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Schroders

PRI reporting framework 2019

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Post-investment (monitoring and active ownership)

Overview

PR 08. ESG issues in post-investment activities

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.

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

As per 7.3 above ESG issues are considered in property management and monitoring. The property managers are central to developing the environmental sustainability credentials of each building as they are responsible for the daily management and operation of the building. We review and discuss energy and water consumption, waste management practices and tenant activity together with the property manager and our sustainability consultant six monthly or annually depending on the asset. We aim to have sustainability objectives for all assets where we in our role as landlord have some control over the management of the asset. Sustainability information and data is held on our sustainability consultant's proprietary software system which is used by us and the property managers.

ESG issues are a feature of developments and refurbishments with many aspects being required as part of regulatory or industry schemes including for example planning/permit requirements, building regulations, Considerate Constructors Scheme together with the building certificate (i.e. BREEAM, Minergie) and energy performance certificate ambitions that we may set for a project. Our investment process guidance documents include a Sustainability Guide for Refurbishments and Developments.

Occupier engagements vary depending on the nature of the asset for example there may be regular tenant meetings with large office occupiers, tenant satisfaction surveys or annual newsletters for tenants at an industrial estate. ESG matters are discussed and highlighted as relevant to the management issues at the asset. For example discussions with occupiers to introduce a new food waste system at a retail and leisure scheme and to trial changes to the operational times of a building management system for a multi tenanted office.


Property monitoring and management

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

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
          Energy reduction target established for UK operational assets. Similar target to be established for European assets.
        
          Energy Performance Certificate (EPC) profile for all UK funds to be reviewed
        
          
        
          2018 saw the completion of a two year target for the UK. A new UK target and targets for European assets are being finalised.
        
          All UK asset EPCs reviewed and actions determined to manage compliance risk of UK minimum EPC rating legislation
        
          
        
Target/KPI
Progress Achieved
          Employees to undertake sustainability related training to maintain competence
        
          Develop baseline for key aspects of health, wellbeing and productivity performance at priority existing assets
        
          
        
          Training delivered internally to the majority of staff
        
          Health and safety survey completed for office assets to establish credentials
        
          
        
Target/KPI
Progress Achieved
          Ensure a consistent approach to property management by our third party property managers in line with our requirements
        
          Participate in Global Real Estate Sustainability Benchmark, the global standard for assessing ESG performance of for real estate funds and companies: green star aim
        
          
        
          Key performance indicators scored for UK property managers in 2018, target scores established with European property managers for scoring in 2018/19
        
          Eight funds participated in 2018, one as a first year Grace period participant, with seven achieving Green stars
        
          
        

09.3. Additional information. [Optional]

We set our Sustainable Investment Policy annually and it's approved by the Investment Committee. The Policy comprises our commitments and targets and applies to all assets (UK and European). Our overarching objective is to ensure our sustainability programme for the investment management of funds and assets addresses landlord responsibilities and aspires to consider overall building construction, refurbishment, management and operation through developing greater collaboration with tenants.

For 2018 there were a number of qualitative objectives in addition to the more quantitative targets referred to in section 9.2:

•          Ensure the application of a consistent approach to property management by our third party property managers in line with our requirements

•          Understand the sustainability opportunities and risks for standing investments and potential acquisitions

•          Deliver developments and refurbishments to sustainable standards in line with our requirements and achieve building certifications (i.e. EPC, BREEAM, Ska, LEED, HQE) where appropriate

•          Manage compliance with environmental legislation and regulation for all portfolios.

•          Ensure waste management plans are in place for all managed assets where appropriate


PR 10. Certification schemes, ratings and benchmarks

10.1. Indicate whether your property assets are assessed against certification schemes, ratings and/or benchmarks

10.2. List the certification schemes, ratings and/or benchmarks your property assets are assessed against and what proportion of your property assets they apply to.

Specify
          National Energy Performance Certification schemes
        
Proportion of property assets these apply to

(in terms of number of property assets)

Specify
          Green building certifications (BREEAM, LEED)
        
Proportion of property assets these apply to

(in terms of number of property assets)

Specify
          Global Real Estate Sustainability Benchmark
        
Proportion of property assets these apply to

(in terms of number of property assets)

10.3. Indicate if your organisation uses property specific reporting standards to disclose information related to your property investments’ ESG performance.

          INREV and EPRA sustainability standards
        

10.4. Additional information.

The Schroder Real Estate portfolio comprises assets in the UK and Continental Europe, there are therefore a number of certification schemes which are relevant, and these may be country specific as required by EU or national legislation or in accordance with market practice.

Certification schemes may relate to an individual building for example an energy performance certificate rating or Building Research Establishment Environmental Assessment Methodology BREEAM (an environmental assessment method and rating system for buildings).

We are fund manager members of and participate for most funds in the Global Real Estate Sustainability Benchmark "GRESB" which is the global standard for assessing ESG performance of for real estate funds and companies.

We include sustainability reports within annual fund report and accounts which are aligned with INREV Sustainability Reporting Guidelines 2016 or EPRA Best Practices Recommendations on Sustainability Reporting 2017 as appropriate.

We are members of the Better Buildings Partnership and submit property data to their Real Estate Environmental Benchmarks (REEB).


Property developments and major renovations

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

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]

Our approach for ESG within active developments and major renovations is framed by what's needed for any building to optimise energy efficiency and cost, be attractive to potential tenants and maximise long term market value/build investment resilience. This may best be captured by a building certification ambition for example a BREEAM (UK Building Research Establishment Environmental Assessment Methodology used in the UK and Europe) or LEED (Leadership in Energy and Environmental Design certificated established by the US Green Building Council and used in Europe). There may also be an energy performance certificate rating ambition.

In all cases our developments and refurbishments will comply with relevant planning and building regulations/codes, environmental permits and contractor schemes. All of these include ESG considerations. Generally for all development and major renovation schemes we seek to achieve improved performance against the existing building and often against required standards. This helps to future proof our investments in relation to energy efficiency and regulation as well as potential changes to an asset's optimal use. In 2018 we introduced Sustainability Guidance on Developments and Refurbishments to support our investment team and third party service providers.

Monitoring of ESG considerations for active projects is often undertaken by third party project managers.


Occupier engagement

PR 12. Proportion of property occupiers that were engaged with

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]

There are a large number of tenants within the direct portfolio and the opportunity or need for landlord engagement on ESG issues only exists for a small number of all tenants.

It is often more pertinent for managed assets, however the landlord may only have operational control for some but not all aspects of a building's operation.

Occupier engagements will vary depending on the nature of the asset for example there may be regular tenant meetings with large office occupiers compared to annual newsletters for tenants at an industrial estate. We seek to ensure ESG matters are regularly discussed and highlighted as relevant to the management issues at the asset. For example discussions with occupiers to introduce a new food waste system at a retail and leisure scheme and to trial changes to the operational times of a building management system for a multi-tenanted office.

We have provided our answer on the basis of % of assets (not occupiers) where we have obtained data from the tenants and/or raised sustainability during tenant meetings.


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.


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.

Our approach is that consideration should be given to the relationship of an asset to the community in which it's located and which it supports to assess a building's contribution to the locality. This should contribute to an asset's longer term investment credentials.

However the opportunity for community engagement is dependent upon the type of asset and how it and its users relate to the local community. For example with a shopping centre there may be communications to help determine local attitudes to the centre, amenity, safety and security, access and open space as well as support opportunities for recruitment. In contrast for a fully let office building there may be more limited scope for community involvement and examples include sponsorship for a street festival and a youth centre.


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