese and the information written in languages other than Japanese the information written in Japanese will take precedence.
[Expertise and Third-Party Characteristics] R&I has launched the R&I Green Bond Assessment business in 2016, and since then, R&I has accumulated knowledge through numerous evaluations. Since 2017, R&I has been participating as an observer in the Green Bond Principles and Social Bond Principles, which have their own secretariat at the International Capital Market Association (ICMA). It also has been registered since 2018 as an Issuance Supporter (external review entity) of the Financial Support Programme for Green Bond Issuance, a project by the Ministry of the Environment. The R&I assessment method and results can be found on the R&I website (https://www.r-i.co.jp/en/rating/esg/index.html). There is no capital or personal relationship between R&I and the fundraiser that could create a conflict of interest.
15/15
Social Bond / Social Bond Programme
External Review Form
Section 1. Basic Information
Issuer name: Nagoya Expressway Public Corporation Social Bond ISIN or Issuer Social Bond Framework Name, if applicable: Social Finance Framework Independent External Review provider’s name: Rating and Investment Information, Inc. Completion date of this form: October 08, 2020 Publication date of review publication: October 08, 2020 [where appropriate, specify if it is an update and add reference to earlier relevant review]
Section 2. Review overview
SCOPE OF REVIEW
The following may be used or adapted, where appropriate, to summarise the scope of the review.
The review assessed the following elements and confirmed their alignment with the SBPs:
☒ Use of Proceeds ☒ Process for Project Evaluation and Selection ☒ Management of Proceeds ☒ Reporting
ROLE(S) OF INDEPENDENT REVIEW PROVIDER
☒ Second Party Opinion ☐ Certification ☐ Verification ☐ Scoring/Rating ☐ Other (please specify):
Note: In case of multiple reviews / different providers, please provide separate forms for each review.
EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)
Latest update: June 2020
Section 3. Detailed review
Reviewers are encouraged to provide the information below to the extent possible and use the comment section to explain the scope of their review.
1. USE OF PROCEEDS
Overall comment on section (if applicable): For details, please refer to “1. Use of Proceeds” in the report above.
Use of proceeds categories as per SBP: ☒ Affordable basic infrastructure ☐ Access to essential services
☐ Affordable housing ☐ Employment generation / programs designed to prevent and/or alleviate unemployment stemming from socioeconomic crises
☐ Food security and sustainable food systems ☐ Socioeconomic advancement and empowerment
☐ Unknown at issuance but currently expected ☐ Other (please specify): to conform with SBP categories, or other eligible areas not yet stated in SBPs
If applicable please specify the social taxonomy, if other than SBPs:
Target populations:
☐ Living below the poverty line ☐ Excluded and/or marginalised populations and /or communities
☐ People with disabilities ☐ Migrants and /or displaced persons
☐ Undereducated ☐ Underserved, owing to a lack of quality access to essential goods and services
☐ Unemployed ☐ Women and/or sexual and gender minorities
☐ Aging populations and vulnerable youth ☐ Other vulnerable groups, including as a result of natural disasters ☒ Other (please specify):General public
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2. PROCESS FOR PROJECT EVALUATION AND SELECTION
Overall comment on section (if applicable): For details, please refer to “2. Process for Project Evaluation and Selection” in the report above.
Evaluation and selection
☒ Credentials on the issuer’s social ☒ Documented process to determine that objectives projects fit within defined categories ☒ Defined and transparent criteria for ☒ Documented process to identify and manage projects eligible for Social Bond proceeds potential ESG risks associated with the project ☒ Summary criteria for project evaluation ☐ Other (please specify): and selection publicly available
Information on Responsibilities and Accountability
☒ Evaluation / Selection criteria subject to ☐ In‐house assessment external advice or verification ☐ Other (please specify):
3. MANAGEMENT OF PROCEEDS
Overall comment on section (if applicable): For details, please refer to “3. Management of Proceeds” in the report above.
Tracking of proceeds:
☒ Social Bond proceeds segregated or tracked by the issuer in an appropriate manner ☒ Disclosure of intended types of temporary investment instruments for unallocated proceeds ☐ Other (please specify):
Additional disclosure:
☐ Allocations to future investments only ☒ Allocations to both existing and future investments ☐ Allocation to individual disbursements ☐ Allocation to a portfolio of disbursements ☐ Disclosure of portfolio balance of ☐ Other (please specify): unallocated proceeds
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4. REPORTING
Overall comment on section (if applicable): For details, please refer to “4. Reporting” in the report above.
Use of proceeds reporting:
☐ Project‐by‐project ☐ On a project portfolio basis ☒ Linkage to individual bond(s) ☐ Other (please specify): Information reported: ☒ Allocated amounts ☐ Social Bond financed share of total investment
☐ Other (please specify): Frequency: ☒ Annual ☐ Semi‐annual
☐ Other (please specify): Impact reporting: ☒ Project‐by‐project ☐ On a project portfolio basis ☐ Linkage to individual bond(s) ☐ Other (please specify): Frequency:
☒ Annual ☐ Semi‐annual
☐ Other (please specify): Information reported (expected or ex‐post):
☐ Number of beneficiaries ☐ Target populations
☒ Other ESG indicators (please specify): Means of Disclosure
☐ Information published in financial report ☐ Information published in sustainability report ☐ Information published in ad hoc ☒ Other (please specify):Issuer’s Website documents ☐ Reporting reviewed (if yes, please specify which parts of the reporting are subject to external review):
Where appropriate, please specify name and date of publication in the useful links section.
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USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.) 1. The evaluation methodology and services https://www.r‐i.co.jp/en/rating/products/esg/index.html
2. Evaluation performance (1) Green Finance https://www.r‐i.co.jp/en/rating/esg/greenfinance/index.html
(2) Sustainability Finance https://www.r‐i.co.jp/en/rating/esg/sustainabilityfinance/index.html
(3) Social Finance https://www.r‐i.co.jp/en/rating/esg/socialfinance/index.html
SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE Type(s) of Review provided:
☐ Second Party Opinion ☐ Certification ☐ Verification ☐ Scoring/Rating ☐ Other (please specify):
Review provider(s): Date of publication:
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ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE SBP
1. Second Party Opinion: An institution with social expertise, that is independent from the issuer may issue a Second Party Opinion. The institution should be independent from the issuer’s adviser for its Social Bond framework, or appropriate procedures, such as information barriers, will have been implemented within the institution to ensure the independence of the Second Party Opinion. It normally entails an assessment of the alignment with the Social Bond Principles. In particular, it can include an assessment of the issuer’s overarching objectives, strategy, policy and/or processes relating to social sustainability, and an evaluation of the social features of the type of projects intended for the Use of Proceeds. 2. Verification: An issuer can obtain independent verification against a designated set of criteria, typically pertaining to business processes and/or social criteria. Verification may focus on alignment with internal or external standards or claims made by the issuer. Also, evaluation of the socially sustainable features of underlying assets may be termed verification and may reference external criteria. Assurance or attestation regarding an issuer’s internal tracking method for use of proceeds, allocation of funds from Social Bond proceeds, statement of social impact or alignment of reporting with the SBP, may also be termed verification. 3. Certification: An issuer can have its Social Bond or associated Social Bond framework or Use of Proceeds certified against a recognised external social standard or label. A standard or label defines specific criteria, and alignment with such criteria is normally tested by qualified, accredited third parties, which may verify consistency with the certification criteria. 4. Social Bond Scoring/Rating: An issuer can have its Social Bond, associated Social Bond framework or a key feature such as Use of Proceeds evaluated or assessed by qualified third parties, such as specialised research providers or rating agencies, according to an established scoring/rating methodology. The output may include a focus on social performance data, process relative to the SBP, or another benchmark. Such scoring/rating is distinct from credit ratings, which may nonetheless reflect material social risks.
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