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Legal & General Investment Management (Holdings)

PRI reporting framework 2018

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Post-investment (monitoring and active ownership)

Overview

PR 08. ESG issues in post-investment activities

New selection options have been added to this indicator. Please review your prefilled responses carefully.

08.1. Indicate if your organisation, and/or property managers, considers ESG issues in post-investment activities relating to your property assets.

08.2. Indicate whether your organisation, and/or property managers, considers ESG issues in the following post-investment activities relating to your property assets.

          We ensure ESG targets and monitoring are placed in our managing agents supply chain and measures social value across our contracts
        

08.3. Describe how your organisation, and/or property managers, considers ESG issues in post-investment activities related to your property assets.

Our policy is to employ best practice techniques in all areas of sustainability in order to minimise environmental impacts, maximise social benefits and enhance asset value. Reducing environmental impacts allows us to deliver lower service charge for tenants and better returns for investors, avoiding unnecessary expenses arising from purchases, disposals or ever growing, sustainability legislation.  Best practice tenant liaison on sustainability issues, also allows us to develop better relationships with tenants and understand their future needs, so leading to improved tenant retention and possibly attraction.  A number of comprehensive initiatives have already been put in place, to strengthen our portfolio, as follows:

  • Energy Performance Certificates (EPC’s) on all applicable assets
  • 100% of service charge properties with IS0 14001 accreditation.
  • Adopting ‘green’ clauses into our standard lease since 2011.
  • BREEAM excellent on all new developments and where possible on major refurbishments.
  • Annual Reporting to GRESB, and Better Buildings Partnerships Real Estate Environment benchmarking (REEB).
  • Asset Sustainability Plan (ASP) for all assets covering a long term strategic view
  • Quarterly Sustainability Reports – for each asset and per fund, showing performance against targets.
  • Annual sustainability action plans (ASAPs) with quanitiave targets and quartelry reproting for every asset.
  • Tenant Liaison procedures for sharing data and progressing annual action plans.
  • Social value studies, health and well being  assessments and embedded carbon studies

Property monitoring and management

PR 09. Proportion of assets with ESG targets that were set and monitored

New selection options have been added to this indicator. Please review your prefilled responses carefully.

09.1. Indicate the proportion of property assets for which your organisation, and/or property managers, set and monitored ESG targets (KPIs or similar) during the reporting year.

(in terms of number of property assets)

09.2. Indicate which ESG targets your organisation and/or property managers typically set and monitor

Target/KPI
Progress Achieved
          20% carbon emission's saving against baseline by 2020
        
          20% water saving against baseline by 2020
        
          90% of waste diverted from landfill
        
          2017 performance achieved 22% saving
        
          2017 performance achieved 18% saving
        
          2017 performance showed 92% of waste was diverted from landfill
        
Target/KPI
Progress Achieved
          Ensure that every member of the property team has sustainability related objectives included in their formal Performance Objectives
        
          Ensure that all new employees in LGP undertake sustainability training and the existing employees receive regular updates on sustainability.
        
          Seek to have a positive impact on the communities around our assets and seek ways to measure social value. Report progress quarterly to the L&G
        
          All property related employees had ESG targets set as part of their appraisal process.
        
          All new employees received an ESG induction and bi-monthly workshops were held to update existing employees
        
          National methodology established for measuring Social Value with British Council of Offices.  L&G target set to measure Social Value of 20% of Real Assets
        
Target/KPI
Progress Achieved
          Engage with investors, and investment agents to gather stakeholder feedback and promoted our belief that sustainability will enhance returns and minimise risk.
        
          Engage with as many occupiers as possible to gather stakeholder feedback and implement Asset Sustainability Action Plans (ASAPs) to improve the sustainability of our assets.
        
          Continue to submit data to legal and general corporate sustainability benchmarking initiatives ie: FTSE 4Good, UNPRI, BITC etc and the Better Building Partnerships, Real Estate
        
          A full, independent stakeholder engagement exercise was carried out in 2017. A materiality assessment was undertaken in order to set the priorities for future targets.
        
          All occupiers were engaged with at least once during the year and all multi-let assets had an asset sustainability action plan, for which progress was
        
          All external surveys ( UNPRI, Carbon Disclosure Project, GRESB, FTSE4good and BBP REEB) were completed in order to assess our performance and compare it with
        

09.3. Additional information. [Optional]

Our Sustainable Property Investment Framework aligns our practice with the principles set out in our Responsible Property Investment Policy.  It is regularly reviewed by our Sustainable Property Investment Committee and is applied to all occupied properties. Our framework not only supports our ISO 14001 system, but ensures that best practice is adopted in all areas of sustainable property management. The framework consists of seven key stages, supported by procedures, templates and technical information, using the UK Better Building Partnership toolkits and other industry best practise standards, wherever possible.  The areas are  summarised below:

 

  •  Policies and objectives - Maintaining corporate, LGP, and fund policies and objectives across all aspects of responsible property investment.
  • Annual Action Plans and Targets - Setting sustainability targets at asset level, fund level and across LGP which align with our publically stated targets and established industry practise.  Using our Asset Sustainability Plan (ASP) toolkit for every asset to ensure that a long term sustainability plan is established for each asset.
  • Monitoring- Quantitative data monitoring (Carbon Emissions, Energy, Water and Waste) monitoring via an industry standard M&T system and qualitative data via reports from our  managing agents network of building and property managers.
  • Active management – Undertaking the actions detailed in our Annual Action Plans and fund level objectives. This includes maintaining ISO 14001 accreditation, energy audits, reduction measures, renewable energy installations, tenant liaison activities, biodiversity and transport plans, community engagement activities and supply chain management.
  • Capital works and Acquisitions – Following our policies and Implementation processes associated with all capital works and acquisitions, standard planned maintenance works.
  • Training and External benchmarking – This includes all reactive and industry participation, internal update training to the compulsory Sustainable Property Investment course, developed with the College of Estate Management, training of our key suppliers in our processes and various key technical training session. Participating in industry benchmarking initiatives such as GRESB, IPD EcoPAs, Upstream benchmarking, UPPRI and  BBP benchmarking.
  • Reporting, communication and industry participation – Disclosure of our performance via an annual report, and communication of our performance via industry case studies, journal articles and quarterly / annual fund reports to investors.  Participating in industry activities to help further legislation, industry techniques and general understanding of responsible property investment.

PR 10. Certification schemes, ratings and benchmarks (Private)


Property developments and major renovations

PR 11. Proportion of developments and refurbishments where ESG issues were considered

New selection options have been added to this indicator. Please review your prefilled responses carefully.

11.1. Indicate the proportion of active property developments and major renovations where ESG issues have been considered.

(by number of active property developments and refurbishments)

11.2. Indicate if the following ESG considerations are typically implemented and monitored in your property developments and major renovations.

11.3. Additional information. [Optional]

We focus on delivering the dual priorities of maximising return to investors and the improvement in sustainability credentials. In 2006 we overhauled our investment process to assess all properties against a set of stringent sustainability criteria, cementing the role such factors play in determining stock selection and shaping recommendations on improvements. Each planned development or refurbishment project is undertaken with a view to achieving the best sustainability outcomes. We have set guidance to direct project delivery teams to consider more sustainable design, including the selection of materials, which can significantly improve the sustainable performance of assets. 
All of our contractors are required to build sustainability considerations into all proposals and our process stipulates that at all stages of the project the highest consideration will be given to sustainability, striving to:
• Improve the sustainability profile of any project over and above any statutory requirement, minimum using best practice
• Achieve a minimum BREEAM Excellent on all new developments and major refurbishments
• Agree sustainability objectives on initial conception and continuously review, update and report on throughout delivery
This approach ensures that environmental and social considerations are fully integrated, whilst appropriate material design and selection from the outset reduces the future costs associated with making a property more sustainable. To build on our understanding of the impact of these works we have also commissioned a pilot study by the New Economics Foundation to calculate the Social Return on Investment arising from our development activities
When acting as a client, on behalf of any Fund, undertaking development activity, refurbishment or added value capital works is committed to a sustainable investment policy within the context of LGP’s Sustainable Property Investment Policy and the Group Corporate Social Responsibility (CSR) policy and objectives. The property development process, in its many forms, presents a unique combination of requirements, aspirations and constraints which sustainability forms an integral part of, and which will, inevitably, result in unique design and construction responses. Throughout this process the objective is that full consideration be given to the sustainability profile and impact of such activities, and where economically viable in the context of a property investment institution, improvements beyond any statutory requirement will always aim to be delivered. Our standard brief states that all stages of the project delivery process consideration will be given to sustainability in the context of the following principles:
• Seek to improve the sustainability profile of any project over and above any statutory requirement, minimum best practice or acceptable standard through identifiable and marketable documentation or accreditation e.g. EPC’s, DEC’s, BREEAM, LEED.
• Seek to agree sustainability targets and objectives from initial project conception, which are then continuously reviewed, updated and reported on throughout the project deliver process.
• Avoid over specification or complex design solutions and seek to achieve the optimum design response to anticipated end user requirements.
• Undertake BREEAM pre-assessments (or similar accredited assessment methodology) on all projects at feasibility stage and prepare recommendations for delivering sustainability improvements to the project.
For any new development or refurbishment process LGP has a set briefing process and contractor guidelines, which ensure a high quality of sustainability design and sustainability management during site works:
• Legal &  General Property:  Sustainability briefing guidelines  for new build and refurbishment projects
• Legal & General Property:  Sustainability  guidelines for consultants and contractors
Furthermore, all improvements made to any of the properties in LGP’s portfolio now require internal teams and external consultants to collectively plan for and demonstrate the optimal solution from a Sustainability perspective. All contractors are required to build sustainability into their proposals and supply chain processes.
 


Occupier engagement

PR 12. Proportion of property occupiers that were engaged with

New selection options have been added to this indicator. Please review your prefilled responses carefully.

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]

LGP believe that the only ways assets can become truly sustainable is if everybody involved in the ownership, management and occupation of an asset work together, in order to achieve common goals.  As such our tenant liaison programme is multi-faceted and involves different communication channels depending on the nature of each tenant and the extent of their in-house teams/ professional advisors.


For Multi-Let Properties we have found the following processes to be most effective:

  • Regular meetings –to discuss sustainability actions and issues on which landlord and tenant can co-operate. Minutes are taken and actions recorded.
  • Data – sharing of Quarterly Sustainability Reports on every asset with all involved (occupants and suppliers).
  • Annual Sustainability Action Plans (ASAP) – agreed with tenants and progress reported quarterly.
  • Tenants Handbooks - Guidance for tenants available on our website and sent to every tenant periodically.
  • Tenant refurbishments and fit outs (Licenses to Alter) –Plans checked by our managing agents and feedback given

For FRI tenants discussions are held with tenants by our managing agents and LGP asset managers. Our aim is to share data and establish if as a landlord we can help commission energy/ sustainability audits or help fund any improvement measures, where capital is a barrier.  All discussions and tenant comments are recorded on a handheld tool, which is then downloaded to a website.
 


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 order to ensure our principles and requirements are embedded from the start of the leasing process we amended our standard lease format in 2011 to include 'green' clauses, that demonstrate our continued commitment to sustainability. Our legal panel are issued with a memorandum of green lease principles that must be considered in the drafting of all standard leases, including clauses relating to the use of environmental contractors and upholding Energy Performance Certificates (EPCs). With a sustainability strategy centred on maximising the efficiency and sustainability of our portfolio, we recognise the fundamental importance of working with tenants to take these changes to the next level. Conditions set out in our green lease clauses include the agreement by both parties to meet regularly to discuss such issues as sharing energy, water and waste data and introducing annual action plans.

However despite that fact that we inlcude our green leases claues in ALL leases put to tenants legal advisors, the majority of tenants/ tenant's lawyers, delete them and refuse to sign them.  This is particularly true in the retail sector where tenants lawyers have reported that they do not have the fees provided to even be able to consider them!


Community engagement

PR 14. Proportion of assets engaged with on community issues

14.1. Indicate what proportion of property assets your organisation, and/or your property managers, engaged with the community on ESG issues during the reporting year.

(in terms of number of property assets)

14.2. Indicate if the following areas and activities are typically part of your, and/or your property managers’, community engagement.

14.3. Additional information.

Social sustainability for our properties is equally important for our business. We need to ensure that our investments deliver long-term benefits for the communities that live near, or work in, our properties, so we are committed to engaging with them throughout our ownership of the asset. Community engagement occurs at both our multi-let and development sites, where helping the environment and our neighbours encourage a long-term beneficial relationship.

Community engagement is measured quarerly in our Quarterly Sustainabiltiy Reports (QSRs) on each asset and across each fund .  All stakeholder feedback is assessed by our Project Green Committee charied by LGP's managing director.

LGP also has a board level committment to monitor community engagement and has recently partnered with the British Council of Offices to develop a Social Value Assessment Methodolgoy, which is alos being adopted by Local Authorities for their planning requirements.


The legacy of our decisions is felt by the communities that live near and work in our properties for many years after our initial investment. By engaging with communities throughout the life of the investments, we believe we can strengthen local areas and build engagement with our properties, in turn increasing the long-term value of the built environment. We also recognise that encouraging our employees to engage with community projects can play a role in their on-going training and development. Community engagement is embedded and encouraged throughout our operations.


We include community engagement in our Annual Action Plans and repeat all activities via the Quarterly Sustainability Reports (QSR). Encouraging community engagement, not only allows for additional interaction with tenants and our ability to support the local area, but can also lead to enhanced footfall in retail and tenant attraction.


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