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EG Funds Management

PRI reporting framework 2019

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Pre-investment (selection)

PR 04. Incorporating ESG issues when selecting investments

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.

EG views the principles of responsible investment as paramount to the investment decision-making process and has developed internal systems to entrench the principles of responsible investment in its decision-making process. These principles and ESG considerations are applied in the management of both existing assets and when making new investments. As a manager and developer of real estate assets, EG seeks the highest and best use for its sites while ensuring that the principles of social and environmental sustainability are applied.

EG believes that it is part of its fiduciary duty to consider all factors which affect its stakeholders, including ESG considerations. EG accordingly incorporates ESG principles throughout the life of an investment including the acquisition, management and the disposal of assets.

From the initial stages of investment evaluation, EG undertakes comprehensive asset due diligence to ensure that key ESG risks and opportunities can be identified and managed. EG’s due diligence process includes the use of EG’s own proprietary risk management system (PRISMS) and a bespoke due diligence checklist.

EG’s due diligence checklist has a comprehensive ESG section with 14 questions covering a range of ESG risks and considerations. These questions consider, amongst other items, the environmental impacts of the asset and how initiatives can be undertaken to improve energy, water and waste efficiency. Consideration is also given to climate change risk. Social considerations are also assessed which often includes profiling tenants and "quality of place".  EG's PRISMS software similarly allows for a systematic approach to undertaking asset due diligence and identifies, quantifies and monitors asset risks over time. These key risks are then registered, monitored and managed throughout the life of the investment. PRISMS® applies a highly quantitative approach to assessing risk and ensures that all prospective investments are considered in a systematic manner. EG provides an assessment of these ESG issues in its investment proposals.

Where EG undertakes due diligence on an asset, external contractors (such as town planners, engineers, environmental consultants and designers) are engaged to perform assessments on a broad array of items, including: 

  • Contamination
  • Heritage
  • Biodiversity
  • Flooding
  • Traffic
  • Safe building materials
  • Natural hazards

The due diligence process identifies those risks and opportunities which will not only affect the financial performance of the asset but also have ESG impacts. Once these issues are identified, they can be responsibly managed.

The key risks identified as part of the due diligence and PRISMS® assessment are then logged, tracked and managed throughout the life of the investment. This risk register forms part of the asset strategy once acquired. Further, during the due diligence phase EG develops an asset plan for each asset which forms the basis of the ongoing asset management.

The asset management plan is then put in place to address issues and opportunities identified during due diligence. Each asset acquired is then continually assessed for ESG improvements and initiatives are put in place, for example, to improve the sense of community at a development and to improve the performance of assets, with a focus on low-cost initiatives that have a substantive positive effect on ESG. For EG developments, we also have proactive and transparent community engagement throughout the planning and construction phases.

EG believes that energy efficiency, water efficiency and waste management are fundamental components of the financial performance of buildings and also tenant satisfaction. These factors are modelled into our financial models quarterly. EG will engage consultants to assess environmental factors before deal execution. 

We currently do not have a materiality threshold for ESG issues. However, when issues are identified, we will assess the risks and opportunities and determine whether it warrants either investigating further or dismissing.  Where we identify ESG issues which can be improved in our due diligence process, we take this as an opportunity to implement our skills in this area and improve the building’s performance as opposed to dismissing the investment. 

Some examples of ESG initiatives which EG undertakes are:

  • Investigation into viability of solar panel installations
  • Energy site audits for leakage of power usage
  • Assessment of employment in the community
  • Preserving heritage
  • Improving building efficiency (electricity and water usage).

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.

Environmental example 1, description

          
        

Environmental example 2, description

          
        

Environmental example 3, description

          
        

Social example 1, description [OPTIONAL]

          
        

Social example 2, description [OPTIONAL]

          
        

Social example 3, description [OPTIONAL]

          
        

Governance example 1, description

          
        

Governance example 2, description

          
        

Governance example 3, description

          
        

04.4. Additional information. [Optional]

There are ESG risks associated with every investment. During due diligence, we consider not only the substantive impacts of these risks but also the potential reputational risks for investors and EG if these risks were to be realised. It should be noted, however, that industry segments or businesses facing high ESG risk are not within our mandates and investors in each of our funds have veto rights. These risks are discussed in our Review/Investment Committee process. We have a 122 due diligence checklist which we complete prior to the acquisiton of an asset and 14 of these items relate to ESG considerations. ESG risks and opportunities are also identified and reported on in investment proposals submitted to fund investors. 


PR 05. Types of ESG information considered in investment selection (Private)


PR 06. ESG issues impact in selection process

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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