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The international business of Federated Hermes (formerly Hermes Investment Management)

PRI reporting framework 2020

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Outputs and outcomes

PR 15. ESG issues affected financial/ESG performance

15.1. Indicate whether your organisation measures how your approach to responsible investment in property investments has affected financial and/or ESG performance.

15.2a. Describe the impact on the following.

Describe the impact on:
Impact
Funds` financial performance

15.2b. Describe the impact on the following.

Describe the impact on:
Impact
Funds` ESG performance

15.3. Describe how you are able to determine these outcomes.

In the past we have worked with Investment Property Databank (IPD) and the Royal Institute of Chartered Surveyors (RICS) to develop IPD Eco-Pas, a tool we use to measure the risk to our portfolio. This service has now been discontinued by MSCI (who bought IPD). We internally continue to measure and track anecdotal, qualitative and quantitative evidence of green buildings impacts on investment performance and inform our asset and fund managers. We do internal risk assessments and have carried out detailed internal analysis on the impact and integration of sustainability regulatory risks in our discounted cash flow models. Responsible investment assessments are integrated into due diligence for new assets and the development of investment plans through the inclusion of environmental and social impact knowledge on discounted cash flow models. Material outcomes are included in the investment papers.

Our responsible property management programme has a comprehensive monitoring programme to measure, monitor and report our ESG performance. The results are published annually in our RPI report, available to the public.

We go beyond standard key performance indicators (KPI) and have developed qualitative processes to assess the wider socioeconomic impacts of their investment programmes. Since 2006 we have been reporting our environmental performance using KPIs that we measure and monitor on a continuous basis. We have also reported on the socioeconomic impacts through a narrative approach based on case studies. In the last couple of years we have expanded our reporting boundaries to provide more specific qualitative and quantitative details on the positive social, economic and environmental impacts of some of our investments, whether large urban regeneration or through community engagement in existing buildings.


PR 16. Examples of ESG issues that affected your property investments

16.1. Provide examples of ESG issues that affected your property investments during the reporting year.

ESG issue
          Meaningful place making
        
Types of properties affected
          Large refurbishment, development
        
Impact (or potential impact) on investment

 

Sustainability outcomes sought:

Economic:

Total investment; Council-tax revenues / Business rates; Prevailing / living wages

Social:

Skill centres / recruitment centres; Jobs created / local jobs; Apprenticeships / skills training provided; Training which led to certified skills

New education facilities; People accessing new education facilities ; Volunteers / youth club

New homes / affordable / student accommodation

Environmental:

New public space; Provision of green, accessible space

Green certification (LEED, BREAM, etc.); Energy and resource-efficiency indicators

Support for biodiversity

Activities undertaken to influence the investment and the outcomes

NOMA regeneration, Manchester:

Innovative, commercial and responsible, NOMA is a 20-acre,

£800m scheme in central Manchester and the largest urban development outside South-East England. It is seen as one of the major engines of the Northern Powerhouse.

ESG issue
          Supporting circular economy transition
        
Types of properties affected
          All assets
        
Impact (or potential impact) on investment

 

Sustainability outcomes sought:

Watts of energy conserved (kWh); Renewable energy generated (kWh); Tons of CO2 emissions avoided ; Litres of waste saved; Tonnes of waste recycled and re-used; Use of recycled material

Urban infrastructure efficiency;  Biodiversity protection

Green certification (LEED, BREAM, etc.)

Innovation – net-zero energy buildings

Access to energy

Activities undertaken to influence the investment and the outcomes

Active climate and energy efficiency programme delivered 9% year on year reduction of carbon emissions and energy consumption on average per year since 2006.

ESG issue
          Health and wellbeing
        
Types of properties affected
          Office buildings
        
Impact (or potential impact) on investment

Sustainability outcomes sought:

Land de-contamination and the use of safe and healthy; Materials in development and refurbishment

Risk and safety measures in development, refurbishment and property management

Wellbeing certification (Wellness; Reset)

Active wellbeing management in properties through measurement and management of CO, CO2, temperature humidity

Initiatives promoting wellbeing among occupiers

Initiatives to address the ageing population, chronic illness and obesity

Projects to support healthy living for occupiers

Projects to support community health

Activities undertaken to influence the investment and the outcomes

We aim to positively impact the health and wellbeing of our occupiers and local communities through a range our activities during the life cycles of real-estate assets:

Development and refurbishment: land de-contamination, the use of safe and healthy materials, and enforcing risk management and safety standards in development, refurbishment and property management.

Asset management: actively managing improve air quality and the comfort of building occupants; CAPP+, targeting greater occupier engagement, wellbeing and comfort;

 

Attaining wellbeing certification: In 2018 we earned

the first RESET Core and Shell Certification designations in Europe. In 2019 we attained Fitwel certification for one of our assets and have a number of others in progress.

Participating in or supporting initiatives that promote wellbeing among occupiers and communities by addressing the following concerns: the aging population, chronic illness and obesity; sustainable transport; healthy living among occupiers; community health; and implementing the UK Modern Slavery Act through our activities and supply chain

16.2. Additional information. [Optional]


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