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Charter Hall Group

PRI reporting framework 2019

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation undertakes scenario analysis and/or modelling and provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Charter Hall consider ESG factors in the annual strategic risk analysis process for consideration within the risk register. The scenario analysis considers risks for each sector and markets for all risk factors. Future ESG factor analysis is also considered in materiality reviews aligned with GRI
Describe Charter Hall undertook climate change risk assessments across office, industrial, retail and hospitality assets, considering potential exposure to a range of climate scenarios utilising the Charter Hall risk profile. Climate change adaptation plans consider these scenarios in terms of likelihood and consequence scales to estimate the level of risk.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

The Charter Hall due diligence process considers a range of ESG issues in its strategic asset aquisitions and allocations, from geographic and economic markets to climate change and other environmental and social issues.  The ESG issues considered across sectors align with higher environmental performance requirements on assets to minimise ESG issues. 

The allocation of assets across sectors and geographies considers a range of markets and ESG factors to provide a diversity of product. and minimise exposure to one market sector or geography  The allocation of investment across wholesale, listed and equity provides further diversity in markets..

Charter Hall Group's Risk Management Policy sets out:

  • roles and responsibilities in relation to risk management at Charter Hall;
  • the review process in regards to the Risk Management Framework and its key components;
  • the assessments that are carried out to identify the risk appetite of the business and the risks within the Group;
  • significant identified controls that seek to minimise, mitigate or manage the risks within the business which includes the roles and responsibilities for the management and oversight of risk; and
  • specific risk areas where there is a specialised approach and policies to control the inherent risks.

SG 13 CC.

13.4 CC. Describe how the organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, the results and any future plans.

Describe

Charter Hall has undertaken Climate Risk Assessments of all standing assets and development sites in FY16. This assessment involved consideration of a range of climate related scenario events (past) and probability and consequence of these extreme climatic events impacting on the Charter Hall portfolio in the the future, using insurance records and claims as well as engagement with asset managers and operational employees. The assessment also considered NARCliM (OEH) and CCiA (CSIRO) data, which projects climate scenarios, to document low, medium or high-risk ratings on assets and development sites across the portfolio.

Charter Hall has commenced preparation of Climate Change Adaptation Plans for all assets in its industrial, office and retail portfolios where Charter Hall has operational control and the asset does not have a triple net lease, by FY2020. These plans complete a climate risk assessment matrix (which is aligned to the Charter Hall Risk Matrix) and identify opportunities to mitigate the risks, with a target of reducing climate risk of assets.  

Charter Hall has commenced a gap analysis of the scenarios and requirements sought under the reporting framework for the Task Force for Climate Change Disclosure in FY19. 

Charter Hall has invested in renewable energy through our tenant customers and is committed to further renewable energy projects in our Retail portfolio from FY19.  

The Charter Hall approach to addressing climate-related risks and opportunities can be found at https://charterhall.reportonline.com.au/fy18/sustainability-report/eco-innovation/our-commitment.html.

Describe

Charter Hall's property investment selection process undertakes a due diligence process which includes ESG issues. This process identifies and considers the sustainability credentials of the property, as well as opportunities to enhance the credentials of the property. The process also considers other ESG factors such as:

  • Geographic location - access to markets, transportation and infrastructure, accessibility for building occupants, suppliers and customers, location of major physical features such as water courses and natural hazards.
  • Market and economic development trends
  • Environmental issues (including contamination, flooding and other climate related and natural hazard risks, materials assessment, water efficiency, energy efficiency/supply. All our buildings are reviewed for flood risk (1 in 100 flood event), as well as the condition and age of HVAC to ensure that tenant comfort is maintained during extended days of extreme heat.
  • Climate change risk assessment (extreme weather conditions such as storm, bushfire, extreme heat and sea level rise) and the ability of the investment to withstanding potential climate change impact, depending on its location.
  • Environmental data/performance ratings against country level or international benchmarks such as NABERS, Green Star or WELL ratings, which inform GHG emissions. Buildings with lower carbon systems (eg  on-site solar) are an attractive option for us based on the energy savings and lower occupancy costs (where applicable).
  • Services and building operations and mechanical - such as water and energy supply and efficiencies, waste management, and ability to perform under extreme conditions (such as extreme heat)
  • Workplace health and safety compliance
  • Building structure, materials and hazardous materials inspections identify compliance with industry codes and certifications.
  • Planning and compliance factors in relation to Federal, State and Local Government regulations such as the Disability Discrimination Act (DDA).
  • • Building ratings against the Property Council of Australia Guide to Office Building Quality

 All due diligence considerations are undertaken in accordance with the Charter Hall Corporate Governance policies, which are publicly disclosed on our website https://www.charterhall.com.au/About-Us/Corporate-Governance/

Investment analysis includes financial and risks of tenant and sector. 

Describe

Charter Hall has undertaken Climate Risk Assessments of all standing assets and development sites in FY16. This assessment involved consideration of a range of climate related scenario events (past) and probability and consequence of these extreme climatic events impacting on the Charter Hall portfolio in the the future, using insurance records and claims as well as engagement with asset managers and operational employees. The assessment also considered NARCliM (OEH) and CCiA (CSIRO) data, which projects climate scenarios, to document low, medium or high-risk ratings on assets and development sites across the portfolio.

Charter Hall has commenced preparation of Climate Change Adaptation Plans for all assets in its industrial, office and retail portfolios where Charter Hall has operational control and the asset does not have a triple net lease, by FY2020. These plans complete a climate risk assessment matrix (which is aligned to the Charter Hall Risk Matrix) and identify opportunities to mitigate the risks, with a target of reducing climate risk of assets.  

Charter Hall has commenced a gap analysis of the scenarios and requirements sought under the reporting framework for the Task Force for Climate Change Disclosure, in FY19. 

Opportunities have been identified in the form of the development of the net zero pathway, in accordance with the SBT methodology and an increased investment in renewable energy.  Alignment with and increased investment in improving both development and operational building performance, as demonstrated through NABERS and Green Star certifications. 

The Charter Hall approach to addressing climate-related risks and opportunities can be found at https://charterhall.reportonline.com.au/fy18/sustainability-report/eco-innovation/our-commitment.html.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether the organisation has evaluated the impacts of climate-related risk, beyond the investment time-horizon, on the organisations investment strategy.

Describe

The Charter Hall Climate Risk Assessment criteria was assessed based on 2030 and 2070 projections, utilising a range of modelling and data sources for climate variables including: mean temperature, extreme temperature, sea level rise, bushfire, tropical cyclones and extreme storms.

The assessment considered these variables against the 2030 and 2070 time horizons and determined the extent of exposure and risk of office, industrial, retail and hospitality investments under both scenarios.  The climate change mitigation plans seek to address operational and capital improvements to mitigate these risks and reduce the likelihood or consequence of these variables in the short, medium and longer term.

The Charter Hall net zero emissions pathway, which is aligned with the Science Based Targets, also assumes future time horizons to in line with anticipated future growth of the Charter Hall business.

 

 

13.7 CC. Indicate whether a range of climate scenarios is used.

Indicate the climate scenarios the organisation uses.
Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          Science Based Targets
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          Diversity of tenant markets and trends
        

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

other description

          Climate Change Risk Assessments across 259 properties. 2,456kW of solar PV installations Environmental, climate change due diligence is carried out in all acquisitions and disposals
        

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description

          Target setting 
Environmental Due Diligence
Report emissions to NGERS and identify Clean Energy Initiatives
        

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

Reporting frameworks which Charter Hall utilise in its disclosure on emissions include:

  • The Australian National Greenhouse Energy Reporting System (NGERS)
  • GRI
  • Green Star Performance
  • GRESB
  • CDP
  • DJSI
  • Science Based Targets - which aligns to the IEA’s Energy Technology Perspectives 2 degree scenario and the IPCC RPC 2.6.

 

14.5. Additional information [Optional]

Charter Hall established targets in FY16 Annual Report and Shared Value Report which identifies time scenarios in FY20, FY25 and Aspirational longer-term targets

Charter Hall investigated the changing demographics in researching office, retail and industrial occupancy and industry trends.  Investigations into changing demographics also influenced the Community Investment approach. 

Charter Hall undertook climate risk assessments across office, retail and industrial portfolios to develop a climate change management framework for existing assets and to inform future asset considerations.

Charter Hall discloses and tracks emissions through NGERS and CDP, as well as in the annual Shared Value and Sustainability Report.  Targets have been set and monitored with asset, property and facility managers to reduce emissions.  Green building achievements and maintenance or improvements of these achievements are integrated into contracts.

Charter Hall has trialled new technologies in building management and building efficiency to enhance operations and tenant customer satisfaction.

 


SG 14 CC.

14.6 CC. Please provide further details on these key metric(s) used to assess climate related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          To determine the risk and coverage of risk in the portfolio.
        
          Number of climate risk assessments and climate change adaptation plans
        
          Number of assets 
Number of climate change risk assessments Number of climate change adaptation management plans
        
Weighted average carbon intensity
          To reduce the carbon footprint.
To measure reduction in carbon emissions in diverse portfolio
        
          kWh/m2/pa
        
          kilowatts per hour/metres squared/per annum
        
Carbon footprint (scope 1 and 2)
          To report our Carbon Footprint (scope 1 and 2 emissions) to the Australian Greenhouse and Energy Regulator annually
        
          kgCO2/m2/ pa
        
          Calculated based on NGERS methodology – base building under operational control
        
Portfolio carbon footprint
          To report our Carbon Footprint and demonstrate reductions across reporting years
        
          kgCO2/m2/ pa
        
          Charter Hall report on our carbon emissions by kilograms of carbon by metres squared per annum. According to our operational control boundary under the National Greenhouse and Energy Reporting Act (2007) (NGER).
        
Total carbon emissions
          To report to the NGERS Regulator and for Science Based Targets
        
          GHG (tCO2) emissions
        
          Charter Hall report on our carbon emissions by kilograms of carbon by metres squared per annum. According to our operational control boundary under the National Greenhouse and Energy Reporting Act (2007) (NGER).
        
Carbon intensity
          To measure reduction in intensity across the diverse portfolio
        
          kgCO2/m2/ pa
        
          Charter Hall report on our carbon intensity by kilograms of carbon by metres squared per annum. According to our operational control boundary under the National Greenhouse and Energy Reporting Act (2007) (NGER).
        

14.7 CC. Describe in further detail the key targets.

Target type
Time Frame
Description
Attachments
          The time frame for emissions reductions targets are 2025 and 2030.
        
          Utilising the Science Based Targets methodology identify a pathway to 2 degree reduction in emissions by 2020; and achieve 2 Degree reduction in emissions by 2025.  Determine a pathway to Net Zero emissions for Scope 1 and Scope 2 and a reduction pathway for Scope 3 emissions by 2030.
        
          Preparation of climate change adaptation plans for office, retail and industrial assets by FY20
        
          Preparation of climate change adaptation plans, aligned with Green Building Council of Australia definitions, across the office, industrial and retail portfolios by FY20.
        
          Targets for emissions reductions (in intensities) are FY2020 and FY2025
        
          Utilising the Science Based Targets methodology identify a pathway to 2 degree reduction in emissions by 2020; and achieve 2 Degree reduction in emissions by 2025.  Determine a pathway to Net Zero emissions for Scope 1 and Scope 2 and a reduction pathway for Scope 3 emissions by 2030.
        
          Reduction in emissions FY17 to FY18
        
          Since FY17, Charter Hall Group emissions reduced by 1%, in FY18. The office portfolio reduced its emissions consumption and intensity by just over 5%. This reflects the divestment of a number of buildings
which were less energy efficient, the acquisition of more energy efficient assets.  Our retail portfolio increased overall emissions and intensity by 6% due to the acquisition of larger, more energy intensive assets and the sale of smaller assets which are less energy intensive.
        
          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risks management processes for identifying, assessing, and managing climate-related risks.

Please describe

The Charter Hall Climate Risk Assessment process considered vulnerability, exposure and weather and climate events and how they interact to define asset risk.  Climate change projections and exposure to natural hazards were carefully selected considering the likelihood of risk to any of Charter Hall properties, including:

  • Increase in mean temperature
  • Increase in extreme temperature
  • Sea level rise
  • Present exposure to bushfire and future projections for bushfire
  • Historical exposure to extreme storms and future projections for extreme storms
  • Historical exposure to cyclones and future projections for cyclones.

The Charter Hall climate change mitigation plans review the climate-related risks in alignment with the Charter Hall risk matrix and against the matrix likelihood and consequence scales.  Once the likelihood and consequence of a risk were determined they are combined to estimate the level of risk using the risk assessment matrix. Consequence assessment included a number of success categories in line with the AGO guidelines for climate change impacts and risk management (AGO 2007).  Risks and materiality threshold points for climate-related risks are also integrated into emergency response and management plans and general operational procedures.  

Since 2017, Charter Hall has been undertaking climate change adaptation plans which outline, for each building, risk mitigation approaches for management and operation of buildings, in accordance with Charter Hall risk management processes.  

The annual Charter Hall strategic risk review also integrates climate-related risks into the overall ESG risks, which is then determined against other company risks and integrated into the Charter Hall Risk Appetite Statement.

The Charter Hall Science Based Target pathway aligns with IEA’s Energy Technology Perspectives 2 degree scenario and the IPCC RPC 2.6.

Within the Australian regulatory context, Charter Hall annually reports to the National Greenhouse and Energy Reporting Regulator.  Charter Hall also participate in a range of industry bodies, such as the Property Council of Australia, Green Building Council of Australia, and the City of Sydney Better Building Partnership which advocate for energy and carbon policy and certainty outcomes within the Australian building codes and regulatory framework.


 


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

100 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

30 % of AUM

Brief description and measures of investment

Across Charter Hall's office, industrial and retail sectors, we have now invested in 2,456kW of solar PV installations, generating over 3,670MWh of electricity per annum. This is enough energy to power 245 homes. In FY18, this included our retail portfolio’s first solar investment of a 250kW PV system at our Singleton Shopping Centre.  In FY19, the retail portfolio has further committed to:

10,300 kW of solar PV generation to be delivered under a Power Purchase Agreement (PPA) model across 13 initial sites in 2019.  This will delivered by Industry leading PPA providers to build, own, operate and maintain roof top solar PV with integrated batteries.  
The PPA is anticipated to deliver affordable long term price certainty for 40% of the retail portfolio’s energy needs at the 13 sites (13.4 GWh of solar energy consumption pa).

Through our net zero pathway, Charter Hall will investigate further renewable opportunities to address Scope 2 emissions.

We will continue to work in partnership with our customers to expand the energy efficiency and renewable footprint of our entire portfolio, resulting in mutually beneficial outcomes for both our customers and our business.

Asset class invested

30 % of AUM

Brief description and measures of investment

Across Charter Hall's office, industrial and retail sectors, we have now invested in 2,456kW of solar PV installations, generating over 3,670MWh of electricity per annum. This is enough energy to power 245 homes. In FY18, this included our retail portfolio’s first solar investment of a 250kW PV system at our Singleton Shopping Centre.  In FY19, the retail portfolio has further committed to:

  • 10,300 kW of solar PV generation to be delivered under a Power Purchase Agreement (PPA) model across 13 initial sites in 2019.  This will delivered by Industry leading PPA providers to build, own, operate and maintain roof top solar PV with integrated batteries; and
  • The PPA delivering affordable long term price certainty for 40% of the retail portfolio’s energy needs at the 13 sites (13.4 GWh of solar energy consumption pa).

Through our net zero pathway, Charter Hall will investigate further renewable opportunities to address Scope 2 emissions.

We will continue to work in partnership with our customers to expand the energy efficiency and renewable footprint of our entire portfolio, resulting in mutually beneficial outcomes for both our customers and our business.

 

Asset class invested

60 % of AUM

Brief description and measures of investment

Charter Hall has achieved Green Star Performance ratings on 178 existing assets and 20 Green Building ratings and now invest in high value green buildings in both acquisitions and developments.  Our investment has resulted in Charter Hall achieving Australia's largest green star footprint.

Charter Hall has set green building targets (through NABERS and Green Star) for new developments across the office, retail and industrial sectors and embarked on first retail and industrial green building ratings in FY17.

All eligible Charter Hall office assets (over 1,000sqm) and eligible retail assets (over 15,000sqm), seek annual NABERS Energy and Water ratings.  

Charter Hall has also invested in new technologies to improve the operational performance of buildings, while also providing customer comfort. These technologies include Comfy which enable building occupants to control the temperatures within tenancies, resulting in energy savings in buildings.

 

Asset class invested

0.5 % of AUM

Brief description and measures of investment

Charter Hall has also invested in seeding to emerging PropTech enterprises to enhance operations and responds to evolving and changing landscapes.  Charter Hall was recognised as the only AREIT named in the ASX 200 top 20 most innovative companies in 2018, as rated by innovation consultants, Collective Campus.

Charter Hall also partner with the Foundation for Young Australians mentoring 15 young social pioneer enterprises and providing seed funding to enable enertprise development.

Asset class invested

1 % of AUM

Brief description and measures of investment

Charter Hall Pledge 1% commits our People: Places: and Partnerships to community investment, through volunteering and workplace giving, donation matching, community place creation, enterprise development and community partnerships.

In FY18, Charter Hall contributed the following through our Pledge 1%"

  • 81% of our people volunteered 330 days to the community
  • $1.3 million in space was provided to not for profit and community groups,
  • $600,000 was donated to community partnerships.

Charter Hall are partners with Social Traders, resulting in an increase of social procurement thorugh corporate services, as well as through our supply chain.

 

Asset class invested

1 % of AUM

Brief description and measures of investment

Charter Hall developed and manages the University of Western Sydney, 1 Parramatta Square, Parramatta campus.  This development has provided the University with a state of the art building, in the easily accessible heart of Parramatta and Western Sydney.  1 Parramatta Square is an integrated development which links the university sector with the commercial office sector and facilitated the co-location of corporate tenants that have strong synergies with the University.

http://1psq.com.au/

Charter Hall is now focussed on developing more education assets, including a second vertical campus for Western Sydney University and University of New South Wales.  Charter Hall Group commenced discussions with the Folkestone Education Trust, in FY18, to integrate early learning assets into the portfolio in FY19.

Asset class invested

0.1 % of AUM

Brief description and measures of investment

Charter Hall's Melbourne and Perth offices achieved the WELL Certified™ Silver Interiors rating from the International WELL Building Institute, in FY18. The first WELL rating to be achieved in WA and the first Interiors rating in VIC, this certification enabled formal recognition of our approach in our workplaces and demonstrated to our people the benefits of our new way of working.

The International WELL Building Institute Certification is underpinned by seven key principles: air, water, nourishment, light, fitness, comfort and mind. The notion is that, by integrating these elements into workplaces, we can create a healthy and productive work environment that enables people to bring their whole selves to work. The certification not only looks at the physical environment, but also considers procurement practices, office systems, employee benefits and broader policies and processes.

https://charterhall.reportonline.com.au/fy18/sustainability-report/enabling-wellbeing/our-journey-to-attaining-well-certification.html.

Charter Hall office developments are now seeking Core and Shell WELL certification for all new office developments in CBD locations.  The Charter Hall Office Trust will also participate in the WELL Portfolio Pilot for existing office buildings in FY19.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]


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