Schroder UK Real Estate Fund Sustainability Guide - July 2020 - Marketing material for professional investors or advisers
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Schroder UK
Real Estate Fund
Sustainability Guide
July 2020
Marketing material for
professional investors or advisers
Contents 3 1. Our approach
3 1.1 Stewardship
3 1.2 Real estate with impact
4 1.3 Our Sustainable Investment Policy:
Real Estate with Impact
5 2. Sustainability for real estate in practice
5 2.1 Environmental Management System
and Policy
5 2.2 Sustainability targets
6 2.3 Fund strategy and the Investment Committee
6 2.4 Property management
6 2.5 Improvements, refurbishments and
building certifications
9 2.6 Sustainability data, monitoring and reporting
10 3. Fund case studies
10 3.1 City Tower, Manchester
11 3.2 The Lexicon, Bracknell
12 3.3 Battersea Studios, London
13 4. Investing with impact
14 5. Climate change
14 5.1 Taskforce on Climate-related Financial
Disclosures (‘TCFD’)
14 5.2 BBP Members Climate Change Commitment
15 5.3 Climate Risk and Resilience research
16 6. Transparency and accreditation
16 6.1 GRESB
16 6.2 Schroders sustainability accreditation
17 6.3 UN Principles for Responsible Investment
(‘PRI’)
17 6.4 Memberships
18 7. Schroders Sustainability team
19 8. Schroders Sustainability Commitment
20 Appendix 1
21 Appendix 2
Wenlock Works,
Old Street, London
(Schroder UK Real Estate Fund)
Schroder UK Real Estate Fund
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Sustainability Guide July 2020
8. Schroders
2. Sustainability for 6. Transparency 7. Schroders Sustainability
1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Our We are progressing our 1.1 Stewardship
At Schroders we see ourselves as long-term stewards of
We believe that a sustainable ‘Real Estate with Impact’
investment programme should deliver:
approach
investment philosophy
our clients’ capital, and this philosophy leads us to focus – Enhanced long-term returns for our clients;
on the long-term prospects for the assets in which we – Contribute to our tenants’ business
invest. It is central to our investment process to analyse performance; and
to incorporate ‘positive each investment’s ability to create, sustain and protect
value to ensure that it can deliver returns in line with our
– Deliver positive impacts to communities, the
environment and society for the long term.
impact’ investing. clients’ objectives.
We believe our responsibility to investors includes
Schroder Real Estate’s Pillars of Impact
Our Pillars of Impact – People, Planet, Place and
protecting the interests of our clients from the impacts Prosperity – are referenced to the UN Sustainable
of financial and non-financial risks. Sustainability is an Development Goals: 8 Good Work and Economic
integral element of our investment process and supports Growth; 11 Sustainable Cities and Communities; and
best practice investment management. In our view, 13 Climate Action, recognising the contribution of the
environmental and social governance (‘ESG’) supports built environment and our responsibilities as real estate
investment returns for the long term. investors to society, the environment and economies1.
Please refer to Section 4 for further information.
1.2 Real estate with impact
Sustainability is an integrated element of our investment
management approach. The world experience of climate People Planet
change, shifting demographics and the technology
revolution, is ever changing and these issues are
reshaping our planet and society’s response. Real estate
gives access to the building blocks of sustainable
economies. The built environment supports people,
communities, business, cities, the environment and
society as a whole. Real estate investing therefore
carries the responsibility to understand and manage
Place Prosperity
environmental, social and economic impacts – positive
and negative – to deliver resilient investment returns for
the long term and manage exposure to material risks.
We are progressing our investment philosophy to
incorporate ‘positive impact’ investing. This is beyond
ESG because it seeks to proactively improve situations,
and do good for society and the environment while 1 In 2015, all United Nations Member States recognised the range of
issues we all face by adopting the UN Sustainable Development Goals
delivering risk-adjusted returns. For example, this may
(‘SDGs’) as part of the 2030 Agenda for Sustainable Development.
be achieved through supporting employment, education, These SDGs provide a common framework for public and private
as well as health and social care. organisations to present the impacts of their activities and report on
the outcomes they achieve.
Understanding and improving our impacts sits alongside
and supports our priority to maximise returns for our
clients in a manner consistent with our funds’ risk profiles.
We have established four pillars of impact, referenced
to the UN Sustainable Development Goals, and use
these pillars to consider impacts for funds and assets.
Schroder UK Real Estate Fund
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Sustainability Guide July 2020
8. Schroders
2. Sustainability for 6. Transparency 7. Schroders Sustainability
1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Our
approach
continued
1.3 Our Sustainable Investment Policy:
Real Estate with Impact Sustainability is integral to our investment process
Schroder Real Estate’s Sustainable Investment Policy,
‘Real Estate with Impact’, can be found via the following
across the real estate life cycle
link. The Policy is considered annually, approved
by the Investment Committee and applies to all real
estate funds.
al
https://www.schroders.com/en/uk/realestate/products-- pos
Dis
services/sustainability/
For more information on Schroders please also refer
Health, safety
to Schroders’ Corporate Responsibility and Schroders People Wellbeing & inclusivity Place
Sustainable Investment Report available via the Carbon
& happiness
following links:
Pr
https://www.schroders.com/en/about-us/corporate- Building Energy &
e -a
certification renewables
responsibility/
cq
uis
itio
https://www.schroders.com/en/sysglobalassets/
n
about-us/sustainable-investment-report-annual-2019.pdf
Climate
Community resilience
Sustainability
Heritage
& culture Framework Transport
Re f u r
bish
Biodiversity
& green Supply chain &
me
infrastructure labour standards
nt &
de
ve
lop
Resources
Governance
m
& waste
en
t
Materials Water
ion
r at
Ope
Prosperity Planet
Schroder UK Real Estate Fund
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Sustainability Guide July 2020
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2. Sustainability for 6. Transparency 7. Schroders Sustainability
1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Sustainability ESG considerations, risks 2.1 Environmental Management System and Policy
The Head of Sustainability and Impact Investment for Real
2.2 Sustainability targets
Schroder Real Estate’s sustainability programme involves
for real estate
and opportunities are an
Estate is responsible for the sustainability programme. objectives, including a commitment to setting quantitative
The Sustainability Policy together with the programme targets, to drive sustainability performance across its
in practice objectives are presented to the Investment Committee portfolios. These are reviewed annually.
integrated part of our annually for approval. The Policy forms part of Schroders’
Environmental Management System (‘EMS’) which Schroders’ direct real estate targets for the UK portfolio,
investment process. is aligned with ISO 14001 and aims to help identify,
monitor and incorporate ESG risks and opportunities
into investment selection, retention and realisation. The
which include assets across a range of UK funds
(including SREF) are as follows:
– Energy reduction of 18% by 2020/21 (against a
system applies to all aspects of the real estate investment 2015/16 baseline)
management life cycle, which is demonstrated in the – This programme has been extended from its initial
diagram below, including acquisition, due diligence, two-year period where we successfully achieved
asset management, refurbishment and development as a reduction of 8.1% to March 2018 against our
well as services provided by third parties. original target of 6%
– At March 2019, the achieved reduction was 15%
– 32% reduction in greenhouse gas emissions by
2020/21 (against a 2015/16 baseline)
– 100% renewable electricity and which aligns with the
Schroder plc RE100 commitment
– 100% diversion of waste from landfill
Schroder Real Estate’s EMS applies to the
real estate investment management life cycle
Pr
l e-
a ac
os Legal q
sp
compliance
ui
Di
si
tio
n
Reporting Risks
& disclosure managed
Value
protection &
Implement
performance Monitor
Re
Targets set Property
fu
l
na
rb
& monitored assessment
io
ish
en at
er
m
t& p
O
de
ve
lop
me
nt
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Sustainability Guide July 2020
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2. Sustainability for 6. Transparency 7. Schroders Sustainability
1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Sustainability
for real estate
in practice We believe our responsibility to investors
continued includes protecting the interests of our clients
from the impacts of financial and non-financial
risks. Sustainability is an integral element of
our investment process and supports best
practice investment management.
Department W, Charlie Jacques
Mile End, London Head of Real Estate Sustainability
(Schroder UK Real Estate Fund) and Impact Investing
2.3 Fund strategy and the Investment Committee The requirements cover:
ESG for the vehicle is the responsibility of the Fund – Data analysis, monitoring and reporting for all
Manager, supported by the investment management managed assets quarterly, six monthly and annually;
team, with oversight by the Head of Sustainability and – Understanding and managing landlord responsibilities,
Impact Investment. Each member of the team is required risks and opportunities;
to have sustainability within their annual objectives. – Tenant engagement, including with regard to fit outs;
– Improvement implementation and monitoring impacts;
The Fund Manager prepares an annual Fund Strategy – Health and wellbeing;
Statement, which includes sustainability and impact – Community engagement;
objectives and contributions for the Fund. This statement – Supply chain; and
is presented to the Investment Committee annually for – Environmental compliance and reporting.
approval. It includes business plans for all assets, which
are required to include consideration of sustainability The property managers are regularly monitored against
risks and opportunities. the requirements using key performance indicators to
drive continual improvement in service levels. Schroders
A Sustainability and Impact Action Plan must be included Sustainability Requirements for Property Managers are
in all proposals to the Investment Committee including updated annually.
potential investment acquisitions and capital expenditure.
2.5 Improvements, refurbishments and building
For successful acquisitions, these action plans are
certifications
developed by the investment and property management
Our Sustainability and Impact Guidance for Development
team as part of the asset strategy with regular review to
and Refurbishments sets out our approach and
ensure the asset management programme fulfils the
requirements for projects. We require developments
investment requirements. Proposals for disposals also
and refurbishments to incorporate sustainable standards
include a sustainability review.
and building certifications (i.e. Energy Performance
Certificate, BREEAM, LEED, and newer wellbeing
2.4 Property management
standards of WELL, Fitwel and Reset). We have a general
Property management is integral to the delivery of an
minimum standard of BREEAM Very Good or equivalent
effective sustainability programme for the management
with ambitions set appropriate to the asset and captured
and operation of buildings. At Schroders, we have
in an Impact and Sustainability Action Plan – a
established Sustainability Requirements for Property
requirement for all projects.
Managers to set service levels required by third-
party property managers to support the programme.
2 Building Research Establishment Assessment Method, Leadership
in Energy and Environmental Design.
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Sustainability Portfolio example:
2 Ruskin Square, Croydon
for real estate Ruskin Square is a nine-acre mixed-used, town centre
in practice regeneration scheme adjacent to East Croydon station,
continued
with excellent transport links.
SREF secured planning consent on 2 million sq. ft. of
office, residential and restaurant space. The first office
building was delivered in 2016 with a 25-year lease to
HMRC and a BREEAM Excellent rating.
An Agreement for Lease was exchanged in March 2020
to pre-let 2 Ruskin Square, an 330,000 sq. ft. office in
its entirety to the government on a 25-year index-linked
lease.
2 Ruskin Square will be a pilot of the Better Buildings
Partnership led Design for Performance initiative which
aims to tackle the performance gap between building
design and operation. The scheme aims to bring the
success of the Australian energy rating system (NABERS)
to the UK. The general principle is to optimise performance
in use.
Embodied carbon will be managed, and the design
will include an all-electric energy strategy, rainwater
harvesting, high performance façade, 35% green roof
cover, 399 cycle racks and 39 showers, modular structural
design to minimise embodied carbon, photovoltaics, and
increased fresh air volumes. The scheme is targeting
BREEAM Excellent, and WELL enabled building. The
procurement process will also focus on modern methods
of construction to minimise construction waste and oblige
SREF to a Local Employment and Training Strategy.
Building 2,
Ruskin Square, Croydon
(Schroder UK Real Estate Fund)
Schroder UK Real Estate Fund
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Sustainability Portfolio example: 2.5.1 Energy Performance Certificates
We review Energy Performance Certificates on an asset
Department W, Mile End, London
for real estate SREF completed a historically sensitive refurbishment
basis and work to ensure compliance with national
regulation UK Minimum Energy Efficiency Standards
in practice of its asset in Mile End during 2019 to create a modern,
open-plan office and educational space. Materials were
(‘MEES’) and set rating requirements as appropriate.
continued retained and reused where practical to do so, such as the The Energy Performance Certificate and building
steel frame, the masonry walls, concrete floors, roof and certificate profile for the Fund is set out in the Fund’s
floorboards. Department W achieved a Fitwel 1 star rating Annual Sustainability Report which is available at https://
on completion of its redevelopment, the second asset in www.schroders.com/en/uk/schroder-uk-real-estate-
the SREF portfolio to achieve this accreditation for fund/about-the-fund/sustainability/
promoting occupier health and wellbeing alongside
Battersea Studios, London.
The sensitive redevelopment has married contemporary
The refurbishment focused on enhancing the energy
efficiency and environmental credentials of the building. requirements with historical preservation and has been
New glazing incorporates solar control glass where
necessary to reduce heat gains and reduce cooling energy
nominated for the BCO (British Council for Offices)
consumption. The LED lighting with DALI control is Awards 2020 for refurbished/recycled workplace and
was shortlisted in 2019 for multiple awards such as the
responsive to daylight and non-occupancy. For space
heating and cooling, a hybrid Variable Refrigerant Flow
(‘VRF’) system was installed, rather than an industry
standard VRF system. The Global Warming Potential FX International Design Awards and the RIBA (Royal
(‘GWP’) of the Hybrid VRF system is approximately one
sixth of the GWP of comparable VRF systems. The
Institute of British Architects) Awards.
building was designed to be largely naturally ventilated,
but where mechanical ventilation systems have been Rob Cosslett,
installed, they include heat reclaim systems. Deputy Fund Manager, SREF
Department W,
Mile End, London
(Schroder UK Real Estate Fund)
Schroder UK Real Estate Fund
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Sustainability Guide July 2020
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2. Sustainability for 6. Transparency 7. Schroders Sustainability
1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Sustainability 2.6 Sustainability data, monitoring and reporting
for real estate 2.6.1 Data
Sustainability data (energy, water, waste consumption
in practice and amounts) is sourced from property managers and
collated by EVORA Global, Schroder Real Estate’s
continued sustainability consultant, using SIERA, their proprietary
software. Data is generally collected quarterly with asset
profiles reviewed by EVORA and the property managers.
Other data and information is collected from property
managers relating to building management, maintenance
and improvement plans, flood rating, and health and
wellbeing credentials as well as energy performance
certificates and building certificates.
Building 2,
Ruskin Square, Croydon
(Schroder UK Real Estate Fund)
2.6.2 Objectives and progress 2.6.4 Sustainability reporting and environmental data
Fund and asset sustainability objectives are set and A sustainability report is prepared annually for
reviewed by the Head of Sustainability and Impact the Fund which includes an explanation of our
Investment, Fund Manager, investment team, property sustainability programme and strategy supported
manager and EVORA on a six-monthly and annual basis, with environmental data. The report is aligned with
with ongoing dialogue with investment managers and the INREV Reporting Guidelines.
property managers through the year.
Environmental data
The annual reviews support continual improvement and The environmental data reported includes:
include analysing fund credentials, risks, opportunities, – Energy, water and waste consumption and
compliance, Global Real Estate Sustainability Benchmark greenhouse gas emissions by sector
(‘GRESB’) results, and setting Fund and GRESB target – On an absolute and like-for-like basis coupled
scores and objectives for the year ahead. The with intensities
sustainability reviews feed into the Fund Strategy – Renewable energy consumed and generated
Statement which is presented to the Investment – Building certifications
Committee annually for approval. – Energy Performance Certifications
2.6.3 Compliance The sustainability report is included in the Fund’s Annual
Schroders monitors requirements and guidance in Report and Audited Financial Statements and also as a
relation to managing and reporting environmental standalone report on the Fund website. The Fund’s
matters and developments in legislation at all stages report is at https://www.schroders.com/en/uk/
of the property life cycle – from acquisition, through schroder-uk-real-estate-fund/about-the-fund/
ownership, to disposal. This process is supported sustainability/
by a legal register within the EMS (Environmental
Management System) (updated six-monthly), and
through appropriate devolution of responsibility
to key personnel involved in the day-to-day
operation of buildings, including asset, property
and facilities managers with regular oversight for
each fund and included in the fund reviews.
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Fund We believe understanding
case studies
our occupiers’ unique
needs and expectations is
key to facilitating wellbeing
and productivity.
City Tower,
Manchester
(Schroder UK Real Estate Fund)
3.1 City Tower, Manchester intranet provides access to building information and
Sustainability is integral to Schroders investment process
City Tower in Manchester city centre comprises local area amenity. Tenants can sign up to the City
with the sustainability programme providing the supporting
610,000 sq. ft. of office, retail, leisure and hotel Tower Black Card which provides reduced membership
framework, the following case studies demonstrate this.
accommodation on a three-acre island site. The gym fees and discounts to local shops and restaurants.
Further information on integration for Direct Real Estate
multi-use aspect of this asset provides a range of There is a programme of onsite events including exercise
and case studies can be found at: https://www.schroders.
opportunities to enhance its sustainability qualities, classes three times per week including pilates, core
com/en/uk/realestate/products--services/sustainability/
including energy consumption, waste management, classes and Bodysculpt. The Shed offers a pop-up shop
integration/
health and wellbeing, community, supply chain and for local businesses at no cost. This facility has helped
tenant engagement. engagement with the local community and recent
residencies have included local start-ups as well
The central site is bounded by a bus and tram hub as Barnados.
and overlooks Piccadilly Gardens. SREF is working
with Manchester Council on safety, security and There are programmes in place to improve waste
improvements to the public realm. management storage and removal, and to assess
opportunities to improve the energy profile of the building.
We promote the use of green and active transport
to support reducing emissions and pollution and The asset recently achieved a Wiredscore Platinum
promote occupier wellbeing. The building has two accreditation for connectivity and, following
onsite cycle facilities: one operated by Transport refurbishment, two of the floors were awarded a
for Greater Manchester; and a second exclusive for BREEAM Very Good rating. Occupiers regularly
occupiers which will be enhanced in 2020 with more attend sustainability meetings and the success of
bike storage, changing and drying facilities. ‘Environmental Week’ in February highlighted increasing
tenant engagement on impact and sustainability.
Tenant wellbeing is important and we are implementing This is encouraging and, as we continue to develop
our Health and Wellbeing Framework at the building. The our understanding of tenants’ needs, we expect
key is understanding tenant requirements. The building the asset’s sustainability credentials to grow.
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Fund
case studies
continued
3.2 The Lexicon, Bracknell: A regenerated town centre
The Fund has invested in Bracknell, Berkshire, for over 15
years and has developed a new town centre, in partnership
with another institution. The new 1,364,906 sq. ft. Lexicon
Bracknell scheme opened in September 2017. Unusually,
and alongside the development partner, SREF has control
over the majority of this post-war town centre.
The scheme delivers new retail, leisure and 1,000 homes,
as well as renovating parts of the original retail.
The regeneration plan involved working closely with
local government and the community to identify the
needs of the centre and the town as a whole. This
collaboration helped shape the design and amenity of
the scheme, including infrastructure and accessibility,
and informed public safety and wellbeing.
Apprenticeship and recruitment services were also
developed to support the construction project.
Approximately 3,500 new job opportunities were created
for construction workers and staff for new occupiers.
The scheme delivers a wholly regenerated town centre to
support Bracknell’s position as a retail centre in Berkshire.
The story does not stop there as our investment continues.
We have more plans to evolve areas across the town to
further improve the amenity and cohesion of the town
centre. This continued investment should help attract
further investment from the wider area to continue
Bracknell’s economic development and prosperity.
The Lexicon,
Bracknell town centre
Berkshire
(Schroder UK Real Estate Fund)
Schroder UK Real Estate Fund
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Sustainability Guide July 20208. Schroders
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Fund 3.3 Battersea Studios, London
Battersea Studios comprises two office buildings located
case studies in the desirable district of Battersea, south west London.
Understanding the needs and expectations of existing
continued and prospective tenants is essential and a comprehensive
review focusing on health and wellbeing credentials has
been undertaken. A wellness gap analysis was completed
for the building and management operations against
the Fitwel standard (a US based health and wellbeing
assessment and certification routine for office buildings).
The review included conducting an occupant commuter
survey to better understand transport requirements for
building users (e.g. bike storage and showers), establishing
an indoor air quality management policy and installing
signs promoting stair use at lift call areas and hand-
washing in bathrooms.
Identified improvements have been implemented
and the Fitwel certification completed in March 2019
with Building 1 officially awarded the first ‘Fitwel for
Workplace: Multi-Tenant Whole Building’ Certification
in Europe gaining a 1 Star rating. We continue to develop
our understanding of what health and wellbeing aspects
contribute to improved tenant experience to further
improve the building and the star rating.
Battersea Studios,
London
(Schroder UK Real Estate Fund)
Schroder UK Real Estate Fund
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Sustainability Guide July 20208. Schroders
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Investing We have referenced our
with impact
key impact pillars – People,
Planet, Place and Prosperity
– to the UN Sustainable
Development Goals. We are progressing our investment philosophy to
incorporate ‘positive impact’ investing. This is beyond
We have referenced our key impact pillars – People,
Planet, Place and Prosperity – to the UN Sustainable
ESG because it seeks to proactively take action to improve Development Goals and use these pillars to consider
situations, do good for society and the environment, impacts for funds and assets. We believe as responsible
alongside delivering risk-adjusted returns. For example, investors that understanding and improving our impacts
supporting employment, education, as well as health and sits alongside and supports our priority to maximise
social care. returns for our clients in a manner consistent with our
funds’ risk profiles.
Schroder Real Estate’s Impact Pillars and key performance indicators
Everyman Cinema, People Planet Place Prosperity
Mermaid Quay, Cardiff
(Schroder UK Real Estate Fund)
Space refurbished Energy reductions Enhanced place Social
and created and GHG avoided
Supply chain compliance Renewable energy Design amenity Environmental
Schroders Suppliers Code procured Wellbeing
of Conduct Biophilia
Heritage Culture
Community
Number of jobs enabled Climate resilience Economic
assessed
Plastic and food waste Investment returns
Our strategy is to understand impact across our An impact baselining exercise has supported our
business. We have set key performance indicators for our understanding of opportunities for action across our
Pillars of Impact and have built an impact measurement sustainable investment process and for the Fund supports
framework to assess impacts within our existing funds. impact aims and targets for 2020.
This framework supports analysis of social aspects for
which examples include tenant satisfaction, selection Please see our Impact Investing in Real Estate: Returns
of suppliers, enhancements to amenities at and around with Purpose insight paper here https://www.schroders.
buildings, and community support and involvement com/en/uk/realestate/insights/real-estate-insights/
together with environmental aspects for example energy impact-investing-in-real-estate/
reduction and use of renewables.
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Climate change We see the real estate Schroders considers the financial materiality of climate
change and we are evolving our approach within our
5.1.1 Schroder Real Estate
Within Schroder Real Estate, we recognise the importance
market’s transition to a
investment process. Schroders has publicly supported of understanding climate risk and are working to integrate
the TCFD recommendations and we have initiated the TCFD recommendations, we have reviewed our
Climate Risk and Resilience research to further support current policies and practices against the criteria and
low carbon economy as analysis for assets, locations and strategies. Details on
these aspects are listed below.
are developing our roadmap. Sustainability is a well-
established element of our investment process and we will
an opportunity to drive 5.1 Taskforce on Climate-related Financial
further integrate the assessment of climate-related issues
into existing reporting and decision-making processes to
innovation, respond to
Disclosures (‘TCFD’) increase our alignment with TCFD recommendations.
TCFD aims to mainstream reporting on climate-related
risks and opportunities in organisations’ annual financial We plan to integrate TCFD recommendations into fund
future demands and filings. The TCFD framework is applicable to all sectors
and is currently a voluntary framework, however it is
reporting and establish our Net Zero Pathway in 2020.
The TCFD Disclosure for the Fund can be found in the
expectations of our anticipated that the framework may soon become
mandatory.
Fund’s Annual Report and Accounts.
occupiers and investors,
We are engaged in industry discussions on the TCFD
Schroders plans to report against the TCFD recommendations and implementation of best practices
recommendations for our own corporate impacts, and including through our membership of the BBP where we
and open up new has signed up to a Global Investor Statement on Climate
Change (post-Paris climate agreement) along with c.400
share and discuss manager and industry approaches in
the Climate Resilience group.
markets for investment global investors, committing to take a series of steps to
contribute to a low carbon and climate resilient 5.2 BBP Members Climate Change Commitment
in real estate.
investments. Schroder Real Estate signed the BBP Members Climate
Change Commitment, which recognises the significance
Our TCFD-related activities include: of buildings in relation to carbon emissions and the role
– In 2017, we became a founding signatory to the that landlords should play in driving energy reductions
Climate Action 100+ initiative, a five-year project to and efficiencies and potential for renewables. The first
engage the world’s largest corporate greenhouse gas stage of this commitment is for all signatories to
emitters to improve governance on climate change determine a pathway to net zero during 2020.
and strengthen climate-related financial disclosures
in line with TCFD recommendations The commitment also includes developing climate change
– We advocate and encourage the development of resilience strategies for portfolios, and determining
stronger models and analytical tools to be developed consistent industry disclosure on climate change risks in
in tandem with the increased reporting line with industry standards, including the TCFD.
– We have developed our unique ‘Climate Progress
Dashboard’ and Carbon Value at Risk model and The BBP commitment is an extension to our sustainability
more information on our approach to climate programme and the BBP will be supporting members
change and related investment issues can be found at through development of their pathways and all aspects
http://www.schroders.com/climatechange/. of the commitment over the course of 2020 and beyond.
Schroders has committed to running its global corporate The BBP Member Climate Change Commitment is
operations on a carbon-neutral basis from 1 January 2020. included in Appendix 1.
See page 20
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Climate change
continued
Bracknell town centre,
Berkshire
(Schroder UK Real Estate Fund)
5.3 Climate Risk and Resilience research Physical risk, from due diligence through hold and exit,
We have initiated a Climate Risk and Resilience research includes consideration of asset and operational risks to
and analysis project which involves members of both our buildings and locations for example:
investment and research teams collaborating with – Flood risk;
divisions from the wider Schroder Group, including – Plant and machinery; and
Sustainability and Data Insights. This project includes – Occupier requirements.
consideration of physical risk and transition risk. This
work will support our understanding of climate risk and Transition risk for all portfolios considers:
resilience for locations and assets to which we can – Regulation and legislation including trajectory
develop strategy, asset and portfolio responses. We plan supported by biannual external legislative reviews;
to integrate TCFD recommendations into our reporting – Our reduction targets for energy and greenhouse gas
for 2020. emissions which apply at the country level and for
assets where appropriate;
This work builds on our existing approach which involves – Energy Performance Certificate programme to
the following considerations. manage portfolios within the UK Minimum Energy
Efficiency Standards; and
– Schroders plc RE100 commitment has been adopted
for Real Estate to secure 100% renewable electricity
for all assets.
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Transparency Schroders has participated 6.1 GRESB
GRESB is the global sustainability benchmark for real
The Fund’s total score improved to 79 in 2019 and
achieved three Stars. It has achieved a Green Star and
and
in the annual GRESB
assets. Schroders has participated in the annual GRESB improved scores for the past five consecutive years. The
survey since 2011. SREF has participated since 2012. headline scores are captured below and the scorecard
accreditation Schroders submitted seven funds in 2019, achieving report for the Fund is appended.
survey for the last nine Green Stars for all seven. A Green Star is awarded where
scores of 50 or more are achieved in both of the two
years. SREF has achieved principal dimensions of management and policy, and
implementation and measurement.
a Green Star over the past ❓ Guide
five consecutive years. 2019 Schroder UK Real Estate Fund
Schroder Real Estate Investment Management Limited
Assessment
GRESB Real
Participation & GRESB Score Peer Comparison
Estate
United Kingdom | Diversified | Non-listed
58
2014
62
2015
63
2016
66
2017
71
2018
79 10th out of 79
2019
GRESB Model
100
79 GRESB Score Green Star
GRESB Average 72 Peer Average 68
100
Management & Policy
50 73 Implementation & Measurement
GRESB Average 69 Peer Average 61
100
96 Management & Policy
GRESB Average 80 Peer Average 87
0 100
0 50 100
Implementation & Measurement
This Entity Peer Group Avg. Peer Group GRESB Average GRESB Universe Asia Performance data reported at asset
Europe Americas Oceania Globally Diversified level
6.2 Schroders sustainability accreditation Schroders Direct Real Estate investment desk which
ESG Breakdown
Schroders Sustainability team has developed Trend is responsible for the Fund is accredited Integrated.
‘Sustainability Accreditation Marks’ to help distinguish
100
Sustainability is a building block of the investment
how ESG68 factors are considered across Schroders
Environment process.
2019 Improvement ⬈ +8
products100
and help investors understand
GRESB Average 65
the different roles.
Peer Average 55
2018 rating maintained
ESG plays in our investment processes. Applications and
92 are Social
Overall Score
accreditation reviewed and awarded
GRESB Average 79 Peer Average 78
by Schroders
100
Sustainability team on meeting pre-determined 50 criteria.
95 Governance This Entity
GRESB Average 84 Peer Average 90 Peer Group Range
100
GRESB Range
Peer Group Average
0 GRESB Average
2012 2013 2014 2015 2016 2017 2018 2019
Schroder UK Real Estate Fund
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Transparency 6.3 UN Principles for Responsible Investment (‘PRI’)
Schroders plc has been a signatory to the UN PRI since
and 2007 and intends to remain an active and engaged
member of the PRI and to meet its ongoing membership
accreditation commitments.
continued Schroders achieved the highest possible ESG score of A+
in 2019, for the fifth year running, for its overarching ESG
approach to the PRI. Schroders has completed the Direct
Property Segment for three years, achieving an A rating
in all three years.
Schroders’ public PRI Transparency report is available via
the following link: https://www.unpri.org/signatories/
schroders/1746.article
Schroders achieved the highest
possible UN PRI ESG score of A+
in 2019 for the fifth year running.
Mermaid Quay, Charlie Jacques
Cardiff Head of Real Estate Sustainability
(Schroder UK Real Estate Fund) and Impact Investing
6.4 Memberships
Schroders is a member, participant or signatory to a
number of reputable industry organisations. These
include the UN PRI, as reported above, in which we
share knowledge and collaborate on various industry
initiatives. Schroders’ memberships are listed at
pages 37–39 of Schroders 2019 Annual Sustainable
Investment Report available via the following link:
https://www.schroders.com/en/sysglobalassets/
about-us/sustainable-investment-report-annual-2019.pdf.
Schroder Real Estate is a member of a number of industry
bodies, including the European Public Real Estate
Association (‘EPRA’); INREV (European Association for
Investors in Non-Listed Real Estate Vehicles); Association
of Real Estate Funds; British Council for Offices; and the
British Property Federation. It was a founding member
of the UK Green Building Council in 2007 and, in 2017,
became a member of the Better Buildings Partnership
and a Fund Manager Member of GRESB.
Schroder UK Real Estate Fund
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Schroders At Schroders, we see
Sustainability
team ourselves as long-term
stewards of our clients’
capital and this philosophy
naturally leads us to focus
on long-term prospects for
companies in which we
invest.
That’s why we seek to Charlie Jacques
Head of Real Estate Sustainability
integrate ESG
and Impact Investing
At organisation level, Schroders has an experienced and than 80% of the assets we manage on behalf of our
considerations into our well-resourced Sustainable Investment team, which has
been embedded into our overall investment processes
clients. Our stewardship activities are also subject
to a review by external auditors.
research and overall for some time. The team comprises 22 dedicated ESG
professionals. Together the team has over 200 years’ Schroders commitment to ESG has been enhanced
investment decisions
combined investment experience. by BlueOrchard a global impact investment manager
joining the Schroders Group in 2019. Founded in 2001,
The Schroder Group team is led by Andrew Howard, by initiative of the UN, BlueOrchard was the first
across investment desks Global Head of Sustainable Investment. As team head he
oversees our corporate governance and sustainable
commercial manager of microfinance debt investments
worldwide. As a pioneering impact investing asset
and asset classes. investment analysts, integration of ESG factors into
investment processes across geographies and asset
classes and is responsible for thought leadership,
manager, BlueOrchard is dedicated to fostering inclusive
and climate-smart growth in emerging and frontier
markets. BlueOrchard’s experience in impact investment
thematic research. is a significant resource for Schroders and Real Estate
has been working with the team on developing
As active investors we see ESG integration and analysis Real Estate’s Impact Measurement Framework for
as a key means to add alpha. It is for this reason that assessment of social and environmental impact within
Schroders’ Group Management Committee (‘GMC’) property portfolios.
which has responsibility for the day-to-day running of
the Company approves the ESG policy, strategy, and
implementation. For more information please refer to:
The GMC also reviews Schroders against its Stewardship Sustainable Investment for Real Estate:
Code statement and corporate governance principles. https://www.schroders.com/en/uk/realestate/
Additional monitoring has been provided by Group products--services/sustainability/
subsidiary boards. In 2019 Schroders committed to full
ESG investment integration across all managed assets by Sustainable Investment at Schroders:
the end of 2020. Schroders Sustainability Accreditation https://www.schroders.com/en/strategic-capabilities/
system, launched in 2017, currently encompasses more sustainability/
Schroder UK Real Estate Fund
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Schroders Schroders is a sustainable- We have a strong belief in the value that investment can
create in our society and appreciate that we have an
Environment: Minimising our environmental impact by
committing to objectives and targets such as reducing
Sustainability
focused business intent on
important role to play in driving positive outcomes for our global carbon footprint.
the world around us.
Commitment Human rights: Schroders is strongly opposed to slavery
delivering long-term financial In 2020 Schroders committed to the United Nations
Global Compact, the world’s largest corporate
and human trafficking. We will not knowingly support
or conduct business with any organisation involved in
performance to clients and sustainability initiative. The UN Global Compact asks
companies to align their operations and strategies to
such activities.
shareholders.
ten universally accepted principles. These principles Anti-corruption: Schroders is fully committed to
represent the 17 Sustainable Development Goals preventing financial crime, as well as promoting
(‘SDGs’), which were set up to end extreme poverty, companies that prioritise good ESG practices.
fight inequality and injustice, and protect our planet.
The Ten Principles of the UN Global Compact relate Schroders was recognised in the top 10 of ShareAction’s
to four key areas which we have aligned our corporate ranking of 75 of the world’s largest asset managers’ for
responsibility strategies and operations to. In addition our approach to responsible investment.
to anti-corruption and human rights, our aim is to help
end extreme poverty, fight inequality and injustice, Schroders is committed to running its global operations
and protect our planet. on a carbon-neutral basis as of 1 January 2020. This
commitment will be achieved through a combination
People: We endeavour to improve the futures of those of initiatives designed to reduce Schroders’ gross
around us – whether it’s embracing our own people, or emissions, as well as a carbon offsetting programme.
creating a lasting positive impact in our society.
Schroders is a member of the Climate Group and Carbon
Disclosure Project RE100 initiative, and committed to
100% of electricity generated from renewable sources.
Schroders corporate revolving credit facility has been
converted into an environmental, social and corporate
governance-linked facility, an innovative move which
underlines the firm’s commitment to sustainability from
a corporate, as well as investment, perspective.
Please see more on Schroders Corporate Responsibility
at https://www.schroders.com/en/about-us/corporate-
responsibility/
Box Park,
Croydon
(Schroder UK Real Estate Fund)
Schroder UK Real Estate Fund
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Appendix 1 Better Buildings Partnership Member Climate Change Commitment
Schroder Real Estate, as a member of the Better Buildings Partnership (‘BBP’), committed to the
To meet these commitments will require unprecedented collaboration across the industry.
We therefore also call upon:
September 2019 Member Climate Change Commitment, which has the aim to deliver net zero – All our stakeholders (e.g. investors, occupiers, architects, engineers, contractors, managing
carbon real estate by 2050. agents, facilities managers) to disclose their own pathways to net zero carbon buildings and
actively engage with us to help us deliver on these commitments
We, the undersigned, make the following commitments: – Professional bodies and built environment institutions to develop industry standards and
– By the end of 2020, we will each publish our own net zero carbon pathway, outlining our support these with education and training to upskill the industry to deliver net zero carbon
trajectory towards net zero carbon new and existing buildings and will address: buildings
– Operational carbon, critically covering whole building performance including our tenant’s – Government to deliver a supportive legislative agenda with a clear long-term trajectory to
activities achieve net zero carbon buildings
– Embodied carbon of development, refurbishment and fit-out works – All property owners to adopt the same commitments
– In developing our net zero carbon pathways we will follow the principles of the energy
hierarchy to ensure effort is focused first on reducing energy demand and improving We will work with the BBP to monitor and report on our progress and to spearhead collaborative,
energy efficiency. To this end, we will support the development of property specific collective action that delivers better buildings and creates long-term value for all of our
Energy Use Intensity (‘EUI’) targets stakeholders, including future generations.
– We will each annually disclose our progress towards our net zero carbon pathway and in
doing so, explain the scope and implementation of this commitment as it relates to our
individual business
– We will publicly disclose the energy performance of our portfolios, where we have permission
to do so, as a minimum at a portfolio level by geography, and ideally at a property level, and
support efforts to develop consistent industry performance disclosure and benchmarks
– By 2022, we will develop comprehensive climate change resilience strategies for our portfolios
and work together to develop consistent industry disclosure on climate change risks in line
with industry standards, including the Task Force on climate-related Financial Disclosure
– To support the implementation of this commitment, we will work with the BBP to:
– Develop guidance on net zero carbon pathways for property owners to encourage greater
consistency in definitions and boundaries
– Develop clear guidance for the industry on the procurement of renewable energy for
real estate assets to ensure that any purchasing in the UK creates additional capacity
– Convene an ‘owner and occupier’ forum inviting our tenants to challenge property owners
and engage with us to improve the performance of the space they occupy in line with our
net zero carbon pathways
Members of the BBP have diverse portfolios with different ownership and leasing structures,
management arrangements and occupiers – how we implement these commitments within our
businesses will differ. However, it is important to emphasise that we will adopt a ‘comply or explain’
approach to this commitment, with the intention that it will cover as many buildings as possible
within our portfolios – the scale of the challenge ahead makes this absolutely imperative.
We see the real estate market’s transition to a low carbon economy as an opportunity to drive
innovation, respond to future demands and expectations of our occupiers and investors, and
open up new markets for investment in real estate.
Schroder UK Real Estate Fund
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1. Our approach real estate in practice 3. Fund case studies 4. Investing with impact 5. Climate change and accreditation Sustainability team Commitment Appendix 1 Appendix 2
Appendix 2 SREF’s 2019 GRESB scorecard report
❓ Guide
2019 Schroder UK Real Estate Fund GRESB Aspects
Schroder Real Estate Investment Management Limited
Assessment
GRESB Real
Management
Participation & GRESB Score Peer Comparison 100
Estate
United Kingdom | Diversified | Non-listed
58
2014
62
2015
63
2016
66
2017
71
2018
79 10th out of 79
Stakeholder Engagement
93
75
100
Policy & Disclosure
2019
50
25
GRESB Model
Risks & Opportunities
81
100 39
79 GRESB Score Green Star
GRESB Average 72 Peer Average 68
100
Management & Policy
Building Certifications 85
50 73 Implementation & Measurement 63
Monitoring & EMS
GRESB Average 69 Peer Average 61
100
96 Management & Policy
Performance Indicators
GRESB Average 80 Peer Average 87
0 100
0 50 100 This Entity Peer Group Average
Implementation & Measurement
This Entity Peer Group Avg. Peer Group GRESB Average GRESB Universe Asia Performance data reported at asset Aspect
Europe Americas Oceania Globally Diversified level Weight in GRESB Score This Entity Peer Group GRESB
PEER GRESB
100
Frequency
Management 7.9% 92 ⬊
-1 88
AVERAGE AVERAGE
0 Score 100
ESG Breakdown Trend PEER GRESB
100
Frequency
Policy & Disclosure 9.4% ⬈
+14 88 ⬊
-2 84 ⬈
+2
100
68
AVERAGE AVERAGE
Environment 0 Score 100
GRESB Average 65 Peer Average 55 2019 Improvement ⬈ +8
100
PEER GRESB
81
Frequency
Risks & Opportunities 12.9% ⬈
+5 76 ⬈
+9 78 ⬈
+6
2018 rating maintained
AVERAGE AVERAGE
0 Score 100
92 Social
Overall Score
GRESB Average 79 Peer Average 78
100 PEER GRESB
85
Frequency
50
Monitoring & EMS 8.6% ⬈
+8 73 ⬈
+2 77 ⬈
+3
AVERAGE AVERAGE
0 Score 100
95 Governance This Entity
PEER GRESB
63
Frequency
GRESB Average 84 Peer Average 90 Peer Group Range
100
GRESB Range
Performance Indicators 25.2% ⬈
+3 47 ⬈
+4 60 ⬈
+4
AVERAGE AVERAGE
Peer Group Average 0 Score 100
0 GRESB Average
PEER GRESB
39
Frequency
2012 2013 2014 2015 2016 2017 2018 2019
Building Certifications 10.8% ⬊
-2 35 ⬈
+1 55 ⬈
+4
AVERAGE AVERAGE
0 Score 100
PEER GRESB
93
Frequency
Rankings Stakeholder Engagement 25.2% ⬈
+15 80 ⬈
+8 78 ⬈
+7
AVERAGE AVERAGE
0 Score 100
United Kingdom | Diversified | Non-listed Global / Diversified All GRESB participants
10th out of 79 65th out of 230 391st out of 964
United Kingdom / Diversified / Non-listed United Kingdom / Diversified Northern Europe / Diversified / Non-listed
10th out of 79 10th out of 88 11th out of 89
GRESB Benchmark Report 2019 for Schroder UK Real Estate Fund — 4 Sep 2019 4:08:34pm Wed UTC Page 5 of 144
Page 6 of 144 GRESB Benchmark Report 2019 for Schroder UK Real Estate Fund — 4 Sep 2019 4:08:34pm Wed UTC
Schroder UK Real Estate Fund
21
Sustainability Guide July 2020Contact Schroder Investment
Freya Petty, Management Limited
Product Manager 1 London Wall Place,
Tel: +44 (0)20 7658 7904 London EC2Y 5AU,
Email: freya.petty@schroders.com United Kingdom
Tel: +44 (0)20 7658 6000
Charlie Jacques,
Head of Real Estate Sustainability
and Impact Investment
Tel: +44 (0)20 7658 7894
Email: charlotte.jacques@schroders.com
Important information for professional investors only Neither we, nor the data provider, will have any liability in
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This information is not an offer, solicitation or recommendation opinion. Any references to securities, sectors, regions and/or
to buy or sell any financial instrument or to adopt any investment countries are for illustrative purposes only. The value of investments
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