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Legal & General Investment Management (Holdings)

PRI reporting framework 2018

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PR 01. Responsible Property Investment (RPI) policy

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01.1. Indicate if your organisation has a Responsible Property Investment (RPI) policy.

01.2. Provide a URL or attach the document

01.3. Provide a brief overview of your organisation’s approach to responsible investment in property, and how you link responsible investment in property to your business strategy.

Legal & General Property (LGP) has a strong and long-term commitment to sustainability and responsible investment, adopting or investing in pioneering solutions, Sustainability is now arguably one of the most critical agents of change in real estate ownership. From a fund management perspective, the drivers of behaviour are primarily about protecting the medium to long term value of portfolios, whilst adding value, and acting in a socially responsible manner.  We believe that through the integration of sustainable thinking and behaviour in everything we do, we will deliver enhanced returns to our investors.

Our commitment to sustainability is driven by the recognition that the built environment has a very significant impact on UK society and its ecosystem, including contributing almost half of the UK’s greenhouse gas emissions.  It is our belief that sustainability already sites alongside location, tenant, building size and building quality as a key factor in real estate’s value and performance and its importance will only increase over time.

As one of the UK’s largest landlords we are highly conscious of our responsibility to go over and above the industry norm of only ‘greening’ part of a property portfolio or specific funds, and instead aim to put environmental and social sustainability at the heart of all of our property investment decision making.  The fact that we apply leading edge environmental and social governance brings numerous benefits, many of which are economic.  Through consistently applying best practice sustainability criteria, across our entire portfolio, including our Environmental Management System (EMS), certified to ISO 14001 since 2005, we have experienced numerous benefits:

  • Reduced investor costs – associated with purchasing, disposal, insurance premiums, regulation and plant replacement, by forward planning and adhering to our process to minimise climate change risk
  • Reduced depreciations – through the creation of asset s that are ‘future proof’ , particularly with regard to the increased prioritisation of sustainably factors amongst tenants, investors and legislation such as the Energy Act 2011
  • Enhanced rental growth – through lower service charges, and minimising the effect of other costs to occupiers such as the Carbon Reduction Commitment (CRC).
  • Risk reduction –using our Asset Sustainability Plans (ASPs) allowing us to minimise risks and costs, by future proofing our assets against future legislation, obsolete equipment and ‘outlawed’ products.
  • Improved EPC’s, - having undertaken EPC’s on the whole portfolio in 2008 and subsequently seeking to improve them, now allow us to be a strong position with regard to the Energy Bill 2011 and the introduction of Minimum Energy Performance Standards (MEPS)
  • Tenant retention and attraction – tenant’s preferences for sustainable buildings, managed in a sustainable manner are increasing due to higher profile corporate social responsibility (CSR) targets and the association with lower service charge and more efficient operation. Especially with green lease clauses that have been part of our standard lease for a number of years, being actively sought by some tenants and assisting in tenant retention.
  • Investor satisfaction – increasingly our existing and potential new investors are demanding, more detail and evidence of our environmental and social governance (CSG) and ethical approaches.
  • Added value– increased capital values with enhanced environmental credentials such as EPC’s, BREEAM ratings and additional income from government backed schemes, such as feed in temps (FIT’s) and renewable heat incentives (RHI).
  • Improved skill sets and knowledge – Thorough employee attraction, the training of our staff, and the ability to participate in industry initiatives involving benchmarking, innovation and sustainability measurement.
  • Reduced environmental footprint – through reduced consumption of energy, water and waste, alongside enhanced biodiversity.
  • Reduced operational costs for our assets – so ensuring lower service charges for our tenants and lower fund costs.

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  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, IPD’s EcoPAS analysis, JLL’s Upstream, 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 and targets.
•   Tenant Liaison procedures for sharing data and progressing annual action plans.