EPC Ratings at a Glance
In order to meet investors’ expectations relating to ESG matters the Group and its advisers adopt both financial and non-financial strategies to drive long-term value with an innovative yet disciplined and conscientious approach to ESG in respect of the property portfolio management.
Ahead of the change in the Minimum Energy Efficiency Standards 2023 regulations, the Company is taking a proactive approach to the procurement of Energy Performance Certificate (“EPC”) reassessments across the portfolio, while maintaining quarterly reviews of EPC schedules, identifying opportunities to improve energy efficiency and reduce greenhouse gas (“GHG”) emissions. It works closely with tenants who occupy under full repairing and insuring leases.
As part of regular due diligence, the Group is also conducting ongoing environmental reviews and audits, including regular asset inspections to avoid any breach in environmental legislation. Additional initiatives include taking a responsible approach to refurbishment in respect of all works to assets. This includes considering the best approach to improving the EPC rating against potential spend, liaison with tenants in respect of any fit-out or alterations to carry out sustainable development and reuse of existing materials where feasible to reduce waste.
More broadly, assets within the portfolio are operated in a manner to reduce overall energy and water consumptions as well as waste production, while maintaining tenant comfort and needs and ‘green lease’ terms are incorporated in leases where feasible. Furthermore, AIRE seeks to continue to leverage technology for data management used to monitor and drive improvement across environmental and social metrics.
The nature of the assets within the Company’s current portfolio limits its ability to drive social priorities, however, AIRE works to three key priorities to support its goal of driving social value for key stakeholders. The first priority is a commitment to proactive occupier engagement. Secondly, the incorporation of social improvements to each asset such as installing defibrillators & electrical charging points and finally the provision of regular training and awareness to all managers on social issues, such as wellbeing.
- Client checks are completed on all tenants as well as new suppliers and contractors.
- Regular tenant engagement and inspections to ensure assets are used as agreed within leases.
- Effective tracking of legislative requirements to assess and monitor risks and opportunities.
Employees, Diversity and Human Rights
As an externally managed business, the Company does not have any employees or office space, as such there is no requirement for the Group to report separately in this area as the management of the portfolio has been delegated to the AIFM and Investment Adviser. The AIFM and Investment Adviser are equal opportunities employers who respect and seek to empower each individual and the diverse cultures, perspectives, skills and experiences within their workforce.
Equally, as the Group does not have any employees it does not operate a diversity policy with regards to any administrative, management and supervisory functions.
The Group is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and therefore no further disclosure is required in this regard.
As well as the critical day-to-day portfolio management, the Group has a set of service providers that ensure the smooth running of the Group’s activities. A list of the Group’s key service providers can be provided on request, and the Management Engagement Committee annually review the effectiveness and performance of these service providers, taking into account any feedback received.
The Group, AIFM and Investment Adviser and other third-party service providers maintain high standards of business conduct by acting in a collaborative and responsible manner with all its business partners that protects the reputation of the Group as a whole.
Greenhouse Gas Emissions
As an investment company, the Group’s own direct environmental impact is minimal and greenhouse gas (“GHG”) emissions are negligible, and as such the Company has not introduced measures to achieve energy efficiency. Information on the GHG emissions in relation to the Group’s property portfolio are shown in the following section. The Group has followed UK Government environmental reporting guidelines and used the UK Government 2020 greenhouse gas reporting conversion factors for company reporting to identify and report relevant GHG emissions over which it has operational control for the 12-month period each year for the Company accounts. An independent consultancy specialising in the application of sustainability in commercial real estate was appointed to calculate the GHG statement and provide verification on the approach used.
GHG emissions have been reported against the following ‘Scopes’, as defined by the GHG Protocol and where relevant:
Scope 1: (not relevant to AIRE): Direct emissions from owned vehicles, controlled boilers and fugitive emissions from air conditioning systems under landlord control.
Scope 2: Indirect emissions from electricity purchased by the Company and consumed within real estate assets owned by the Company.
Scope 3: Indirect emissions from electricity and gas purchased/consumed within AIRE assets, by tenants, where the tenant is counterparty to the energy supply.
Statement of GHG Emissions
The table setting out the emissions per sector and for the Group overall are set out in the Company’s latest Annual Report. The approach taken follows guidance provided by the GHG Reporting Guidelines (BEIS, 2019) and EPRA Best Practice Recommendations of Sustainability Reporting 2017. The Group has little or no control over energy purchased over the majority of its assets. However, there are two properties where there is some form of control being Droitwich Spa Retail Park (Retail Park) and Pocket Nook Industrial Estate (Industrial Warehouse), and therefore their Scope 2 and 3 emissions are disclosed in the Annual Report.
In addition to reporting relevant absolute GHG emissions (per scope and per sector), the Group has chosen to report intensity ratios, where appropriate. An intensity measure is reported for assets, in the Annual Report, within the like for like portfolio, where:
- No major renovation or refurbishment has taken place i.e. affecting more than 50% of the building by area or number of occupants.
- Occupancy is at least 75%.
- At least 24 months data is available.
- Emissions reported relate to an indoor area.
The Group’s GHG emissions have been calculated and verified by an independent third-party in accordance with the principles of ISO 14064. A full copy of the methodology used, including scope, source or data and conversion factors, is available on request.
The following disclosure describes how the Directors have had regard to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006, in promoting the success of the Company for the benefit of members as a whole. This section describes how the Board has regard to the likely consequences of any decision in the long term, the need to foster the Company’s business relationships with suppliers, customers and others, the desirability of the Company maintaining a reputation for high standards of business conduct, and the need to act fairly as between members of the Company. The Company does not have any employees and therefore s172(1)(b) is not applicable to the Company. The impact of the Company’s operations on the community and the environment is set out more fully in the Environmental, Social and Governance section of the Annual Report.
Property Portfolio ESG Activity
During the year ended 30 June 2023, the Group has worked closely with its tenants to encourage and facilitate improvements in ESG activities within the property portfolio.
Two new EPC’s have been carried out; Motorpoint, Birmingham improved from C75 to C62; Travelodge Hotel, Swindon improved from C62 to B42. These improvements are mainly as a result of tenant’s internal refurbishment works.
Following inspections by EPC assessors, works have been identified at six properties to improve EPC levels in the year to 30 June 2024 including: new LED lighting, replacement of an oil fired boiler, solar panels and installation of secondary glazing. The costs of these enhancements will be borne by the occupiers.
Future projects are being developed with three other occupiers.