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Legal & General Investment Management (Holdings)

PRI reporting framework 2018

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Pre-investment (selection)

PR 04. Incorporating ESG issues when selecting investments

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

04.1. Indicate if your organisation typically incorporates ESG issues when selecting property investments.

04.2. Provide a description of your organisation's approach to incorporating ESG issues in property investment selection.

LGP has sort to lead the industry in terms of sustainability issues in due diligence since 2006, by developing innovative new processes to assess all acquisitions against a set of stringent sustainability criteria. This cements the significant and active role such factors play in determining stock selection and shaping recommendations on future improvements. We actively engaged the wider industry on the issue, producing thought leadership papers and this has now lead to the first toolkit for acquisition surveyors being published by the Better Building Partnership. Our current specification for acquisition surveys, are still seen by our due diligence consultant, as one of the most stringent in the industry , typically including:

  • Executive summary - Fiscal and legislative risks, Pro’s and Con’s, benchmarks, potential for added value.
  •  Recommendations  - List of improvements with costs and savings, Future potential ratings
  • Environmental – BREEAM / lead rating, tenants environmental impact ( fitout and business)
  • Energy - EPC rating against benchmark and likelihood of upgrade, Electricity usage metering, Gas usage metering, Lighting controls, Heating controls, Uninterruptible Power Supply, CRC impact to owning Fund and energy procurement route and consumption statistics, Previous Energy Audits
  •  Water usage -Water metering, Leak detection system, Water efficiency measures, Rainwater harvesting, Grey water harvesting
  • Waste management - Waste Management Plan, Recycling, Segregation of waste
  • Flood  - Flood risk area, Flood control measures in place on site and locally
  • Contamination - Risk rating, Contaminants, Ventilation and monitoring systems for contaminants
  • Building materials - Design and thermal performance, Sustainable materials, Longevity of building
  • Building equipment - Ozone depleting substances, Certificates of inspection of refrigerant containing equipment, planned preventative maintenance schedule, Insulation, Plant upgrade
  • Renewable energy – Low and zero carbon (LZC) technologies installed on site, potential for installing LZC technologies (include ground conditions for GSHP and solar shading
  • Occupier wellbeing -Neutral ventilation/local controls, Showers/changing facilities, Recreation space and facilities, Local amenities
  • Transport - Proximity to public transport, Parking facilities, Cycle storage facilities, Cycle lanes, Footpaths, Green travel plans
  • Property Management - Environmental Management Systems in place (landlord and tenants), Measurement and benchmarking, Environmental Manager, Memorandum of Understanding/Green Lease provision, Planned preventative maintenance schedule, Tenant participation in sustainability, Nuisance issues.

In terms EPC’s we will ensure that any asset we purchase with an E, F or G rated EPC has the potential to be upgraded to a D rating over time, and to achieve a minimum of an E rating by April 2018.  If a vendor will not provide the EPC software file for the EPC certificate produced, then we will produce our own EPC as part of our due diligence process on all properties over 1,000m2.  We have found a number of EPC’s on acquisitions, have not been accurate or reliable, and so we review EPCs on every acquisition. We will also undertake our own EPC on any property, once it has been bought, where we perceive a risk as to the reliability of the EPC or where the original software file for the EPC is not provided by the vendor.

04.3. Indicate which E, S and/or G issues are typically considered by your organisation in the property investment selection process, and list up to three examples per issue.

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04.4. Additional information. [Optional]

Property is and has always been a long term asset class, best suited to those who are willing to invest for the future and have access to the right skills to protect their investments from depreciating over the span of their ownership. When we acquire a property, we need to know that it represents value for a long period of time. In order to assess risk, we look at potential investments in the most holistic sense possible. This means taking a robust approach to sustainability risk management to ensure our portfolio is durable over the long term.

Not only do our criteria cover a number of different issues (as set out below), they also take an issue such as flood risk and examine it from more than one angle – for example, looking at local roads’ or power stations’ vulnerability to a flood.

This process also informs our on going plans to improve a given property’s sustainability, enabling us to mitigate against any risks we identify when we come to refurbish properties.

Each acquisition is carefully screened to understand any sustainability risks and how we would manage or reduce them during its active ownership. We use a system developed with JLL Upstream and ensure each due diligence covers the following headings as a minimum:

ENERGY

EPC rating against benchmark and likelihood of upgrade
Electricity usage metering
Gas usage metering
Lighting controls
Heating controls
Uninterruptible power supply
CRC impact to owning fund and energy procurement route and
consumption statistics
Previous energy audits

WATER USAGE

Water metering
Leak detection systems
Water efficiency measures
Rainwater harvesting
Grey water harvesting

WASTE MANAGEMENT

Waste management plan
Recycling
Segregation of waste

FLOOD CONTROL

Flood risk area
Flood control measures

GROUND CONTAMINATION

Risk rating
Contaminants
Ventilation and monitoring system for contaminants

BUILDING FABRIC

BREEAM Rating (or LEED etc)
Planned preventative maintenance schedule
Design and thermal performance
Sustainable materials
Longevity of building

BUILDING EQUIPMENT

Ozone depleting substances
Certificates of inspection of refrigerant containing equipment
Planned preventative maintenance schedule
Insulation
Plant upgrade

RENEWABLE ENERGY / SITE INITIATIVES

Renewable energy sources

OCCUPIER WELFARE

Neutral ventilation / local controls
Showers / changing facilitates
Recreation space and facilities

TRANSPORT LINKS AND PARKING

Proximity to public transport
Parking facilities
Cycle storage facilities
Cycle lanes
Footpaths
Green travel plans


PR 05. Types of ESG information considered in investment selection

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

05.1. Indicate what type of ESG information your organisation typically considers during your property investment selection process.

05.2. Provide a brief description of how this ESG information was incorporated into your investment selection process.

Property is and has always been a long term asset class, best suited to those who are willing to invest for the future and have access to the right skills to protect their investments from depreciating over the span of their ownership. When we acquire a property, we need to know that it represents value for a long period of time. In order to assess risk, we look at potential investments in the most holistic sense possible. This means taking a robust approach to sustainability risk management to ensure our portfolio is durable over the long term.

Not only do our criteria cover a number of different issues (as set out below), they also take an issue such as flood risk and examine it from more than one angle – for example, looking at local roads’ or power stations’ vulnerability to a flood.

This process also informs our on going plans to improve a given property’s sustainability, enabling us to mitigate against any risks we identify when we come to refurbish properties.

Each acquisition is carefully screened to understand any sustainability risks and how we would manage or reduce them during its active ownership. We use a system developed with JLL Upstream and ensure each due diligence covers the following headings as a minimum:

ENERGY

EPC rating against benchmark and likelihood of upgrade
Electricity usage metering
Gas usage metering
Lighting controls
Heating controls
Uninterruptible power supply
CRC impact to owning fund and energy procurement route and
consumption statistics
Previous energy audits

WATER USAGE

Water metering
Leak detection systems
Water efficiency measures
Rainwater harvesting
Grey water harvesting

WASTE MANAGEMENT

Waste management plan
Recycling
Segregation of waste

FLOOD CONTROL

Flood risk area
Flood control measures

GROUND CONTAMINATION

Risk rating
Contaminants
Ventilation and monitoring system for contaminants

BUILDING FABRIC

BREEAM Rating (or LEED etc)
Planned preventative maintenance schedule
Design and thermal performance
Sustainable materials
Longevity of building

BUILDING EQUIPMENT

Ozone depleting substances
Certificates of inspection of refrigerant containing equipment
Planned preventative maintenance schedule
Insulation
Plant upgrade

RENEWABLE ENERGY / SITE INITIATIVES

Renewable energy sources

OCCUPIER WELFARE

Neutral ventilation / local controls
Showers / changing facilitates
Recreation space and facilities

TRANSPORT LINKS AND PARKING

Proximity to public transport
Parking facilities
Cycle storage facilities
Cycle lanes
Footpaths
Green travel plans


PR 06. ESG issues impact in selection process

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

06.1. Indicate if ESG issues impacted your property investment selection process during the reporting year.

06.2. Indicate how ESG issues impacted your property investment deal structuring processes during the reporting year.

06.3. Additional information.


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