Investor commitments.


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Investor commitments

We commit

Governed by

Area of focus for 2012 – 2014

GCSR Owner

On track / off track

Red / Amber / Green status?

To promote responsible ESG (environmental, social and governance) business practices in the companies in which we invest to create long term value for investors.

Group CSR committee

In 2012 – we will hold 300 ESG meetings with investee companies on a global basis, of which 25% will be covering environmental and/or social topics. This recognises the value of repeated engagement we carry out with companies, the target has been changed from number of individual companies to number of meetings.
Our focus is to carry out meaningful dialogues that lead to positive changes for the long term shareholders

Mark Zinkula via Meryam Omi

In 2012, LGIM achieved the target with 425 meetings.

Of such meetings, 30.1% covered environmental and/or social topics.

Publication of the External corporate governance report in March 2012.

Publication of Fundamentals on executive pay in October 2012.

Publication of ESG thought piece on China’s sustainability in October 2012.

February sees the publication of the 2012 Corporate governance report and a comms piece to all employees on our influence as a business.

We exceeded

Work with regulatory and policy bodies to ensure that the UK financial services industry has the appropriate regulatory environment to allow both insurance and pension fund assets to be invested in the long-term growth of the UK economy.

John Godfrey

The major pieces of work we have driven in this area include.

  • Greater adoption of insurers/investment in growth argument across EU has helped secure in-principle adoption of matching adjustment under Solvency II.
  • Aggregation vehicle to enable insurers to invest in SME loans due to be proposed in UK government in the Autumn statement - this the result of the Breedon Review
  • The Kay Report is complimentary about LGIM's approach to long term investment and governance
  • Further potential opportunities resulting from government decision to provide partial guarantees for infrastructure and export finance
  • Continued publicity around the need for Green Bonds for fixed income investors via Climatewise to offset Solvency II capital requirements
  • In view of concerns about financial services industries and their interaction with regulators and governments our public affairs stance is stated publcily alongside a aummary of our work
Infrastructure investments made by us in 2012 are
  • We provided development funding for a sale and leaseback scheme to finance the building of the new National Football Centre at St George’s Park in Burton-on-Trent.
  • We also established a joint venture with Imperial College to build student accommodation with a 45-year lease, in Clapham, South London.
  • We have provided a £121 million commercial loan to the Unite Group, who are also responsible for building new student accommodation.

We have interacted with regulators and now we are doing business in infrastructure.

We commit to promote the sustainable management of our investment property portfolio, whatever our mandate, in the belief that enhanced investor returns will be delivered.

Sustainable property investment committee

To promote positive social impact where LGP advocates significant development projects. In particular to assess the social and environmental impacts as part of the analysis of the viability of such schemes

Bill Hughes via Debra Hobbs

Major development projects are being explored in Eastbourne, Northampton and Milton Keynes shopping centers and in Crowthorne.

For each new development / major refurbishment the design team is required to produce a sustainability plan and this is signed off at the start of a project. This includes community engagement targets and is reported regularly throughout each project. Recent examples include:

  • Central St Giles – Simon Wilkes has continued to work with the local school, following ongoing governor commitments, to enable them to obtain compensation from Camden Council for a new refurbishment being undertaken by the council adjacent to the school.
  • 67 Tufton Street - BREEAM workshop held to set targets prior to scheme design commencing.
  • 6 Agar Street - green lease clauses agreed with lawyers for draft lease.
  • 7-10 Hanover square and 103 Wardour Street - Stage C design completed confirming BREEAM targets being achieved with the design.
  • 76 Wardour Street - community project being agreed with the building contractor as part of social benefits of the scheme.
  • Midsummer Place, Milton Keynes – community engagement prior to and post submission of planning application for extension of retail and leisure offer within the centre.
  • Arndale Centre Extension, Eastbourne – public consultation and exhibition prior to submission of planning application. This included participation event into retailers who the public of the town want to see located in the extension of the shopping centre. We are involved with ongoing presentations to community groups and stakeholders including involvement with youth groups, hospitality groups and local colleges and universities.
We are also working with the New economics foundation (NEF) to look at ways of measuring the social return on investment. We are using our English Cities Fund and an asset in St Pauls, Liverpool to trial their initial thoughts of how we can measures social returns.

In addition we have been working with the Housing Associations Charitable Trust (HACT) to look at how you measure the social impact of housing provision. Pete Gladwell has been involved in the launce of a recent publication called ‘The social impact of housing providers and has written the forward to the publication.

Further work to measure the social return on investments will continue in 2013.%

On Track to deliver in 2013.

As part of a three-year plan to 2013, in 2012 develop further building-by-building strategies for improved sustainability performance across the whole of the investment property portfolio.

Bill Hughes via Debra Hobbs

A new Sustainability property investment framework (SPIF) has been developed to shape LGP’s annual processes for managing sustainability across our funds. Asset sustainability plan (ASP) templates have also been developed for all managed asset types. Three templates have been developed to cover:

  • Multi-let assets – offices and shopping centers
  • Estates – retail parks, industrial parks and leisure parks
  • Single let assets – all FRI leased assets
These templates will be completed during 2013, with all 132 multi let assets completed by June 2013 and all 430 FRI assets completed by Dec 2013. The ASPs cover a 5 - 10 year lifecycle of each asset and ensure that sustainability is embedded in each assets strategic plan, while owned by an LGP fund. The ASPs cover energy, water, waste, carbon emissions, transport, biodiversity, tenant liaison and community engagement plans and are used to produce annual action plans (Asset sustainability action plans (ASAP) each year. These plans are also discussed with tenant liaison groups on sustainability and reported against on a quarterly basis by our managing agents.

Working with our managing agents we have also developed reporting formats for Quarterly sustainability reports (QSR) on all managed assets which cover energy, carbon emissions, water, waste, transport, biodiversity, tenant liaison, and community aspects, The QSR also details a RAG report on the Annual sustainability action plan, on an asset-by-asset basis.

Targets for energy and water have been set for each asset, along with objectives in other areas of sustainability and quarterly reporting via our new online system, will commence at the end of Q1 2013, with a standard template agreed. The new Inenco database will go live on the 1st April 2013 to allow easier access to web-based data and allow for more accurate and timely reporting of performance against targets. Currently our previous provider (Power Efficiency) and new provider (Inenco) are running in parallel for Q1 2013 at no additional cost.%

On Track

In 2012 continue at the forefront of the property sector, developing thinking and promoting improved industry performance, leading by example as recognised by the industry. To chair a leading Sustainability organisation and to contribute or publish articles in the property press.

Bill Hughes via Debra Hobbs

In 2012 we have continued to host industry ‘round tables’ with Property Week and have taken part in a round table with RICS, which was written up in their Modus publication in January 2013. We have published a number of journal articles and industry ‘thought’ papers as previously reported.

We have also recently secured a place on the DECC working group looking at how to establish the Minimum energy performance standard (MEPs) legislation due to be drafted later in 2013). This is a key industry working group for us to be in, as EPCs are currently affecting all our property asset plans and other investment decisions. In 2016 it will not be possible to sell or let a building with an EPC of an F or G rating.

We are currently working with BRE’s BREEAM team to trail the new BREEAM refurbishment product which they are developing ( due out in 2013) and in 2013 are aiming to trail their BREEAM-in-Use product on some of our multi-tenanted assets ( offices and shopping centers), as a measurement of sustainability at asset level.

During 2013 all our funds have taken part in the Global real estate sustainability benchmarking (GRESB) annual survey, allowing us to benchmark the sustainability criteria our funds against a wider international database of different fund types.Bill Hughes is currently:

  • Chairman, Green Property Alliance
  • Member of Green Construction Board (GCB)
  • Sponsor of GCB Valuation and Demand Working Group
  • Chairman of EcoPAS Implementation Group
Debbie Hobbs is currently:
  • Chairman of the Central London Energy Managers Group,
  • Chairing the Better Building Partnership, Managing Agents Toolkit review
  • Committee member - Chartered Institute of Building Services Engineers (CIBSE) Energy Performance
  • Committee member - Institutional Investors Group on Climate Change (IIGCC) committee member
  • Committee member – British Property Federation, Sustainability Committee
  • Global Real Estate Sustainability Benchmarking – technical committee member
  • IPD EcoPAS – technical committee member
  • Better Building Partnership - LGP staff are represented on all 12 Better Building Partnership committees in various areas including Green Leases, Innovations for refurbishment, +Benchmarking, Landlords Energy Rating and Retailer forum.

De­livered

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