The Company's qualitative and quantitative environmental targets, measured via the KPIs, cover four 'boundaries' and are set out below: 


Boundary          KPI 
                  Reduce total portfolio absolute emissions by 30% by 2025 
Whole portfolio   All 'D' EPC ratings to be removed or improved by 2027, all 'E' EPC ratings to be removed or improved 
boundary          by 2025 and all 'F' and 'G' EPC ratings to be removed or improved by 31 March 2022 
                  Reduce absolute energy consumption of the property portfolio by 15% against a 2019 baseline by 2025 
                  Switch all landlord-controlled sites to 100% renewables by 2025 
                  Switch all landlord-controlled sites to green gas by 2025 
Landlord 
controlled        Install EV charging points across 100% of the Company's retail warehouse assets by 2025 and 
boundary          investigate onsite renewables on one asset by 2025 
                  Zero waste to landfill from landlord-controlled waste by 2022 
                  Reduce landlord-controlled water consumption by 50% by 2025 
                  Engage with occupiers during lease negotiations to incorporate sustainability clauses into new leases 
Tenant boundary 
                  Engage with tenants on quarterly basis on ESG issues 
                  Achieve EPRA Gold Standard for the year ended 31 March 2021 
Development 
boundary          Report to TCFD by 2021 
                  Incorporate ESG factors into all investment due diligence undertaken

These KPIs were formulated during the year ended 31 March 2021. The Company intends to report on progress against each measure in subsequent financial years.

To help this assessment of progress against KPIs a central data management system, hosted by the Company's environment consultants, has been established to provide a robust data collation and validation process. This data management system is being used to identify tenant engagement and asset optimisation opportunities and facilitates the communication of environmental performance data to various stakeholders.

Investment decisions

Investment decisions will play a key role in achieving the Company's environmental KPIs. The Company undertakes an environmental assessment on vacated assets and during the acquisition due diligence process, rating assets or tenants against a number of ESG factors which form part of the Investment Committee decision making process. This process also helps the Investment Manager evaluate the potential environmental risks and opportunities associated with an asset and the impact on the achievement of the KPIs.

During the year the Company amended its procurement policy for property services to include an assessment of new suppliers on their specification and use of sustainable and energy efficient materials, systems, equipment, onsite operating practices and performance evaluation/incentives put in place for direct external suppliers and/or service providers to employ sustainable processes in day-to-day work.

Current initiatives

To achieve the Company's environmental objectives and targets, the Investment Manager seeks to achieve the following initiatives:

Energy consumption & management ? Comply with all applicable, relevant energy-related legislation and other requirements; ? Monitor energy consumption across our properties and tenant consumption, where possible; ? Undertake thorough environmental due diligence including obtaining an EPC for all new property acquisitions; ? Identify and, where possible, upgrade high energy-consuming properties within our property portfolio assets to

achieve higher energy efficiency levels and improved EPC ratings; ? Review our energy objectives and targets on an annual basis; ? Promote energy efficiency and management to our tenants; and ? Where possible, build in green lease[24] clauses into our tenant leases.

Building materials ? When we have the opportunity to develop new property or refurbish current assets, we commit to reviewing building

materials which have a lower environmental impact and to select these materials, if appropriate; and ? Select greener building materials, in line with our vision to increase the sustainability certifications of our

property portfolio.

GHG emissions and management ? Quantify our Scope 1 and 2 (landlord controlled) emissions on an annual basis in line with reporting requirements; ? Gather tenant energy consumption data, where possible, to quantify our properties' emissions; ? Comply with, and make representations to, industry standard ESG frameworks including the EPRA Annual Sustainability

Report and GRESB; and ? Continue to expand our carbon reporting in line with industry expectations and relevant legislation.

Further information on our GHG emissions is set out within our Streamlined Energy and Carbon Report (SECR) in the Directors' report.

Waste management ? Monitor waste levels across our properties and monitor tenant consumption, where possible; ? Implement landfill diversion waste streams such as recycling in our properties, where possible; and ? Promote waste management to our tenants.

Water consumption and management ? Monitor water consumption across our properties and monitor tenant consumption, where possible; ? Identify and implement water reduction technologies and opportunities within our property portfolio, where

possible; and ? Promote water management to our tenants.

Climate change adaptation and resilience ? Through our risk management processes, identify climate-related risks, both physical and financial; ? Perform environmental risk assessments of our property portfolio on an on-going basis; and ? Design mitigation and management strategies for climate and environmental risks.

Biodiversity

In the circumstances where we are developing new assets, the biodiversity of the development area will be considered and maintained to the highest level possible.

Asset level safety, health and well-being

We wish to manage and develop buildings which are comfortable, safe and high-quality spaces. As such, our aim is that the safety and well-being of the occupants of our buildings is maximised. We will implement a property portfolio approach to well-being which encourages engagement with tenants, ensures maximum building safety and optimises the comfort and quality of occupancy.

Stakeholder engagement

We engage regularly with the following internal and external stakeholders on environmental and social matters: ? Board - the Board meets at least quarterly and monitors ESG performance and progress towards our objectives; ? Investment Manager - as part of the Investment Manager's training and staff roles and responsibilities, ESG

progress is discussed and embedded across the work it does; ? Managing agents - we receive quarterly reports on our asset performance and engage directly on property portfolio

optimisation; and ? Tenants - we attempt to engage with tenants on a quarterly basis both to understand consumption trends and data and

understand where we can upgrade and optimise buildings for tenant well-being and environmental impact reductions.

To monitor energy consumption across the property portfolio, as well as identify opportunities to make energy reductions, the Company has engaged with Carbon Intelligence to provide strategic advice on the process. This collaboration promotes the ethos of investing responsibly and has ensured statutory compliance with the Energy Savings Opportunity Scheme (ESOS) Regulations 2014 and The Companies (Director's report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, and has facilitated inclusion of EPRA Sustainability Best Practice Recommendations in the Annual Report.

Case study - West Bromwich

As part of a comprehensive refurbishment of Units 1-7 Hawthorns Business Park, West Bromwich, significant investment is being made to improve the ESG credentials of the asset. This additional investment will significantly reduce the use in carbon for operation when assessed against competing buildings in the local market.

On completion, the refurbished property will be served by six EV charging points to promote and support the use of electric vehicles. These installations support all forms of electric vehicles currently on the market and will be an attractive proposition to any future tenant.

In addition, Custodian REIT is making an investment of circa GBP85k to provide solar photovoltaic (PV) coverage to over 700 sq m of the roof area. This renewable energy is anticipated to offset circa 116 tonnes of carbon in Year 1, meaning the anticipated payback on investment is 3.5 years. As well as aiding tenants in their reduction of carbon usage, the Company is able to offer future tenants a reduction in their utility costs by selling generated energy directly to the tenant rather than directing to the central network. The panels are self-cleaning and offer a 20 year guarantee.

A further investment of circa GBP50k is being made to install air source heat pumps to provide heating and hot water. This installation will see a saving of nearly GBP2k a year in running costs and a reduction in carbon use of around 12k kg a year in comparison to traditional gas boilers. As part of this investment new energy efficient radiators are also being installed. Warehouse and office lighting is being replaced with new LED fittings including passive infrared sensors to reduce operational use.

Pre-refurbishment, the EPC rating for the property was C (69) and it is projected that a high B will be achieved on completion of the refurbishment.

It is anticipated that the ERV of the property on completion of the works will increase from GBP280k pa (GBP4.80 per sq ft) to circa GBP350k pa (GBP6.00 per sq ft). Once re-let it is estimated that the uplift in property valuation will be well in excess of the capital outlay for refurbishment.

EPC ratings

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June 16, 2021 02:16 ET (06:16 GMT)