Sustainability and ESG issues are a key part of the commercial real estate investment decision making process from purchase, through ownership and ultimately to disposal.

The Cordatus Property Trust decided to become a GRESB Real Estate Fund Manager member in 2016 as the ability to demonstrate and benchmark ESG performance of property companies and property funds is becoming ever more important and relevant in today’s investment world.

GRESB is widely recognized as the global benchmark for ESG assessment of real estate portfolios and by our participation, we will be able to easily communicate with our investors on ESG performance using a clear, consistent and recognized framework.

Since joining GRESB, the Trust’s GRESB survey score has improved significantly through active implementation of a variety of ESG policies and measures. Our ongoing aim is to achieve steady and sustainable improvement in our GRESB ratings across all areas of the portfolio and our business.

As part of that process, where possible, we will continue to reduce energy consumption and improve energy efficiency across landlord areas of the portfolio and to encourage our tenants to do the same.

Our Sustainability Objectives and Trust Annual Report are available on request. For further information please contact Mike Channing, Fund Manager for the Cordatus Property Trust and our Director in charge of Sustainability.

We recognise the significant impact that buildings have on the environment and that environmental issues are also directly linked to the financial performance of real estate investments. Sustainable approaches to real estate can make a major contribution both to combating climate change and to reducing occupational costs. For this reason we take sustainability into consideration when investing in real estate. In the UK, buildings account for approximately 45 per cent of energy consumption (source: BRE 2006), making them a natural starting point for reducing carbon emissions. Our policy covers the acquisition, use, management, development and refurbishment of buildings. Our aim is to maximise practical environmental performance opportunities and minimise the adverse impact our real estate activity has on the environment. Refurbishing buildings to incorporate positive environmental features can be rewarding – it can reduce the carbon footprint and hence reduce occupancy costs through reduced energy bills.

New Investment

The principal considerations on considering new investment opportunities are:

• Energy Performance Certificate (EPC) rating – prior to any acquisition, we will review the vendor’s EPC and associated recommendation report. The control and efficiency of energy usage is a key factor in influencing occupiers use of space and in reducing occupational costs. What is the potential to improve the building’s carbon footprint and EPC rating with a more sustainable energy efficient solution and at what cost? The recommendation report will show the works that the assessor thinks could improve the rating over a set period of time, assessing the impact and payback periods of these initiatives.

• In the light of current legislation, the Minimum Energy Efficiency Standard Regulations, (MEES) introduced under the Energy Act 2011, it is unlikely that a building with an EPC rating below ‘E’ will be considered for acquisition. From 1 April 2018, a commercial property will require an ‘E’ rating or higher, if it is to be let. If the rating is below an ‘E’, the assumption should be made that the property will soon require upgrading by way of a refurbishment.

• Consider as part of the acquisition due diligence whether an independent assessment of energy performance is required, to ensure accuracy.

• Environmental risk appraisals will be undertaken prior to acquisition – including assessments of ground contamination and flood risk.

• Overall adaptability – as regulation, technology and occupier behaviour evolve, the risk of functional obsolescence increases. Buildings should be flexible to adapt to changing circumstances and thus remain commercially useful.

Portfolio Management

• Appointed managing agents will take responsibility for landlord’s energy, water, and waste consumed in each managed asset. An environmental file will be established for each asset and the landlord’s utility consumptions, water usage and waste disposal for each building will be recorded and monitored.

• Quarterly energy reviews will be carried out on each property and an Annual Energy Statement will be produced to assist tenant engagement.

• Water usage and efficiency – the cost of water is increasingly considered as a sustainability factor. Water efficient buildings with low usage and /or water recycling are more efficient and less costly to run. We will review the potential to reduce water consumption.

• Waste production and recycling – waste costs, particularly landfill taxes, have increased and are likely to continue to increase in proportion to overall occupancy costs. We will review opportunities to improve waste recycling and management systems to reduce building waste where we manage the waste removal. An Annual Waste statement will be produced to engage with tenants to maximise opportunities to reduce waste to landfill and increase recycling.

• An Asset Action Plan of improvement will be produced for each asset.

• We will consider the purchase of green energy for the asset/portfolio.

• We will promote dialogue with our tenants on all aspects of energy and water consumption and waste recycling.

Development and Refurbishment

• Where possible we will refurbish/redevelop existing buildings rather than develop greenfield sites.

• We will adopt sustainable principles throughout the design and construction process and encourage the use of sustainable building materials.

• These principles will form an integral part of all design team appointments and building contracts and will be used to review the contractor’s performance to ensure their obligations on environmental and social considerations are achieved. We will encourage contractors to adopt the “Considerate Contractors” scheme.

• We will seek to achieve best practice standard energy efficient techniques for all developments, taking into account legislation, planning and available technology, including renewable energy solutions.

• Where possible on all developments, we will seek to construct to a minimum BREEAM standard of “very good”.

• Where possible on all developments construct the building to achieve the best EPC rating for the type of asset.

• During the development process, monitor and review at regular and strategic milestones to ensure the standards set out in the project brief and building contract are met.