Critically, the RPI appraisal identifies clearly where intervention might need to be explored and in this respect, the RPI appraisal outcomes are fully integrated into the wider asset business plan exercise. Not only is risk mitigation considered at this point but also opportunities for improvement. These inevitably will be centred around refurbishment cycles or lease events.
Integrating ESG factors into asset due diligence
As a further expansion of the fund’s RPI appraisal process, new acquisitions are now subject to a more intense due diligence process, with consultants going beyond traditional contamination and flood risk analysis by investigating and considering a range of ESG factors such as metering strategies, energy performance and carbon intensities, the presence of ‘green lease’ clauses within existing lettings, and potential climate impacts on the asset.
Metering remains one area of focus for the fund, driven by a desire to achieve maximum automatic energy consumption data flows in order to establish more accurate carbon intensities for the fund as a whole. This objective requires effort beyond the landlord controlled areas and will necessitate direct engagement with occupiers who, in the case of full repairing and insuring (FRI) leases, usually have sole responsibility for procuring and
settling energy accounts. Building on some limited success earlier in 2017 from occupier engagement, the fund is looking to use asset management angles to open up dialogues with occupiers on metering and data sharing.
Additional team resource
The fund will benefit from the recent expansion of in-house resource with the appointment of a sustainability analyst to the team at BMO Real Estate Partners. The additional staff member will focus on data management and will look to establish relationships with, and data flows from, occupiers as well as supporting the team on ever evolving carbon reporting requirements and strategies. In this latter respect, we are currently evaluating a piece of work to determine appropriate longer-term targets that recognise COP21 and the Paris Agreement, and additionally align with the Science Based Targets Initiative.
Finally, for 2018, the fund has set itself a target of achieving Living Wage Accreditation.
For all directly-managed property assets, the fund has once again secured 12-month electricity supply contracts taken from 100% renewable sources, whilst also expanding this to include all landlord-controlled gas supplies.