BMO Real Estate Investments Limited - Responsible Property Investment Report 2019
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BMO Real Estate Investments Limited Responsible Property Investment Report 2019
Common acronyms 4
Foreword from the Chairman 5
1. About this RPI Report 6
2. About the Company 7
Management 7
Portfolio 8
3. RPI Strategy and priorities 9
Developing our RPI Strategy 9
The BMO Real Estate Partners approach to RPI 9
Progress against our RPI commitments 10
Spotlight on Portfolio-wide ESG improvements 15
4. ESG Performance 16
Scope 16
Environmental 16
Energy 16
Emissions 16
Contents
Water 17
Waste 17
Social 18
Scope 18
Gender Equality 19
Health & Safety 19
Community Engagement 19
Governance 19
5. ESG Risk Profile 20
Asset Classifications 20
Flood Risk 21
EPC Ratings 23
Other RPI risk metrics 26
Appendix 1: EPRA sBPR performance data to 30 June 2019 28
Appendix 2: Notes on environmental data 35
Appendix 3: TCFD Disclosures 39
Appendix 4: Independent Assurance in accordance with ISO 14064-3 44
BREI RPI Report 3
Common acronyms
BMO REP BMO Real Estate Partners GAV Gross Asset Value
BREEAM Building Research Establishment Environmental GRESB Global Real Estate Sustainability Benchmark
Assessment Method
GRI Global Reporting Initiative
BREI BMO Real Estate Investments Limited
MEES Minimum Energy Efficiency Standards, as enforced
CDP Carbon Disclosure Project by The Energy Efficiency (Private Rented Property)
(England and Wales) Regulations 2015 (Principal
DEFRA Department for Environment, Food and Rural Affairs
Regulations) as amended by The Energy Efficiency
EPC Energy Performance Certificate (Private Rented Property) (England and Wales)
(Amendment) Regulations 2016.
EPRA European Public Real Estate Association
NLA Net lettable area
ESG Environment, Social, Governance
RPI Responsible Property Investment
FRI Full repairing and insuring (lease type)
sBPR Sustainability Best Practices Recommendations
TCFD Task Force on Climate-related Financial Disclosures
Corporate information
Directors (all non-executive) Alternative Investment Fund Manager (‘AIFM’)
Vikram Lall (Chairman) and Investment Managers
Andrew Gulliford BMO Investment Business Limited
Mark Carpenter Quartermile 4
David Ross 7a Nightingale Way
Alexa Henderson Edinburgh EH3 9EG
Tel: 0207 628 8000
Secretary
Northern Trust International Fund Administration Services
Property Managers
(Guernsey) Limited
BMO REP Asset Management plc
PO Box 255
7 Seymour Street
Trafalgar Court
London W1H 7JW
Les Banques
St Peter Port
Registered Office
Guernsey
PO Box 255
Channel Islands GY1 3QL
Trafalgar Court
Tel: 01481 745001 Les Banques
St Peter Port
Guernsey
Channel Islands GY1 3QL
Tel: 01481 745001
4 BMO Real Estate Investments Limited
Foreword from the Chairman
Welcome to the latest Responsible Property Investment (RPI) Report for BMO Real Estate Investments
Limited, covering the financial period ending 30th June 2019, and providing further insight into our
Environmental, Social & Governance (ESG) processes and performance.
The Company, supported by its Property Manager, continues to make good
progress with its Responsible Property Investment (RPI) strategy building
on the foundations laid in previous years.
The importance of environmental and social factors continues to
strengthen within the UK commercial property market. We believe our
attention to such matters continues to be an important determinant
of the confidence both existing and prospective shareholders place in
the Company as an attractive and appropriate investment vehicle. The
integration of ESG considerations into our investment and management
approaches remains a core feature of our activities.
The details of our progress are presented in this Report. We trust they
are found to be both informative and transparent. As ever, my fellow
Board members and I would be very pleased to discuss our approach and
performance with any of our key stakeholders and we look forward to
receiving any feedback.
Vikram Lall Chairman
23rd September 2019
BREI RPI Report 5
1. About this RPI report
This annual Responsible Property Investment (RPI) Report • Provides an overview of key ESG risks facing the property
for BMO Real Estate Investments Limited (BREI) follows portfolio and outlines our approach to managing these.
the inaugural report released earlier this year to align with
the company’s interim period. This and future reports will The ESG data section of the report is written in accordance
be published alongside the Company’s Annual Report and with the latest European Public Real Estate Association’s (EPRA)
Accounts so that financial and non-financial disclosures are Sustainability Best Practices Recommendations (sBPR), which in
fully aligned. turn are aligned principally with the Global Reporting Initiative
(GRI) standards. ESG data is reported for the year ending 30
This RPI Report:
June 2019.
• Describes the Company’s RPI strategy and related priorities,
This report has been prepared on behalf of the Company by BMO
including the process for determining these and the
Real Estate Partners Asset Management plc, working closely with
progress against them so far.
our strategic advisor on responsible investment matters, Hillbreak.
• Presents key Environmental, Social and Governance (ESG) Any reference to “we”, “us” and “our” throughout the report refers
performance data for the reporting year, as well as our to BREI. BMO Real Estate Partners Asset Management plc is
targets for future performance. referred to throughout as BMO REP or ‘the Property Manager’.
6 BMO Real Estate Investments Limited
2. About the company
The Company Objective
BMO Real Estate Investments Limited is an authorised The investment objective of BMO Real Estate Investments
closed-ended Guernsey-registered investment company. Its Limited is to provide ordinary shareholders with an
shares have a premium listing on the Official List of the UK attractive level of income together with the potential for
Listing Authority and are traded on the Main Market of the capital and income growth from investing in a diversified
London Stock Exchange. UK commercial property portfolio.
Management
The BREI Board has appointed BMO Investment Business Key to terms used in this report
Limited (BIBL) as the Company’s investment managers and
BMO Real Estate Partners Asset Management plc as the The Company: BMO Real Estate Investments Limited
Company’s property managers. BIBL and BMO REP are both
The Property Managers: BMO Real Estate Partners Asset
part of the BMO Asset Management (Holdings) PLC (BAMH).
Management plc (BMO REP)
BAMH is owned by Bank of Montreal (BMO) and is part of the
BMO Global Asset Management group of companies. The Investment Managers: BMO Investment Business Limited (BIBL)
BMO Global Asset Management is a member of the United
Nations Principles for Responsible Investment (UN PRI),
and is committed to exercising responsible investment
practices throughout the BMO Global Asset Management
group, including through BMO REP. This is reflected in the
high ratings it achieved for its UN PRI Transparency Report,
including an A+ rating for Strategy & Governance.
The approach to RPI, which is described in more detail in
the following section of this Report, is reflective of these
arrangements, whereby:
• The Board of Directors has engaged closely with BMO REP,
with the support of specialist consultant, Hillbreak, to
satisfy itself that the approach to integrating ESG factors
into the investment and property management process is
rigorous and appropriate to the investment strategy of the
Company; and
• The Board of Directors has determined a suite of RPI
pillars, commitments and targets that are bespoke to the
Company and its portfolio of property assets.
BREI RPI Report 7Portfolio
BREI is an authorised closed - ended Guernsey-registered ensure that the assets we buy and hold are resilient and capable
investment company with focus on prime UK commercial of being adapted in response to changing demands.
property. As at the 30th June 2019, the BREI property portfolio
Measured by number of assets, around two-thirds of the
had a total value of £344 million.
portfolio is directly managed, meaning that there is a degree
The portfolio has exposure across a range of property asset of operational landlord control in the majority of assets. The
classes, broadly a quarter each to the offices and logistics extent to which the landlord provides services to these assets
sectors, with the remaining half spread relatively evenly varies and this has a bearing on the extent to which our Property
between high street retail, industrial and retail warehouse. Manager is able to influence or control certain activities, such
as waste management, for example. When measured by total
The portfolio is dominated by core assets which are held
floor area, directly managed properties account for just less than
for the long-term. More than 80% of the portfolio has an
half of the portfolio. Consequently, when measured by the most
anticipated hold period (the amount of time an asset is held by
meaningful intensity metric for key environmental performance
an investment owner before being sold) of five years or more,
measures such as energy consumption and greenhouse gas
with circa 50% likely to be held for over 10 years. This means
emissions, the landlord and Manager has little direct control over
that the integration of ESG factors into our asset management
the way a significant proportion of the portfolio is managed.
activities is concerned primarily with the safeguarding of
rental income and the preservation of strong, long-term The ESG Performance data in Section 4 and the ESG Risk Profiles
capital values. With evolving expectations in the commercial set out in Section 5 of this RPI Report, particularly that relating
real estate market in respect of ESG factors (from investors, to utilities and related greenhouse gas emissions, are limited to
lenders, occupiers and regulators, for example), we need to those assets where we have operational control.
Figure 1: Portfolio composition
Percentage of portfolio capital value Property type (number of assets)
9 10
26.42%
39.67%
14.92% 9
Office Office
12
Retail – High Street Retail – High Street
18.99%
Retail – Warehouse Retail – Warehouse
Industrial & Logistics Industrial & Logistics
Management status (absolute) Management status (percentage)
Capital Value Number of Capital Value Assets NLA
NLA (sq ft)
(£) Assets % % %
Directly managed 233,325,000 27 939,158 Directly managed 67.92% 67.50% 50.23%
Indirectly managed 110,225,000 13 930,464 Indirectly managed 32.08% 32.50% 49.77%
8 BMO Real Estate Investments Limited3. RPI strategy and priorities
Developing our RPI strategy
During the year 2018-19, the Company strengthened its focus on Environmental, Social and related corporate Governance (ESG)
matters by developing a formal Responsible Property Investment (RPI) Strategy. The development of the Strategy builds on the
strong foundations established by the Property Manager’s approach to ESG integration throughout all key investment and property
management activities.
The process for defining and prioritising the Company’s material RPI issues included:
• Appointment of a specialist consultant, Hillbreak, to provide strategic advice on the process.
• Support for the strategy from the whole Board, led by the Chairman.
• Dialogue and cooperation with the Property Manager, BMO REP.
• Use of the robust BMO REP approach to RPI (see box, below) as a foundation for BREI, particularly in relation to the integration of
material ESG considerations into investment decision-making processes, throughout the management lifecycle.
The BMO Real Estate Partners approach to Responsible Property Investment
As Property Managers for BREI, the BMO REP approach to • Applying the ESG framework across all core business
Responsible Property Investment was used as the foundation functions, supporting full integration, including by its
for the development of BREI’s own Strategy. professional staff having a clear understanding of the
interactions between different business functions on
The BMO REP RPI approach was developed in response to
relevant ESG matters;
a recognition of the increasing level of risk presented to
financial markets and real estate assets by ESG issues such • Routinely considering and integrating ESG factors within
as climate change, and the growing interest and attention regular asset business planning activities; and
paid to ESG issues by investors, occupiers and governments –
• Implementing ESG interventions in a co-ordinated manner.
including through evolving regulatory frameworks.
The BMO REP ESG Committee – with reference to the BMO
BMO REP applies a consistent approach to integrating
Global Asset Management Governance and Sustainable
ESG matters into fund management, asset management,
Investment Team and its reference to the BMO GAM
property management, and development, with a particular
Responsible Investment Advisory Council – monitors and
emphasis on:
reviews the RPI approach and performance.
• Having a clear understanding of the material issues and
Further information on the BMO REP approach to Responsible
priorities for commercial real estate presented by the
Property Investment can be found here:
evolving ESG landscape;
https://www.bmorep.com/wp-content/uploads/2018/10/
• Identifying and responding to the investment risks and
cm16109-bmo-rep-responsible-property-investment.pdf
value enhancing opportunities presented by ESG criteria;
• Setting asset-specific targets within an overall context of
fund policy, direction and vision;
BREI RPI Report 9The process described above led to the development of 3. Portfolio – attendance to and optimisation of material ESG
a focused RPI approach, bespoke to the BREI portfolio, performance and risk factors across the portfolio, with a
investment strategy and business model, and centred on four particular emphasis on resource efficiency and renewable
key pillars: energy, occupier wellbeing and satisfaction, managing
the implications of new regulations concerning minimum
1. Leadership & Effectiveness – measures through which
energy standards for leased properties, and ensuring that
we will demonstrate effective governance in relation to
our properties are not used by organisations connected to
ESG criteria, a theme that is particularly pertinent to our
Controversial Weapons activities.
shareholders in the context of our outsourced investment
and property management arrangements. 4. Transparency – approach to investor reporting and public
disclosure on relevant ESG factors, including participation
2. Investment Process – procedures through which BREI
in recognised industry reporting initiatives and through
integrates ESG into the investment process, ensuring that
alignment to applicable standards of best practice.
material factors are central to investment decision-making
and property management so that relevant risks to income
and long-term performance are addressed in a timely and
efficient manner.
Progress against our RPI commitments
The BREI ESG commitments and targets set out below these pillars to the end of June 2019 is described, along with
address each of the four pillars of our RPI approach. an explanation of notable outcomes, many of which are
further elaborated in later sections of this RPI Report.
These commitments and targets were set in 2017. Some
have required immediate action, many impose ongoing The Company will continue to drive ahead with its RPI
requirements, whilst others set a longer-term direction of Strategy in 2019 and beyond, and will provide shareholders
travel and remain as forward actions. Our progress against with regular updates of progress.
Fulfilled (including those that are ongoing) In progress and on track ! Not on track or at risk Not achieved
ESG commitment Status Review of progress
Leadership & effectiveness – measures through which BREI will demonstrate effective governance in relation to ESG criteria.
Participate in the Global Real Estate We participated in the GRESB survey for the first time in 2018, achieving an
Sustainability Benchmark (GRESB) from inaugural score of 43 out of 100. This resulted in a one-star rating.
2018, with the objective thereafter of
The Fund achieved an overall score of 60 in the 2019 GRESB Real Estate Survey,
realising year-on-year improvements in
the 17 point improvement representing a 39.5% increase over the previous
score and peer group ranking.
year’s count. The Fund maintained its one-star status. The Company also
achieved a B rating in the GRESB Public Disclosure assessment representing a
much improved level of transparency for disclosure of ESG related information.
We recognise the important role that GRESB has played in facilitating the
advancement of the RPI agenda within the commercial real estate sector globally,
and our commitment to participating in the survey remains. However, we are
also cognisant of its inherent limitations and the results of all participants in
the Survey should be interpreted with these limitations in mind. We would
be happy to discuss our observations in this regard with our shareholders and
other stakeholders, albeit in full acknowledgement of the fact that we will be
continuing to pursue improved scores and rankings in the years ahead.
10 BMO Real Estate Investments LimitedESG commitment Status Review of progress
Investment process – procedures through which BREI integrates ESG into the investment process.
Confirm classification of all assets within the manager’s One of the driving criteria in the Asset Classification System
Asset Classification System by procuring EPC assessments is the EPC rating of the properties. The Company has
for those assets for which an EPC is not in place. Implement maintained 100% EPC coverage throughout the reporting
routine of Asset & Property Management actions according period, obtaining updated assessments as EPCs expire or
to the classification of each asset and the manager’s asset improvements dictate. The impact on the distribution
corresponding RPI Requirements for Asset Managers and of properties and capital values according to the classification
Property Managers. system is shown in Section 5. Seven assets fall into the
upper (more material) tier of the classification system, whilst
the number in the second tier is 19 and the third tier is 14.
The distribution of energy ratings for the portfolio is also
shown and explained in Section 5. This shows that 4.15% of
income, corresponding to 2.68% of floor area, is associated
with F or G rated properties. Our approach to managing
these issues is explained in Section 5 but it is worth noting
that some of these F or G ratings have not been formally
lodged on the national database pending incorporation of
potential improvement options within the asset business
planning process.
This is an ongoing commitment and our comprehensive
and diligent approach has ensured that it has been fulfilled
from 2018.
Where assets have been classified, undertake RPI Appraisals RPI Appraisals have been completed for all assets in relation
of all Tier 1 assets by end of 2017, Tier 2 assets by end of Q2 to issues that we have determined to be potentially material
2018 and Tier 3 assets by end of Q4 2018. Asset Business to future investment performance, such as EPC ratings,
Plans to be updated to reflect the findings of the RPI green building certification coverage and contamination. A
Appraisals. Appraisals to be kept updated on an annual basis. comprehensive, desk-based screening of the exposure of all
assets to flood risk, using a range of up-to-date public and
proprietary modelled data, has also been undertaken.
The aggregated profile of the key ESG risk metrics arising
from these RPI Appraisals is disclosed and discussed in
Section 5.
Completed RPI Appraisals are being used to inform the asset
business planning process and will be subject to ongoing
annual review.
Undertake RPI Appraisals on 100% of new acquisitions prior The Company has not acquired any new assets within the
to transaction closure, with investment critical findings reporting period, however, we are ready to implement an
reported to the Property Investment Committee and relevant enhanced approach to capturing and evaluating material
findings and improvement recommendations incorporated ESG factors in the form of an extended brief for consultants
into the Asset Business Plan. engaged in due-diligence enquiries, completion of an RPI
Appraisal and specific coverage within the Investment
Committee approval process.
BREI RPI Report 11ESG commitment Status Review of progress
Portfolio – attendance to material ESG performance and risk factors across the portfolio.
Using aggregated data from asset level RPI Appraisals, This RPI Report provides the first Portfolio ESG Profile, as
prepare an annual report to shareholders on the exposure presented and explained in Section 5.
of the portfolio to key ESG risks including those pertaining
to energy (including MEES), water, waste, flooding
contamination, accessibility and building certification.
Establish year-on-year intensity-based energy, carbon, water Building on the steps that have already been taken
and waste reduction targets for landlord services against an with the support of Carbon Credentials to develop and
appropriate baseline. implement an environmental monitoring protocol, a
comprehensive third-party analysis of data robustness
for energy and carbon was completed by Verco Advisory
Services Limited for the whole of the portfolio, covering
annual data for both 2017 and 2016. From this, the relative
energy efficiency and absolute landlord-procured energy
consumption of each asset has been determined, allowing
assets to be classified according to the relative materiality
of their in-use energy performance attributes.
Following this process, Verco Advisory Services Limited
provided advice on the establishment of a long-term target
for reducing energy consumption across the portfolio,
using a methodology consistent with the goal of the Paris
Agreement on Climate Change to limit global warming to
less than 2ºC above pre-industrial levels.
Informed by the long-term framework, we established asset-
specific energy targets for 2018-19 amounting to an average
reduction target for the portfolio of 3% for the year.
In addition, we have set a portfolio-wide water use reduction
target for 2018-19 of 1% for directly managed assets.
We continue to make efforts to improve the collection of
waste data to enable us to determine an appropriate suite of
waste management targets.
Set a long-term (2030 or beyond) target for energy (and Based on the advice of Verco Advisory Services Limited,
carbon) reduction according to a recognised science-based the Company has looked to adopt a target of reducing the
targets methodology. energy intensity of the portfolio by 20% per square meter by
2031, against a 2016 baseline.
This target exceeds the science-based Sectoral
Decarbonisation Approach pathway and has been used to
frame the establishment of asset-specific energy reduction
targets for 2018-2019 which average to 3% for the portfolio.
The Fund is currently considering an appropriate means by
which to demonstrate alignment with a recognised science-
based methodology.
Establish a basis for measuring occupier wellbeing and We have commenced a pilot occupier satisfaction survey
satisfaction across the portfolio and set targets by 2020 for programme with the support of specialist customer
improved performance in this regard. experience consultancy, RealService. However, restrictions
imposed under GDPR have resulted in a protracted timetable
for occupier engagement. We hope to be able to disclose the
results of this initial survey, together with our response to
them, later in 2019.
12 BMO Real Estate Investments LimitedESG commitment Status Review of progress
Have in place 100% renewable electricity supplies for all We renewed landlord electricity contracts at the end of
landlord procured power by the end of 2018. Q3 2018 resulting in 100% of supplies being from certified
renewable energy sources.
Prohibit new lease contracts with organisations connected to BMO REP has prepared and enacted a Policy on Controversial
the production, storage, distribution or use of Controversial Weapons and other controversial activities, drawing on
Weapons. Monitor the tenant mix of the Company on a the resources available to its parent, BMO Global Asset
regular basis and exercise discretion when considering Management, to actively screen organisations based on
leasing to organisations involved in other controversial their association of their activities with a range of ethical
activities and engage regularly with investors on their criteria, including Controversial Weapons. The Policy and its
expectations in this regard. implementation support our commitment, and ensure that
we have the necessary processes in place to address the
criteria at each relevant stage of the property investment
and management cycle.
We monitor our tenant mix as part of our commitment to
minimising its leasing exposure to organisations connected
to the production, storage, distribution or use of Controversial
Weapons. At the period ending 30 June 2019, 0% (zero
percent) of rental income was attributed to organisations
that appear on the exclusions list managed by BMO Global
Asset Management.
In addition to the exclusionary screening of companies
linked to Controversial Weapons, and the discretion we apply
to entering into contracts with organisations based on a
range of additional ethical criteria, we have also enacted
enhanced standard lease clauses in England & Wales, based
on the models of good practice established by the Better
Buildings Partnership, to address environmental performance
and risk. In particular, we have instructed our retained
solicitors to incorporate, wherever possible within new
leases, requirements on both the Company and the tenant
to share in-use environmental performance data, whilst also
prohibiting the implementation of alterations that would
weaken an EPC rating.
Transparency – approach to investor reporting and public disclosure on relevant ESG factors.
Submit the Minimum tier questionnaire of the Carbon The Property Manager made its first submission to the full
Disclosure Project (CDP) General Climate module in 2019 tier general climate module on behalf of the Company in
and the Full tier from 2020 onwards, whilst investigating 2019. The results will be made available to our shareholders
the potential to submit across the Water and Supply on request.
Chain modules.
BREI RPI Report 13ESG commitment Status Review of progress
Align Non-Financial Reporting to the 3rd Edition of the EPRA Ahead of our 2019 commitment, we prepared our first RPI
Sustainability Best Practices Recommendations. Include Report for the 2018-2019 interim period, with the inclusion
summary of performance measures in the 2019 Annual of ESG data for the 2018 financial year, and setting out
Report, linked to full ESG disclosure on Company website. our performance against a range of ESG metrics. This is
aligned to the latest EPRA sustainability Best Practices
Recommendations. This 2019 report represents the first
report with non-financial disclosures aligned with the
Company’s Annual Report and Accounts.
We recognise that we have work to do to increase the
extent of the portfolio for which we hold data, especially for
environmental metrics. Our priorities for the remainder of
2019 include extending the scope of the data captured.
Produce in the 2019 Annual Report a ‘routemap’ towards We have continued to advance our approach to addressing
financial reporting in line with the recommendations of the climate risk across our portfolio and through our investment
Financial Stability Board (FSB) Task Force on Climate-Related processes during 2018-2019.
Financial Disclosures (TCFD).
Disclosures aligned to the TCFD recommendations are set
out as an appendix to this Report, along with a statement
of intended actions for the remainder of 2019 and beyond
which are intended to further develop the precision of our
analysis of, and response to, climate risks and opportunities.
Provide six-monthly dashboard and commentary updates to Our first RPI Report established a baseline against which
shareholders on key ESG attributes for the portfolio. we will report to shareholders, on a six-monthly basis, the
evolving profile of ESG characteristics that will occur as a
result of portfolio churn, management action and changing
external circumstances.
This Report provides shareholders with an update across a
full range of ESG metrics. Thereafter, and between annual
RPI reports, a summary of notable changes will be presented
to shareholders within interim reports.
14 BMO Real Estate Investments LimitedSpotlight on
Portfolio-wide ESG improvements
With a portfolio characterised by a wide range of asset types and varying degrees of direct operational
control and influence, the Company works hard to identify potential opportunities where small
incremental improvements to individual assets can add up to better overall portfolio credentials.
14 Berkeley Street, London
Engagement and dialogue with occupiers
New movement-controlled energy efficient LED lighting installed within circulation areas
Major plant operation aligned to occupier operational hours
Independent air-conditioning systems to match occupier demand and reduce building base-load
Creation of outdoor relaxation space to support occupier well-being initiatives
24 Haymarket, London
Energy reduction interventions
New energy efficient LED lighting installed
Replacement lifts with energy saving idle mode
Installation of energy efficient air-conditioning unit within tenant demised area
Hemel Gateway, Hemel Hempstead
Efficient security components
Replacement electronic components to main gates to reduce energy consumption
LED bulbs introduced to security floodlighting to support energy efficiency
Lochside Way, Edinburgh
Efficient security lighting
LED bulbs introduced to security floodlighting to support energy efficiency
Sunningdale, Chobham Road
Residential areas over retail pitch
Programme of enhancement as residential units become vacant
New efficient electric heating system installed
Improved energy performance ratings achieved on completion
BREI RPI Report 154. ESG performance
A high-level summary of ESG performance for the period Energy
ending 30 June 2019 is provided below. A more detailed
Since October 2018 the Company has purchased renewable
analysis of the data is included in Appendix 1 and is
electricity for all properties where the landlord is
presented in accordance with the European Public Real
responsible for energy procurement.
Estate Association’s (EPRA) sustainability Best Practice
Recommendations (sBPR). The Property Manager continues to engage the services
of Carbon Credentials, a third-party environmental data
Environmental services provider, to collect energy for those assets in
the fund where there is a permanent landlord-controlled
Scope
energy supply. The figures presented below show the
The Company had an overall investment in real estate of outcome of the in-house analysis of this data, and include
£344 million as at 30th June 2019. Whilst approximately two properties for which there has been some landlord
thirds of this capital value is considered to be in directly responsibility during the reporting period from transient
managed property, the extent to which the landlord exercises supplies, typically those associated with vacant demised
operational control varies significantly, impacting on the extent premises. Absolute energy figures were independently
of data that can be established. The extent of data coverage is audited by Lucideon, for which the audit statement can be
detailed in Appendix 1. found at Appendix 4.
Table 1: Summary of energy data
Current year 2019 Prior year 2018
Like-for-like electricity usage (kWh) 935,140 991,585
Like-for-like fuel usage (kWh) 470,198 579,587
Energy intensity (kWhe/m²) 41.1 44.9
During the reporting year gas consumption in the managed and the continued roll-out of more energy efficient lighting
portfolio decreased substantially. This was predominantly across the portfolio.
as a result of the refurbishment of Park View House in
Emissions
Nottingham in 2018, during which modern, more efficient
plant and equipment was installed. Whilst the Company has committed to procuring 100% of landlord
electricity supplies from renewable sources (that is, not derived
Additionally, at 14 Berkeley Street in London, major plant from greenhouse-gas-emitting fossil fuels), it was considered
operation was aligned to occupier operational hours and appropriate, for better comparison purposes, to adopt location-
demand, reducing overall building base load. Further based conversion factors provided by the UK Government to
decreases in electricity can be attributed to the reduction of calculate the respective emissions as opposed to market-based,
landlord liability from utilities associated with void demises, which would take into account this purchase of renewable energy.
16 BMO Real Estate Investments LimitedThe greenhouse gas (GHG) emissions are reported here as
kilograms of carbon dioxide equivalent (kg CO2e). The following Renewable Energy Generation
table reports on:
During the year, the refurbishment of the Royal Standard Place
• Scope 1 emissions – resulting from the burning of natural
Offices in Nottingham included installation of a roof mounted solar
gas in a boiler on-site
photo voltaic panel system generating 4,000 kWh of renewable
• Scope 2 emissions – resulting from the procurement and energy annually, reducing grid demand, offsetting landlord service
use of electricity from the National Grid charge expense and offsetting over 2 tonnes of CO2e per annum.
Table 2: Summary of emissions data
Current year 2019 Prior year 2018
Total carbon emissions (kg CO₂e) 326,098 388,871
Emissions intensity for Scope 1 and 2 (kg CO₂e/m²) 11.9 14.2
Water
The following table reports on water consumption and water consumption can be attributed to vacant units
intensity, and covers the limited extent of landlord being occupied, and the transfer of supplies to the
control within the portfolio. The reduction in like-for-like tenant’s responsibility.
Table 3: Summary of water data
Current year 2019 Prior year 2018
Like-for-like Water Usage (m )
3
1,128 2,079
Water intensity (m3/m2) 0.24 0.4
Waste
The Property Manager began collecting detailed waste looking to engage waste carriers across the portfolio who can
data in 2018 and is therefore unable to make year on year provide suitable account for the total waste removed from site
like for like comparison at this time. Waste produced in and the component waste streams.
properties under the landlord’s responsibility is reported in
At present, all properties which generate waste streams under
the following table by proportion recycled, incinerated for
landlord control are controlled through site management
energy and sent to landfill.
procedures which are aligned to ISO14001 standards. This
The Company targets zero waste to landfill by the end of accreditation ensures proper management and removal of
2020 and to achieve this the Property Manager will be both hazardous and non-hazardous waste from site.
Table 4: Summary of waste data
Total weight of waste by disposal route (tonnes) Recycling 35%
Incineration with energy recovery 64%
Landfill 1%
BREI RPI Report 17Energy Consumption GHG Emissions Water Consumption
1,000,000 300,000 2,500
250,000
800,000 2,000
200,000
600,000 1,500
kg CO2e
kWh
150,000
m3
400,000 1,000
100,000
200,000 500
50,000
0 0 0
2018
2018
2018
2018
2019
2019
2019
2019
2018
2018
2019
2019
2018
2018
2019
2019
Elec-Abs Elec LfL Fuel-Abs Fuel-LfL GHG- GHG- Water-Abs Water-Lfl
Dir-Abs Indir-Abs
Energy Intensity GHG Intensity Water Intensity
50 15 0.5
40 12 0.4
30 9 0.3
kg CO2e/m²
kWhe/m²
m3
20 6 0.2
10 3 0.1
0 0 0.0
2018
2018
2019
2018
2019
2019
Social
Scope
Through its Property Manager, the Company takes a The Company has no direct employees, however, a
responsible approach to corporate citizenship, both number of Building Managers are employed directly by
through engagement with industry and corporate BMO REP and are required to achieve a minimum of 50
stakeholders, and through the positive impact it seeks to hours of Continuing Professional Development (CPD)
generate in the communities around its managed assets. each year.
18 BMO Real Estate Investments LimitedGender equality Governance
The Company has no direct employees, and therefore the table The Property Manager has a strong governance structure that
disclosing gender equality data (Table 6, Appendix 1) pertains ensure its activities are undertaken in the best interests of
solely to the Company’s board. the fund. Its robust operating procedures and policies ensure
the risks associated with illegal practices such as bribery and
Health & safety corruption are in line with local legislation and expectation.
The Property Manager’s parent organisations, BMO Global
The Property Manager ensures that all legislative requirements
Asset Management and the Bank of Montreal, provide
connected with maintaining safety and security at premises
detailed oversight of the arrangements, which includes the
are met where it has operational control. This includes, but is
requirement for mandatory annual training and declaration
not necessarily restricted to, undertaking regular reviews of
for all employees. More detailed explanations of governance
health and safety status and performance, undertaking fire
structures can be found in the Annual Report and Accounts.
risk assessments, including special investigations as presented
by the Grenfell disaster for example, and maintaining robust
procedures for the control of water hygiene.
Supply chain
Much of the Property Manager’s supply chain management is
delivered through the properties’ ISO 14001 accreditation (see
page 27). This is applicable to all managed assets. Property
managers at these sites are given the responsibility to select
and manage contractors servicing the sites. They follow the
BMO REP supply chain strategy to hire locally and ensure all
health and safety and ISO 14001 standards are adopted.
Community Engagement
The characteristics of the current portfolio are such that
opportunities for community engagement, for example
through forward funded or redevelopment schemes, are
limited. Nevertheless, the Company maintains vigilance in
seeking out any opportunities it may have to engage with
local stakeholders impacted by its activities.
BREI RPI Report 195. ESG risk profile
The ESG Risk Profile described in this Section presents key frequency and extent to which its ESG characteristics and
data collated by BMO REP as part of its ongoing process of performance are monitored within the asset and property
appraising all held assets using its RPI Appraisal system. management process. For example, the relevant Asset
It provides a picture of the key ESG characteristics of the Manager should review Property Manager reports on
BREI portfolio at 30 June 2019 with respect to issues such as environmental performance against targets, as well as
environmental management, flood risk, energy performance progress against Asset Action Plans, for Level 1 assets on a
and contamination. quarterly basis. For Level 2 assets, the frequency of the review
is reduced to six months, whereas for Level 3 assets, where
Asset classifications there is no landlord energy spend, there is no requirement to
review consumption on a regular basis.
It is important that our approach to ESG is proportionate in
the context of each asset’s impact and the degree to which BMO REP has in place clear procedural guidelines to assist
we have management control. This is particularly the case for asset and property managers in this regard.
energy, in relation to which both regulatory and performance-
The classification of an individual asset will quite likely
related risks to value can materialise. We have therefore
change over time, as its energy rating(s) or performance
devised a classification system to enable resources to be
attributes evolve. So, for example, a Level 1 FRI asset may be
directed at those assets for which the risks and potential
downgraded to Level 3 if there is a change in its EPC rating,
enhancement opportunities are likely to be greatest.
or a directly managed asset may be upgraded to Level 1 from
Importantly, the classification of an asset determines the Level 2 if energy consumption increases.
Asset Classification Energy Rating Energy Spend
Level 1 EPC Rating of F or G and/or Total annual landlord energy spend ≥£50,000
Level 2 EPC Rating of E and/or Total annual landlord energy spend >£0 andFigure 2: Asset classifications by property type (continued)
Office Retail – high street Retail warehouse Industrial & Logistics
2 1
2
3 3 4
5 5 3
5
7
Asset classifications
Level 1 – where EPC rating is F or G and/or annual
landlord energy spend is > £50,000
Level 2 – where EPC rating is E and/or annual
landlord energy spend is between > £0 and £50,000
Level 3 – where EPC rating is A+ to D and there is no
landlord energy spend
Flood Risk
The exposure of the portfolio to the principal sources of flood • Ensuring that we have adequate insurance cover in place;
risk is shown in the Flood Risk Dashboard. This shows that,
• In areas of higher risk, maintain a watching brief
taking account of flood defences, the majority of the portfolio
on insurance premiums and planning decisions for
is at negligible or low risk of flooding from rivers or seas,
development work, including in relation to change of use
with 15.97% of capital value at high risk of flooding from this
decisions which may be pertinent to future asset strategy;
source. Approximately 9.03% of capital value is deemed to be
at high risk from groundwater flooding, principally confined to • For assets subject to higher levels of direct risk, review
a number of office and high street retail assets. Circa 10.18% of asset files, including purchase reports, to ensure that
capital value is deemed to be at high risk from surface water detailed flood risk information is held by the Company;
flooding, again principally confined to office and retail sectors.
• For directly managed assets in areas of high and
The principal elements of our approach to managing flood moderate indirect risk, prepare operational contingency
risk include: plans so that anticipatory and responsive measures can
be put in place effectively to deal with local disruption,
• Undertaking annual flood risk assessments of all held assets
and ensure that tenants are engaged in this process;
to keep our overview of portfolio risk exposure under regular
review; • Engage with our tenants in those assets that are not
directly managed but to which higher levels of risk apply, to
• Undertaking flood risk assessments, including an
ensure that they can be prepared for a possible future flood
assessment of repairing obligations within lease terms, at
event; and
the pre-acquisition stage for all assets in which we consider
investing and taking account of any material issues in • Ensuring that flood resilience is a feature of our approach
investment decisions and subsequent asset business planning; to sustainable development and refurbishment.
BREI RPI Report 21Figure 3: 2019 Flood risk comparison
Fluvial flood risk Surface water flood risk Groundwater flood risk Historic flooding
Distribution of risk ratings as a Distribution of risk ratings as a Distribution of risk ratings as a Distribution of historic flood
proportion of total Capital Value proportion of total Capital Value proportion of total Capital Value incidents in relation to total
Capital Value
2.26% 10.18% 9.03% 8.24%
15.97%
24.29%
17.83% 18.00%
12.20% 31.64%
3.13%
69.58% 70.01% 73.76%
33.89%
Fluvial flood risk by sector Surface water risk by sector Groundwater risk by sector Historic flooding by sector
Distribution of risk ratings by Distribution of risk ratings by Distribution of risk ratings by Distribution of risk ratings by
number of assets number of assets number of assets number of assets
Legend Legend Legend Legend No
Negligible Low Negligible Low Negligible Low Level of No record
groundwater
Moderate High Moderate High Moderate High flood risk Yes (Multiple
sources)
Risk of fluvial or storm-surge Level of surface water Level of groundwater
flooding accounting for existing flood risk flood risk Yes (Main
flood defences River)
12 12 12 12
10 10 10 10
Number of assets
Number of assets
Number of assets
Number of assets
8 8 8 8
6 6 6 6
4 4 4 4
2 2 2 2
0 0 0 0
Office
Retail Warehouse
Industrial & Logistics
Retail High Street
Office
Retail Warehouse
Industrial & Logistics
Retail High Street
Office
Retail Warehouse
Industrial & Logistics
Retail High Street
Office
Retail Warehouse
Industrial & Logistics
Retail High Street
Risk definitions Risk definitions Risk definitions
Fluvial & tidal (defended) Pluvial (surface water) Groundwater flood extent
flood extents flood extent • High
• High [>3.3% event] • High [>1% event, where flood • Moderate
• Moderate [between 3.3% & 1%] depths >1m]
• Low risk with [>1% likelihood]
• Low [between 1% and 0.1%] • Moderate [>1% event, where
flood depths between 40cm • Negligible with [1% event, where
flood depthsEPC ratings
The dashboards below and overleaf provide a summary of floor area. By number of EPCs, 12.82% are F or G rated,
the profile of Energy Performance Certificate (EPC) ratings compared to 15.02% of EPCs lodged on the National Register.
for the portfolio. Across all UK assets, it can be seen that the
When viewed specifically within the context of our properties
majority, from both a rental value and floor area point of
located in England & Wales, the jurisdiction within which
view, relates to the higher EPC ratings, indicating a good level
regulations pertaining to Minimum Energy Efficiency Standards
of modelled energy performance for the portfolio.
(MEES) apply, the proportion of rental value that is associated
Indeed, the two lowest ratings summate in combination to with F and G ratings is slightly higher at 4.9%, applicable to
only 4.15% of rental value and 2.68% of the total lettable some 3.2% of net lettable area.
Figure 4: EPC ratings
Distribution of EPC ratings by rental value
Assets in England & Wales only
2.98% 1.51%
EPC rating: CO2 emissions
A (0-25) E (101-125)
B (26-50) F (126-150)
22.67%
20.19%
C (51-75) G (over 150)
9.89% D (76-100)
42.76%
2019
Distribution of EPC ratings by NLA
Assets in England & Wales only
1.85% 1.04%
EPC rating: CO2 emissions
14.00% A (0-25) E (101-125)
20.55%
B (26-50) F (126-150)
13.43%
C (51-75) G (over 150)
49.15% D (76-100)
2019
BREI RPI Report 23Figure 4: EPC ratings (continued)
EPC ratings by rental value
Whole portfolio – including assets in Scotland
A B C D E F G
50% 43.02%
41.20%
40%
% of Total CRV
30% 23.73%
20.94%
18.04% 18.65%
20%
12.48% 13.24%
10%
1.61% 3.15% 2.75% 1.39% 1.40%
0.00% 0.00%
0%
2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019
EPC ratings by net lettable area
Whole portfolio – including assets in Scotland
A B C D E F G
48.32%
50% 46.05%
40%
% of Total CRV
30%
22.31%
19.11%
20% 15.96% 16.48%
12.71% 13.40%
10%
1.61% 2.02% 1.72% 0.95% 0.96%
0.00% 0.00%
0%
2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019
24 BMO Real Estate Investments LimitedFigure 4: EPC ratings (continued)
Sector distribution of EPC ratings (NLA)
Whole portfolio – including assets in Scotland
Office Industrial & Logistics EPC rating: CO2 emissions
A (0-25) E (101-125)
B (26-50) F (126-150)
C (51-75) G (over 150)
D (76-100)
Retail – Retail –
high street warehouse
Sector distribution of EPC ratings (by rental value)
Whole portfolio – including assets in Scotland
Office Industrial & Logistics EPC rating: CO2 emissions
A (0-25) E (101-125)
B (26-50) F (126-150)
C (51-75) G (over 150)
D (76-100)
Retail – Retail –
high street warehouse
Notes
1 Values shown are Contracted Rental Value (CRV) except for void units and those few (de minimis) commercial leases for which CRV data is not available,
for which Estimated Rental Values (ERV) have been used.
BREI RPI Report 25We have in place a comprehensive policy and strategy for Other RPI risk metrics
managing the risks associated with MEES, with particular
The profile of the portfolio with reference to a range of additional
emphasis on ensuring that:
ESG attributes is shown in Figure 5. This indicates that the
• We maintain comprehensive records that are kept up-to- exposure of BREI assets to various environmental risk criteria is
date to ensure clear visibility on related risks; limited, whilst other metrics convey the extent to which certain
management actions have been fulfilled.
• We procure high-quality EPC assessments from best-in-
class providers so that the ratings we hold are accurate
Current contamination risk
and the information supporting them useful for managing
performance; With reference to capital value, approximately two-thirds (62%)
of the portfolio is at low risk of contamination, with the majority
• We are well-sighted on energy performance risk when
of the remainder at the modestly elevated level of Moderate-
acquiring assets and when preparing for and executing
Low risk. One retail warehouse, representing 0.6% of total
lease transactions;
capital value, is deemed as moderate risk. Contamination is
• We have robust processes in place to ensure that EPC an ‘investment critical’ criteria within our RPI Appraisal process
ratings are optimised through development, refurbishment when considering potential acquisitions. FRI assets over which
and routine property management activities; and we have no direct management control benefit from an annual
inspection by an asset manager, whilst directly managed assets
• We have in place comprehensive information to support
have the benefit of our Environmental Management System,
sales when we choose to bring properties to the market.
certified to the ISO 14001 standard, of which the prevention and
With these measures in place, we ensure not only that we management of contamination is part.
take timely and cost-effective action to address energy
ratings ahead of a legislative restriction on transactions, HCFC coolants
but also that we future-proof our assets to future regulatory
Currently, two office assets within the portfolio have air-
change and standards, in the interests of delivering
conditioning equipment that utilises a hydrochlorofluorocarbon
occupational benefits for our customers and sustainable
(type R-410A and R407C) coolant which is subject to the European
returns for our shareholders in the long-term.
F-Gas Regulations for the phasing out of ozone depleting
substances. The Regulations prohibit the use of ‘recycled’ and
‘reclaimed’ HCFCs to top up or service existing equipment and we
manage the implications of this through our asset business plans.
Figure 5: Other Risk Metrics
Current contamination risk HCFC coolants Building manager ESG training
Distribution of risk ratings as a proportion No. of directly managed assets in which Directly managed assets for which Building
of total Capital Value HVAC systems using HCFCs are present Managers have received ESG training
16.61% 3
6
21.55%
61.84% 21 20
What is the current level of risk? Are HCFCs (eg. R22) used in cooling systems? Level of training received
Low Moderate-Low No Yes Advanced Foundation None
Moderate No record
26 BMO Real Estate Investments LimitedFigure 5: Other Risk Metrics (continued)
Green building certification Statutory wildlife designations Aquifer protection zones
Distribution of green building ratings with Assets to which statutory nature No. of assets which are situated in Acquifer/
reference to Net Lettable Area conservation designations apply Groundwater Protection Zones
11
100% 40
29
Green building certification Are there any statutory wildlife designations Does the site fall within an Aquifer/
scheme & rating (eg. SSSI, Ramsar, SPA, SAC)? Grounwater Protection Zone?
BREEAM BREEAM None No No Yes
Excellent V. Good
Groundwater Source Protection Zones training delivery to these building managers over the course of
the next year.
Eleven assets fall within Groundwater Source Protection Zones,
six of which, three Nottingham properties, Bromsgrove, Hemel
Green Building Certification
Hempstead and High Wycombe, relate to directly managed
sites. These are designated zones around public water supply None of our properties have the benefit of a formal
abstractions and other sensitive receptors that signal there BREEAM rating. As previously mentioned, the Company
are particular risks to the groundwater source they protect. considers the merits of green building certification on a case-by-
It is important that our pollution prevention measures are case basis.
particularly effective in these areas of elevated risk.
Building User Guides
Statutory wildlife designations
There are no known Building User Guides in place at any of the
None of our properties are affected by statutory assets where the landlord has direct responsibility for operation of
wildlife designations. common parts and services. There are a number of assets where
such common parts and services are of a type and scale that
Building Manager ESG Training merit the creation of such guides to promote better efficiency in
use and we will look to procure these over the next year.
All building managers employed directly by BMO REP have
received a basic foundation level of training on relevant ESG
Environmental Management System
matters, commensurate with the enhanced RPI Protocols for
Asset & Property Management that have been put in place. An Environmental Management Systems (EMS) accredited to
This training has been delivered by the Property Manager’s the ISO 14001 standard and covering energy, water, waste and
dedicated sustainability professionals. One building manager the control of hazardous substances has been established by
has undertaken more advanced training delivered by BMO REP and applies to all directly managed assets with the
specialist third-party providers. exception of properties considered to be de minimis in terms of
the landlord’s environmental impact.
The directly managed assets at which building managers
are engaged but have not received formal training relate For the current portfolio, 16 of the 27 directly managed assets
to outsourced building management services provided by are considered to be of this nature and include for example the
our Managing Agents, Eddisons. BMO REP will extend their assets at Hemel Hempstead, Eastleigh and Edinburgh.
BREI RPI Report 27Appendix 1: EPRA sBPR performance data to
30 June 2019
This section of the RPI Report has been written in accordance as the respective occupiers are responsible for property
with the European Public Real Estate Association’s (EPRA) management, including the procurement of utility supplies.
sustainability Best Practices Recommendations (sBPR), which
Thus, the organisational boundary used for the
are principally aligned with the Global Reporting Initiative
environmental data in this report is based upon operational
(GRI) standards. BMO REP has taken responsibility for
control. This is explained in more detail in the notes on
providing the data held within this report.
environmental data contained in Appendix 2.
Scope BREI has no employees or premises, however, the Company
believes it to be appropriate to refer to the environmental
BREI had an overall investment in real estate of £344 million
footprint associated with the operational activities of our
as at 30th June 2019.
Property Manager as a form of proxy for our own impacts.
Where there is a landlord-obtained supply of water, electricity BMO REP manages several listed and non-listed property
and/or natural gas, the respective data on water and energy funds and is resourced accordingly.
consumption has been analysed for this report. BMO REP also
In August 2018 BMO REP relocated to a newly refurbished
arranges for waste collection and disposal at five properties,
single floor in a multi-tenanted building. It was
equating to 6% of the whole portfolio by floor area. As waste
anticipated that water and energy efficiency would improve.
management data is only available from 2018, like-for-like
However, this could not be confirmed as the managing
comparison is not presented.
agent for the property could not provide BMO REP with
Landlord-procured utilities may be consumed in the whole sufficient consumption data to permit reporting for the
building, in shared spaces only, or by tenants in their leased August 2018 to June 2019 period. We aim to disclose the
demises. Properties where a full repairing and insuring (FRI) consumption data for this premises in future years once
lease is in place are outside the scope of this RPI Report, this becomes available.
Table GRI standard and
EPRA sBPR code Code meaning
number CRESD indicator code
Elec-Abs (4.1) Total electricity consumption 1 302-1
Elec-LfL (4.2) Like-for-like total electricity consumption 1 302-1
DH&C-Abs (4.3) Total district heating and cooling consumption Excluded 302-1
DH&C-Lfl (4.4) Like-for-like total district heating and cooling consumption Excluded 302-1
Fuel-Abs (4.5) Total fuel consumption 1 302-1
Fuels-LfL (4.6) Like-for-like total fuel consumption 1 302-1
Energy-Int (4.7) Building energy intensity 1 CRE1
GHG-Dir-Abs (4.8) Total direct greenhouse gas emissions 2 305-1
28 BMO Real Estate Investments LimitedYou can also read
