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Principal Global Investors

PRI reporting framework 2018

Export Public Responses

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Occupier engagement

PR 12. Proportion of property occupiers that were engaged with

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12.1. Indicate the proportion of property occupiers your organisation, and/or your property managers, engaged with on ESG issues during the reporting year.

(in terms of number of occupiers)

12.2. Indicate if the following practises and areas are typically part of your, and/or your property managers’, occupier engagements.

12.3. Additional information. [Optional]

Promoting sustainability to our tenants is part of our Pillars of Responsible Property Investing program for our property managers. They are directed to develop an education, communication and engagement plan for the tenants. We expect property managers to encourage tenants to implement sustainable building practices within their business operations, provide tenants with information and tools on benchmarking, and actively promote and enforce sustainable building practices and initiatives. To increase engagement and enforcement, we also strive to incorporate green lease clauses into our standard lease form as well as incorporate sustainability standards into the building rules and regulations and the tenant improvement guidelines.

Tenant engagement programs are specific to each building and vary by market. Property managers are asked to include tenant and community engagement in their sustainability plans.

In 2016, we created the PRPI Handbook and Addendum, a comprehensive set of resources that includes property manager responsibilities as they relate to tenant engagement in addition to other responsible property investing policies and guidance materials. Components of the Handbook and Addendum include: Broker education materials, a Tenant/Resident Guide to Saving Energy and Water, Vendor education sheets, and community outreach recommendations to better inform and organize participation by stakeholders on environmental, social, and governance issues related to the property.

PR 13. Proportion of green leases or MOUs referencing ESG issues

13.1. Indicate the proportion of all leases signed during the reporting year that used green leases or the proportion of Memoranda of Understandings (MoUs) with reference to ESG issues.

(in terms of number of leases or MoUs)

13.2. Additional information.

In 2017, we completed and incorporated revisions to our standard Green Leasing Language. This new language allows us to: pass through energy efficiency-related capital expenses to tenants, require disclosure of tenant utility consumption information for the purposes of whole building benchmarking in Portfolio Manager, require tenants to purchase ENERGY STAR and/or WaterSense certified equipment and fixtures during tenant improvements, and install submeters to track tenant space energy consumption. As a result of these efforts, we earned the 2017 Green Lease Leaders Award from the Institute of Market Transformation and the U.S. Department of Energy. This leasing language is currently being rolled out across our portfolios.

Principal Real Estate Investors encourages the use of green lease language for its transactions and is developing further guidance for property managers, brokers, and staff. We have also adjusted our standard lease language and direction to property managers to ensure that we and our building occupants remain in compliance with local energy disclosure mandates as they become increasingly prevalent. We recognize that utility costs are part of the total cost of occupancy for tenants and encourage leasing brokers and property managers to recognize this and factor into any lease negotiations.

Lease language is modified to fit specific situations, property types and market conditions. More comprehensive language may be used especially if the building is LEED certified or intends to become LEED certified. The building rules and regulations are also modified to address building standards and building operations and practices.

All leases are required to include the following minimal information:

Energy and Environmental Initiatives. Tenant shall fully cooperate with Landlord in any programs in which Landlord may elect to participate relating to the Building's (i) energy efficiency, management and conservation; (ii) water conservation and management; (iii) environmental standards and efficiency; (iv) recycling and reduction programs; and/or (v) safety, which participation may include, without limitation, the Leadership in Energy and Environmental Design (LEED) program and related Green Building Rating System promoted by the U.S. Green Building Council. All carbon tax credits and similar credits, offsets and deductions are the sole and exclusive property of Landlord.