Responsible Property Investment

Transcription

1 Responsible Property Investment Supplementary Performance Report 2013/14 Part of the M&G Group

2 About M&G Real Estate M&G Real Estate is a top 25 global real estate fund manager*. We form part of the M&G Group of Companies, the asset management arm of Prudential plc in the UK and Europe. We have considerable knowledge and experience in delivering excellent property fund management results for our investors. This report provides an update on the progress we have made during 2013/14 in implementing our Responsible Property Investment (RPI) strategy and a summary of our activities. For more detailed information, please see our website: bn worldwide Funds under management 840 assets 4,800 occupiers globally Source of data: M&G Real Estate as at 30 September 2014 Where we are invested 224 staff at 7 offices worldwide Our achievements 6% reduction in our global energy consumption like-for-like properties 3 Green Stars in the Global Real Estate Sustainability Benchmark, recognition of our market-leading performance Over 1,100,000m 2 of assets with an environmental accreditation All environmental data in this report supplied by M&G Real Estate, as at 31 March 2014, unless stated otherwise. Over 250 community events held across our portfolio 92% of our staff agree that it is important we have an RPI strategy 6% reduction in global carbon emissions like-for-like assets We have offices in: United Kingdom France Luxembourg Germany Singapore South Korea Japan Office 31% Retail 50% Industrial 12% Residential 3% Other 4%

3 This document provides the detailed data behind our 2013/14 Responsible Property Investment Report. In addition, it provides the additional information required to for our reporting to be In Accordance with Level C of the Global Reporting Initiative G3 guidelines. Contents Global Reporting Initiative Compliance Table Standard Disclosures Part 1: Profile Disclosures : Strategy and Analysis : Organisational Profile : Report Parameters : Governance, commitments, And Engagement Standard Disclosures Part 3: Performance s Economic Performance s Environment Performance s Social: Labour Practices and Decent Work Performance s 10 Social: Society Performance s Social: Product Responsibility Performance s Performance Against 2014 Targets Verification Statement Targets for 2014/ Key Performance s Portfolio Resilience Environmental Improvements: Energy Environmental Improvements: Greenhouse Gas Environmental Improvements: Waste Environmental Improvements: Water Environmental Improvements: Compliance Strong Relationships Our Own Operations Please contact the Sustainability Team with any questions or feedback on this document. our Sustainability Director at nina.reid@mandg.com or visit our webpage: You can also write to us at M&G Real Estate, City Place House, 55 Basinghall Street, London, EC2V 5DU. Supplementary Performance & GRI Compliance Report

4 Global Reporting Initiative Compliance Table We have developed our sustainability reporting in accordance with the Global Reporting Initiative (GRI) G3 sustainability reporting guidelines, and the Construction and Real Estate Sector Supplement document. We are reporting in accordance with the Level C of GRI G3, and the table below sets out the details of how we conform with it. We have reported on 37 Key Performance s, including at least one from each category. For the full list of GRI Key Performance s, please visit the GRI website. All data in this table is as at 31 March 2014, unless specifically stated otherwise. Standard Disclosures Part I: Profile Disclosures Profile Disclosure Description Reported Cross-reference/Direct answer 1. Strategy and analysis 1.1 Statement from the most senior decision-maker of the organisation. 2. Organisational profile Our Responsible Property Investment Annual Report on 2013/14 (hereafter: RPI Report), page Name of the organisation. M&G Real Estate Ltd 2.2 Primary brands, products, and/or services. 2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries, and joint ventures. M&G Real Estate is a specialist investor in all major property sectors across the globe. Our primary products are the real estate funds that we manage. Our primary service is the management of the property portfolios the funds invest in, to deliver returns for our investors. As at 31 March 2014, M&G Real Estate had a number of subsidiaries: M&G Real Estate Asia PTE Ltd, M&G Real Estate Japan Co Ltd, M&G Real Estate Korea Co Ltd, M&G Real Estate Funds Management s.a.r.l, M&G Real Estate (Luxembourg)SA. Joint Ventures: Ascent Holdings Ltd (in liquidation)- a joint venture with Valad, and St Edward Homes a joint venture with Berkeley Homes. A number of our assets are held as Joint Ventures. 2.4 Location of organisation's headquarters. M&G Real Estate s registered office is Laurence Pountney Hill, London EC4R 0HH. Our postal address and headquarters are City Place House, 55 Basinghall Street, London EC2V 5DU. 2.5 Number of countries where the organisation operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report. 2.6 Nature of ownership and legal form. M&G Real Estate has offices in France, Germany, Japan, Korea, Luxembourg and Singapore, and holds assets in Australia, Canada, the EU, Hong Kong, Japan, Singapore, South Korea, the UK and the USA. As at 31 March 2014, 82% of assets under management were in the UK. M&G Real Estate is a business name of M&G Investment Management Limited and is used by other companies within the Prudential Group. M&G Real Estate is a wholly privately-owned limited company. 4 Responsible Property Investment

5 Profile Disclosure Description Reported Cross-reference/Direct answer 2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries). 2.8 Scale of the reporting organisation. 2.9 Significant changes during the reporting period regarding size, structure, or ownership Awards received in the reporting period. 3. Report parameters Partly M&G Real Estate has approximately 4,800 tenants across its portfolios. The geographic and sector breakdowns of our holdings can be seen here, and in our RPI report. M&G Real Estate has 213 employees including an investment team of 65 professionals, in six offices. As a wholly-owned subsidiary of Prudential plc we do not publicly disclose our financial results. We have invested (either solely or in a joint venture arrangement with one or more third parties) in 848 properties on behalf of our client funds. There are no significant changes during the reporting period. The usual portfolio churn meant that 66 assets were sold and 159 were purchased. At 31 March 2014, we had 18.6bn of assets under management, an increase of 2.7% over the previous year. Since the end of the reporting year, two of our Funds were awarded Green Star status in the Global Real Estate Sustainability Benchmark survey, and a third was awarded Sector Leader Status as well as a Green Star. The Mall at Cribbs Causeway in Bristol won the ICSC Foundation European Community Support Award 2014 for Gromit Unleashed a fundraising public art trail. M&G Real Estate won the Real Estate Manager of the Year title at the Financial News Awards in both 2013 and The Gromit Unleashed project also won a merit at the British Council of Shopping Centres (BCSC) Purple Apple Marketing Awards in April Manchester Arndale secured a merit for its Tweet Seat campaign, where North West fashion bloggers were invited to write about the centre, and a Purple Apple Award for The Empty Shop initiative in the Community Relations category as well as the overall prize of a Golden Apple for this campaign. Hollywood House, Woking, won the CIBSE Refurbishment of the Year (up to 5million). Renaissance House, Croydon, won Sustainable Achievement of the Year at the Office Agents Society Development Awards The Mall at Cribbs Causeway in Bristol won a Green Apple for Waste and Recycling. 3.1 Reporting period (eg, fiscal/calendar year) for information provided. The report data covers the period 1 April 2013 to 31 March Where this is different for any reason it is clearly stated in the explanatory notes. 3.2 Date of most recent previous report (if any). 3.3 Reporting cycle (annual, biennial, etc) Our last report was published in October 2013 and covered the period 1 April 2012 to 31 March Our reporting cycle is annual. We have been reporting our sustainability performance since Supplementary Performance & GRI Compliance Report

6 Profile Disclosure Description Reported Cross-reference/Direct answer 3.4 Contact point for questions regarding the report or its contents. 3.5 Process for defining report content. 3.6 Boundary of the report (eg, countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). 3.7 State any specific limitations on the scope or boundary of the report (see completeness principle for explanation of scope). 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organisations Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such restatement (eg,mergers/ acquisitions, change of base years/periods, nature of business, measurement methods). The Sustainability Team can be reached by In defining the contents of this report, we have considered the likely audience, the amount of control we have over various aspects of our impacts, and the significance of the impacts themselves. In 2011, when developing our RPI strategy, we undertook internal and external stakeholder consultation, which further helped us to define material issues and report content. More insight into the issues that we consider to be material can be found in our Responsible Property Investment Annual Report on 2013/14, available via realestate/responsible-investing The data in this report relates to our global operations. The vast majority of our business activities are undertaken in the UK, and the vast majority of our property investments are held in the UK. However, we own and manage properties in the UK, EU, Asia Pacific and Australia, America and Canada, and data from these properties is also recorded and reported here. For full details on data scope on performance indicators, please see the data qualifying notes for each indicator. The scope of sustainability topics covered in this report is limited to those aspects which we believe are material and significant to our business. We aim to capture all relevant data, but where this is not feasible, we pro-rate available data. Where we utilise information on billed consumption, this is potentially open to amendment and restatement in subsequent years, as estimated consumption data is corrected with more accurate data. Specific data on properties included and coverage is given in the data qualifying notes for each indicator. This report includes information and data that relates to M&G Real Estate s UK and global operations, and assets owned and managed in the UK, EU, Asia Pacific and Australia, America and Canada. We report on an operational control basis, so for JV s and other structures where there is more than one owner, we will report performance for assets that we have operational control over. Any deviations from this are provided in the detailed data notes are given for each indicator. We have updated the greenhouse gas emissions factors that we use in accordance with the data and guidance from DEFRA, available at For our 2013/14 data, we have used the 2013 conversion factors, in line with DEFRA guidance, as the majority of the data year falls in the calendar year Responsible Property Investment

7 Profile Disclosure Description Reported Cross-reference/Direct answer 3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report Table identifying the location of the Standard Disclosures in the report. In accordance with good practice, we have included the transmission and distribution element from our carbon calculations and are reporting this as Scope 3 emissions. Likewise, where we have separate, metered tenant energy supplies, we have reported emissions generated by them as Scope 3. This table. 4. Governance, commitments, and engagement 4.1 Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight. 4.2 Indicate whether the Chair of the highest governance body is also an executive officer. 4.3 For organisations that have a unitary board structure, state the number and gender of members of the highest governance body that are independent and/ or non-executive members. As at 31 March 2014: M&G Real Estate s Board, chaired by our Chief Executive, Alex Jeffrey, is the highest governance body, and receives reports from the Risk Management, Property Investment, Institutional Business, Business Operating, Insurance Oversight, Institutional Product and Asset Management Committees. M&G Real Estate has two non-executive Board members: Anthony Ashplant and Martin Lewis of M&G. Alex Jeffrey and Martin Lewis are both also members of M&G s Board of Directors. As a wholly-owned subsidiary of M&G, the asset management arm of Prudential plc in the UK and Europe, M&G Real Estate has no public shareholders. 4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body. M&G Real Estate s staff are represented on M&G's Staff Consultative Committee, where M&G Real Estate s Board is represented by our Human Resources Director. The Terms of Reference of this committee enable staff to make suggestions and respond to consultations by M&G Real Estate s Board, and provides a mechanism for employees to engage with M&G Real Estate s Board. In connection with Sustainability, issues were only raised at corporate level (ie,nothing specific to M&G Real Estate was raised in this forum) List of stakeholder groups engaged by the organisation. Stakeholders are engaged at an organisational level including civil society, our parent companies M&G and Prudential plc, occupiers, employees and suppliers and at a property or asset level, including visitors to our properties, local civil society, and local communities. In 2011, we engaged with both internal and external stakeholders as part of the development of the Responsible Property Investment strategy. Specific engagement with key stakeholder groups is highlighted in our RPI report Basis for identification and selection of stakeholders with whom to engage. Stakeholder groups are selected based on our extensive experience of real estate fund management. Supplementary Performance & GRI Compliance Report

8 Standard Disclosures Part III: Performance s Performance Description Reported Cross-reference/Direct answer Economic performance s Aspect: Economic performance EC1 Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments. No Our economic impacts are diverse. As one of the world s largest property investors, M&G Real Estate had 18.3 billion of assets as at 30 March 2014, in Europe, North America and the Asia-Pacific regions. M&G Real Estate forms part of the M&G Group of companies, the asset management arm of Prudential plc in the UK and Europe. We aim to generate superior returns for our investors by actively managing our wide range of property funds. M&G s objective is to produce superior long-term investment returns for its clients individual and institutional investors and its shareholder, the Prudential Group. Our financial performance figures are included in our parent company s legally-mandated financial reporting, but they are not reported separately. EC2 Financial implications and other risks and opportunities for the organisation's activities due to climate change and other sustainability issues. See our RPI report, and the Portfolio Resilience section of the KPI table below page 17. This is a modified version of the input we provide to Prudential plc for its participation in the Carbon Disclosure Project (CDP). Prudential s full CDP response is available online at EC4 Significant financial assistance received from government. M&G Real Estate does not receive any significant financial assistance from government. Aspect: Indirect Economic Impacts EC9 Understanding and describing significant indirect economic impacts, including the extent of impacts. Partly See examples in our RPI report (page 6, 11). Environment Performance s Aspect: Energy EN3 Direct energy consumption by primary energy source. See the Environmental Improvements section of the KPI table below page 20. EN4 Indirect energy consumption by primary source. See the Environmental Improvements section of the KPI table below page 21. CRE1 Building energy intensity. Partly See the Environmental Improvements section of the KPI table below page 23. Where we have the best quality data and a high degree of control, we are able to include building energy intensity metrics. EN5 Energy saved due to conservation and efficiency improvements. Partly See the Environmental Improvements section of the KPI table below page 20, and page 11 of our RPI Report. EN6 Initiatives to provide energyefficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives. Partly See the RPI report, page Responsible Property Investment

9 Performance Description Reported Cross-reference/Direct answer EN7 Aspect: Water Initiatives to reduce indirect energy consumption and reductions achieved. Partly See the RPI report, page 11. EN8 Total water withdrawal by source. Partly See the Environmental Improvements section of the KPI table below page 30. Where we have the best quality data and a high degree of control, we are able to include building energy intensity metrics. All our water supplies come from the relevant local water company. CRE2 Building water intensity. Partly See the Environmental Improvements section of the KPI table below page 30. Aspect: Emissions, Effluents and Waste EN16 Total direct and indirect greenhouse gas emissions by weight. See the Environmental Improvements section of the KPI table below page 25 and page 26. Emissions are reported in tonnes of CO 2 equivalent. EN17 Other relevant indirect greenhouse gas emissions by weight. See the Environmental Improvements section of the KPI table below page 26. Emissions are reported in tonnes of CO 2 equivalent. CRE3 Greenhouse gas emissions intensity from buildings. Partly See the Environmental Improvements section of the KPI table below page 27. Where we have the best quality data and a high degree of control, we are able to include building energy intensity metrics. CRE4 Greenhouse gas emissions intensity from new construction and redevelopment activity. Partly In 2014, we conducted an embodied carbon study on a refurbishment project at one of our assets. For more information, see page 12. EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. Partly See the 2014 RPI Report, pages 12-15, for some examples. EN22 Total weight of waste by type and disposal method. See the Environmental Improvements section of the KPI table below page 28 and page 29. EN23 Total number and volume of significant spills. See the Environmental Improvements section of the KPI table below page 31. Aspect: Products and services EN26 Initiatives to enhance efficiency and mitigate environmental impacts of products and services, and extent of impact mitigation. Partly See the Environmental Improvements section of the KPI table below page 20. For examples, see our 2014 RPI Report. Aspect: Compliance EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations. No fines or non-monetary sanctions were imposed. Supplementary Performance & GRI Compliance Report

10 Performance Description Reported Cross-reference/Direct answer Aspect: Transport EN29 Significant environmental impacts of transporting products and other goods and materials used for the organisation's operations, and transporting members of the workforce. Partly The carbon emissions generated by our air, rail, and car business mileage are reported in the KPI table page 35. Social: Labour Practices and Decent Work Performance s Aspect: Employment LA2 Total number and rate of new employee hires and employee turnover by age group, gender, and region. Partly See the Employees section of our KPI table page 34. Aspect: Occupational health and safety LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region and by gender. Partly See the Employees section of our KPI table page 34. Aspect: Training and education LA10 LA12 Average hours of training per year per employee by gender, and by employee category. Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings. See the Employees section of our KPI table page 34. See the Employees section of our KPI table page 34. Aspect: Diversity and Equal Opportunity LA13 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity. Partly See the Employees section of our KPI table page 34. Social: Society Performance s Aspect: Community SO3 Percentage of employees trained in organisation's anti-corruption policies and procedures. 100% of M&G Real Estate employees receive training in anti-bribery and -corruption policies and procedures. SO4 Actions taken in response to incidents of corruption. There were no incidents of corruption; no actions were needed or taken in response. SO5 Public policy positions and participation in public policy development and lobbying. Partly For details of the groups that we have been involved with, please see page 4 of our RPI report. 10 Responsible Property Investment

11 Performance Description Reported Cross-reference/Direct answer SO6 Total value of financial and in-kind contributions to political parties, politicians, and related institutions by country. M&G Real Estate did not make any such financial contributions. SO7 Total number of legal actions for anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes. No such legal actions were taken against M&G Real Estate. SO8 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations. No significant fines or non-monetary sanctions were levied as a result of non-compliance with laws and regulations. Social: Product Responsibility Performance s Aspect: Customer Health and Safety PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction. Partly For examples of how we are building strong relationships with our occupiers, see page 16 of our RPI report. PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services. No fines or non-monetary sanctions were imposed. Aspect: Product and Service Labelling CRE8 Type and number of sustainability certification, rating and labelling schemes for new construction, management, occupation and redevelopment. Partly The environmental management system at 22 UK large managed office assets is independently accredited to the ISO14001 standard. Of the 10 UK shopping centres we owned at the beginning of the year, 8 were independently accredited to PAS99, an integrated system which incorporates environmental management, health and safety and quality. The remaining two, which were purchased in 2013, were in the process of gaining accreditation. Eighteen assets (one Swedish, one French and the rest in the UK) were BREEAM certified: 163,000 m 2 to Very Good and Good and 35,000 m 2 to Excellent. One French asset is certified to Haute Qualité Environnementale. Two Canadian assets have LEED Gold certification, and in the USA, two assets have LEED Gold certification, and two have LEED silver certification. All four US assets have Energy Star ratings varying from 82 to 92. Together, these certifications and accreditations account for 1.2 million square meters of floor space. This total includes an element of duplication as some assets have more than one type of accreditation. Supplementary Performance & GRI Compliance Report

12 Performance Against 2014 Targets In 2013, we set ourselves fifteen Responsible Property Investment targets to achieve by the end of March Progress against each target has been established by an internal review of the evidence of achievement. We assessed our progress on the targets as follows. In addition, Upstream Sustainability Services was engaged to provide limited verification of the environmental targets identified by the icon: and environmental datasets for the period April 2013 to March Upstream s Verification Statement can be found on page 14. Target Assessment Comments Ensure opportunities to identify and mitigate EPC risks are embedded within our asset management processes Carry out two embodied carbon assessments for proposed development or refurbishment projects and share the results with industry Continue to contribute data to IPD EcoPAS Reduce CO 2 intensity by 7% against 2012/13 baseline at landlord-controlled areas of UK shopping centres Reduce CO 2 intensity by 5% against 2012/13 baseline at landlord-controlled areas of 24 large multi-let offices (ISO accredited) Reduce water consumption at UK shopping centres by 6% against 2012/13 baseline, normalised by footfall Achieved Achieved Achieved Achieved Achieved Part Achieved EPC ratings are one of five key sustainability aspects which must be reviewed by the asset manager as part of the asset planning process. They must also be reviewed at acquisition. When an EPC rating is cause for concern, a plan should be developed, recorded, and actioned to improve the EPC. Regular spot checking is in place to ensure the quality of the commentary and action planning process. M&G Real Estate commissioned an embodied carbon assessment from Sturgis Carbon Profiling on the refurbishment of several floors of office space in Central London, at Minster Court. The resulting report was unveiled at a presentation to which relevant M&G Real Estate staff and M&G Real Estate s term consultants were invited. Although only one report was commissioned, we have nevertheless assessed our performance as achieved as there was not an appropriate development project on which an embodied carbon assessment could have sensibly been carried out. M&G Real Estate provided data on seven funds in 2014 to IPD for its EcoPAS analysis, adding an extra year of data on all of the funds which were submitted in When energy use attributable entirely to tenant consumption is excluded from the performance data for the year, a significant reduction of 13% was achieved across the eight UK shopping centres that we owned and managed consecutively for two years, outperforming the target. CO 2 intensity fell from 91.4 kg/m 2 to 79.8 kg/m 2. This impressive reduction is a result of a combination of low- and no-cost changes to the way properties are managed to ensure maximum energy efficiency in all types of fuel consumed, combined with various investments in new technologies, and training and support to drive cultural changes at the centres themselves to support energy efficiency. We are pleased to report that at our large multi-let office portfolio, we also reduced CO 2 intensity, this time by 6% compared to the baseline. As with the shopping centres, this is due to a combination of low- and no-cost changes to property management methods, investment in new technologies and providing training to support cultural changes. One property was excluded from the calculations as, half-way through the year, it became a redevelopment site meaning that the changed pattern of consumption would have rendered it an invalid comparison year on year. At the remaining 23 properties, CO 2 emissions per square meter fell from 67.1 kg to 63.3 kg. Water consumption at the eight UK shopping centres that we owned and managed consecutively for two years fell by 4.6%, when normalised by footfall. Although this was a creditable performance, saving 8,800 cubic meters of water, it did not reach the target we had set ourselves, and we have therefore assessed our performance as Part Achieved. We will redouble our efforts both to achieve greater water efficiency and to ensure that we have good-quality water data. 12 Responsible Property Investment

13 Target Assessment Comments Reduce water consumption at 24 large multi-let offices (ISO accredited) by 2% against 2012/13 baseline, normalised by average m 2 of floor space let Ensure at least 90% of waste from UK shopping centres is diverted from landfill Ensure at least 80% of waste from ISO offices is diverted from landfill Engage with our existing key investors to ensure they are aware of our RPI strategy and approach and to better understand their priorities in this area Engage with our key occupiers to ensure they are aware of our RPI strategy and approach and to better understand their priorities in this area Hold at least one tenant engagement event at a retail asset and one at an office asset Review M&G Real Estate s community investment and volunteering policies to ensure they reflect our new fund management identity Reduce absolute paper consumption at our head office by 15% compared to 2012/13 levels Reduce energy consumption at our head office by 5% compared to 2012/13 levels, normalised by headcount Not Achieved Achieved Achieved Achieved Achieved Part Achieved Achieved Achieved Achieved Regrettably, normalised water consumption at our UK large multi-let offices actually increased by 1.6% compared to the baseline year. A number of issues including a few large leaks have contributed to the poor performance but we continue to work with our property managers to try to improve water efficiency and manage leaks. One property was excluded from the calculations as, half-way through the year, it became a redevelopment site meaning that the changed pattern of consumption would have rendered it an invalid comparison year on year. At the remaining 23 properties, water consumption increased by 13,200 cubic meters. At our UK shopping centres, 92% of all waste generated in the year in question was diverted from landfill. This year, for the first time, we were able to calculate, from the waste that our centres sent to a materials recovery facility (MRF), the amount which was recovered, incinerated and sent to landfill by the MRF. After taking this into account, we exceeded our target for diversion from landfill. This performance data includes recycling data from the two shopping centres which we acquired part way through the year. At our 24 ISO-accredited large, multi-let offices, 86% of waste generated in the year was diverted from landfill. We are pleased with this performance which represents a significant improvement in just a few short years, thanks to improved facilities, a significant effort from the property and facilities managers and co-operation from our occupiers. Investors in certain of our funds under management have different approaches to responsible property investment, but we have been encouraged by the number of them who are increasingly pro-active and seeking to understand, in some detail, the implications of their holdings, and our approach to RPI. We believe that this can only be of benefit to their investments. Most notably, our Asian portfolio has recently carried out a materiality exercise which explicitly sought investors views on RPI (for more details, see our annual RPI report). We have launched a quarterly investor newsletter which provides a concise update on our activities and industry initiatives that may be of interest to our investors. Through a number of different programmes, we have liaised with our key occupiers. For example, sustainability-specific meetings were held with some of our occupiers, which enabled us to discuss in detail our individual and mutual priorities. We also launched our occupier guide and have looked to improve the environmental performance information provided to tenants at our managed offices. In addition, we have undertaken surveys of all our shopping centres, retail parks and multi-let offices which looks at general occupier satisfaction as well as specifically on RPI issues (see page 16 of our RPI report) For our retail occupiers, we organised an environmental awareness day at one of our retail parks. Unfortunately, the event had to be postponed as insufficient occupiers were able to attend. Instead, we produced two environment guides, tailored for retail and office occupiers, which we launched in January For more information, see page 16 of our RPI report. Our community investment and volunteering policies were reviewed and amended as appropriate. They are now a better fit for our fund management identity, and correspond more closely with M&G s own policies. For more details of our activities see page 19 of our report. A number of staff education initiatives, combined with increased investment in new technologies (such as tablet computing), led to a drop in paper consumption in 2013/14 of 16% compared to 2012/13. We will keep up the campaign and have set ourselves another ambitious reduction target for 2014/15 to build on this performance. Our energy consumption per capita fell by 5%, thanks to the introduction of energy efficient appliances such as printers and thin client devices rather than desktop computers, together with an increased focus on adjusting lighting levels in our offices. Supplementary Performance & GRI Compliance Report

14 Verification Statement Environmental Targets and Data To the Stakeholders of M&G Real Estate, Scope of Work Upstream Sustainability Services, (a division of JLL UK Ltd, hereafter referred to as Upstream), has been engaged by M&G Real Estate to provide limited verification of selected environmental targets and environmental datasets for the April 2013 to March 2014 financial year. Methodology In order to complete the above Scope of Work, Upstream: Obtained details of the performance to be reported against the following targets: 1. Reduce CO 2 intensity by 7% against 2012/13 baseline at landlord-controlled areas of UK shopping centres 2. Reduce water consumption at UK shopping centres by 6% against 2012/13 baseline, normalised by footfall 3. Ensure at least 90% of waste from UK shopping centres is diverted from landfill 4. Reduce CO 2 intensity by 5% against 2012/13 baseline at landlord-controlled areas of 24 large multi-let offices (ISO accredited) 5. Reduce water consumption at 24 large multi-let offices (ISO accredited) by 2% against 2012/13 baseline, normalised by average m 2 of floor space let 6. Ensure at least 80% of waste from ISO14001 offices is diverted from landfill. Discussed the verification process and its evidence requirements and implications with the relevant M&G Real Estate Sustainability Advisor and the Director of Responsible Property Investment; Identified, on a risk weighted basis, selected consumption and/or production amounts and obtained primary evidence such as energy and water invoices and waste management company records in order to verify these amounts; Reviewed, with M&G Real Estate, internal data verification and selection processes and verified selected non-invoiced energy and other consumption data back to its highest primary source, (eg supplier annual statements, meter read sheets etc); Performed limited testing of the data and calculations used to derive the reported performance against targets; Performed limited testing of data from the wider M&G Real Estate environmental dataset (ie data related to building or fund performance but which are not used in the calculation of KPIs); Advised any significant data or calculation discrepancies identified during the verification process to M&G Real Estate and checked that these had been corrected in the source data prior to the final reporting of performance in the Responsible Business Report. Limitations and exclusions The following limitations and exclusions apply: Data outside the defined reporting period of April 2013 to March 2014; Financial information related to any of the data or performance verified; Performance data against targets or performance indicators compiled and calculated from the above datasets unless listed in the Methodology of this statement. Opinion Based on the Scope of Work and Methodology outlined above, nothing has come to Upstream s attention that would indicate that M&G Real Estate s reported performance against the targets specified in this statement and the reported environmental data totals for energy, water and waste, are not fairly stated. Management Report The verification opinion above is supported by a short management report to M&G Real Estate which details observations on M&G Real Estate s data quality, availability, supporting evidence, KPI wording and KPI performance calculation, and makes recommendations on how these might be further developed or improved. About Upstream Upstream provides leading advice on sustainable property and environmental sustainability strategies. Its team has extensive experience in verifying environmental data, information, systems and processes. The team for this work was not involved in any other Upstream and/or JLL projects with M&G Real Estate. JLL s Code of Ethics outlines our commitment to maintaining the highest standards of ethics and integrity in all of our business dealings. Gavin Tivey Senior Consultant Upstream Sustainability Services JLL 14 Responsible Property Investment

15 Targets for 2014/15 To continue to build on the progress outlined above against our 2013/14 targets, we have set the following targets. We have decided this year to increase the time horizon for our environmental targets, which we will continue to monitor regularly and report progress annually. Portfolio resilience Ensure material RPI issues are considered as part of the acquisitions process and asset management strategy, and that asset management plans have actions to reduce any risks identified Global Apply our new Sustainable Development and Refurbishment Framework to all directly managed projects, and where possible, seek to apply the principles to all other projects UK Continue to contribute data to IPD EcoPas to measure sustainability risk and understand the link between sustainability and investment performance UK Continue to submit data to the Global Real Estate Sustainability Benchmarking (GRESB) initiative on an annual basis to benchmark the sustainability performance of our funds and communicate the outcomes to our investors Global Review the opportunities to certify assets as green buildings using international best practice rating tools, and commit to move forward with certification where there is a clear business case to do so Global Environmental efficiency By 2020: Achieve a 20% reduction in energy intensity and associated GHG emissions based on an indexed trend for all landlord procured energy based on a 2012/13 baseline Global By 2020: Achieve a 10% reduction in water use based on an indexed trend for all landlord procured water based on a 2012/13 baseline Global By 2020: Send zero waste to landfill arising from day to day operation of our assets (where we have control over the final disposal route of the waste) UK Undertake a detailed review of global waste management practices and feasibility of achieving zero waste to landfill and set a long-term target for non-uk assets accordingly Global Increase the absolute quantity of on-site generated renewable energy (kwh) Global Strong relationships Review how we communicate RPI performance with our customers and ensure that this enables them to understand and contribute to the improved performance of the building and their space Global Review how we capture and report our community investment and engagement activities, with a view to expanding the scope of our reporting next year Global Develop our customer engagement programmes and surveys to ensure they are delivered in the right language at the right time for our customers utilising enhanced technologies and tools to support delivery UK Own operations Develop an action plan based on the outputs of the 2014 staff survey, ensure this is implemented and the plans success is measured Global Develop RPI training module for all new starters globally and undertake regular RPI training for all staff as required Global Ensure that all suppliers are screened using M&G Real Estate pre-qualification process which includes questions on H&S and sustainability competence UK Reduce paper consumption at our head office by 20% compared to 2013/14 UK Reduce energy consumption at our head office by 10% compared to 2013/14 (normalised kwh/average headcount) UK Supplementary Performance & GRI Compliance Report

16 Key Performance s We have been monitoring the sustainability performance of our assets and our own operations using key performance indicators since This section summarises our performance against a number of key performance indicators. Where a key performance indicator is also a Global Reporting Initiative (GRI) key performance indicator, its reference number is given thus: [EN17]. Our full GRI compliance table can be found on page 4. We also follow the INREV Sustainability Reporting Recommendations. Where assets are part-owned in a joint venture arrangement, consumption data is only included where M&G Real Estate has management control of the asset or assets. Where management control is held elsewhere, this data is not included. Portfolio Resilience Key Performance 2011/ / /14 Our comments % Proportion of completed developments on brownfield land 100% (by area) 75% (by area) 100% (by area) Our construction projects which completed during the reporting year varied greatly, including a hotel, offices, and retail warehouses. Two received BREEAM Excellent certifications, and all were on brownfield sites. Proportion of properties rated as having a low to moderate risk of contaminated land liability 89% 92% 92% We maintain a database of environmental risk assessments, whether commissioned at the time of purchase or at other times in the property life cycle, and analysing it enables us to see the portfolio s risk profile. This year it has remained stable. 16 Responsible Property Investment

17 Key Performance 2013/14 Financial implications and other risks and opportunities for the organisation s activities due to climate change and other sustainability issues [EC2] Risks driven by changes in regulation General environmental regulations, including planning, for example: Increasingly stringent building regulations regarding Greenhouse Gas emissions/energy efficiency for both new build and refurbishments Increasing legislative/planning requirements for on-site renewables Requirement for energy efficiency to be known during property acquisition, sales and lettings eg requirements for Energy Performance Certificates (EPCs) in Europe Anticipated legislation outlawing the rental of premises that do not meet an as yet unspecified minimum energy efficiency standard (UK at the moment but may see this expand) Requirements for energy audits eg the implementation of the EU Energy Efficiency Directive Emission reporting obligation such as the Carbon Reduction Commitment Energy Efficiency Scheme and the Mandatory Emissions Reporting: Companies Act 2006 (Strategic and Directors Reports) Regulations 2013 The potential financial implications of the risk: Possible fines imposed for non-compliance with relevant legislation, as well as negative impact of bad publicity; reduced liquidity of assets if unable to trade. To manage this risk, we are: 1. Setting targets to ensure minimum BREEAM standards are achieved on new developments and refurbishments; 2. Setting targets to improve energy efficiency focus is initially on low- and no-cost improvements before expensive capital expenditure; 3. Setting targets to maximise recycling and minimise waste to landfill; 4. Achieving ISO14001 accreditation for the Environmental Management Systems in place at the largest assets where we have management control and the largest environmental impacts; 5. Understanding the exposure of our funds to properties with F and G rated EPCs, and the cost of improving the ratings. 6. Understanding the exposure of our funds to properties with F and G rated EPCs, and the cost of improving the ratings; 7. Working closely with our property managers to ensure we have robust, accurate and timely environmental performance data. Risks driven by change in physical climate parameters Change in temperature extremes, potentially leading to: 1. Damage to external facing part of building structure caused by extreme weather; 2. Wind-related structural damage; 3. Decreased durability and performance of materials; 4. Poorer internal environment; 5. Subsidence; 6. Pressure on water resources; 7. Pressure on infrastructure; 8. Delays to construction and 9. Flooding. The potential financial implications of the risk Decreased investment returns on buildings not sufficiently future-proofed Supplementary Performance & GRI Compliance Report

18 Key Performance 2013/14 Financial implications and other risks and opportunities for the organisation s activities due to climate change and other sustainability issues [EC2] To manage this risk, we are: At M&G Real Estate, we believe that sustainability will significantly impact future property values and prospective returns. Our strategy is to implement sustainability improvements that will add value to our existing assets, and to incorporate consideration of sustainability risks into our acquisition and disposal decisions. We identify opportunities to improve the sustainability performance of our assets through the EPC rating process and environmental audits. We are also participating in a number of national and international working groups to develop the link between sustainability and investment performance. We have integrated key sustainability issues into our acquisition Due Diligence process, and other key points in the property cycle, to ensure we have relevant data to inform our decision-making. Other initiatives in the UK investment property portfolio include: Developed Sustainable Development/Refurbishment Frameworks to ensure consideration of sustainability issues by the design and construction teams; Put an environmental management system programme in place at major managed properties; Developed a database of environmental risk, containing all property assets. Risks driven by changes in other climate-related developments Reputation: Risk that property, as a physical asset, is susceptible to climate change resulting in it being perceived as a less desirable investment option The potential financial implications of the risk 1. Reduction in management fees for real estate investment; and 2. Reduction in value of real estate. To manage this risk, we are: Involved in a number of steering groups and industry initiatives to ensure institutional investors have a clear understanding of both the risks and the opportunities inherent in real estate as an asset class, as well as speaking at industry conferences to share our thinking. Opportunities driven by changes in physical climate parameters Change in temperature extremes Opportunity to develop, refurbish and manage properties sustainably The potential financial implications of this opportunity Opportunity to apply large scale purchasing power to greener technology, across a large portfolio, and leverage better deals for individual properties To manage this opportunity, we are: Ensuring environmental management is thoroughly embedded into all aspects of asset, property and facilities management so that every asset is running at optimum efficiency. Ensuring that environmental implications are considered when equipment is upgraded. Ensuring all developments and refurbishments follow our Sustainable Framework guidance documents and meet our minimum standards. Opportunities driven by changes in other climate-related developments 1. Opportunity to launch a green portfolio 2. Opportunity to work with occupiers to reduce whole building environmental impacts 3. Opportunity to shape and inform industry and government thinking on key propertyrelated climate change issues 18 Responsible Property Investment