IMPACTFUL INTENT Creating Positive Outcomes Through Real Estate Investment 2018 Responsible Property Investment Report

IMPACTFUL INTENT Creating positive outcomes through real estate investment 2018 Responsible Property Investment report

Hermes Real Estate December 2018

For professional investors only www.hermes-investment.com CONTENTSREPORT COVERAGE Report coverage, material aspects and boundaries The purpose of The Hermes Real Estate 2018 Responsible Property Investment (RPI) report is to describe our approach to integrating responsibility within our portfolio, covering governance, strategy and management. We focus on the areas of operations that we identify as material to our business activities and those of our stakeholders. The materiality assessment is carried out by the Head of RPI and reviewed by the Director with responsibility for RPI and the RPI steering group. There are no significant changes in the materiality assessment, the scope, and the boundaries of our reporting compared to last year’s report, published in June 2017.

We report on our responsible-investment governance, strategy, risk assessment and management for our whole portfolio through a narrative approach. This narrative covers our directly managed assets, and our indirectly held assets that we have influence over, in the UK and internationally for the period July 2017 to October 2018. We engage with and monitor the sustainability performance of our indirectly held property portfolios through active engagement and by using the Global Real Estate Sustainability Benchmark (GRESB) survey responses. We report key environmental and social performance indicators for our UK assets over which we had management control for the period January 2006 to December 2017. Continuing to build on our approach from the last couple of years, we are focused on improving our report on positive impacts through a detailed narrative and quantitative KPIs.

We actively engage stakeholders. They include: upstream, the asset owners we manage money on behalf of; downstream, the subcontractors we appoint through direct service agreements; the occupiers of the assets we manage, and the communities that live in the places our properties are located in. Finally, we engage with European Union and UK policy makers and selected real-estate and financial-sector organisations in order to enable us to help transform the industry in which we operate. All of our new suppliers in the UK are screened for environmental, social, and human rights criteria. We have found no potential negative impacts on society in our directly controlled supply chain, and we work to mitigate the impacts of environmental pollution created through our activities, and to enhance our social impact on the communities and tenants located in and near our assets.

For more details on our RPI programme, please visit: www.hermes-investment.com/ukw/capabilities/real-estate/responsible- property-investment/ HERMES INVESTMENT MANAGEMENT 3

SECTION 1 04 SECTION 2 08 WHO WE ARE IMPACTFUL INTENT Outcomes beyond performance RPI in a time of transition Hermes Investment Management 04 Impactful intent 08 Hermes Real Estate 05 The wisdom of clearly defined terminology 08 Segregated and unitised solutions 06 Beyond bricks and mortar: our impactful approach 09 Awards 06 Our impactful approach to RPI 10 Financial performance 07 Impactful investment themes 12 Meaningful place-making 12 Climate and resource efficiency 18 Health and wellbeing 19 SDG targets covered by our impactful 20 investment themes

SECTION 3 22 SECTION 4 28 PERFORMANCE OUTPUTS Reporting and certifications Setting RPI targets within our GRI G4 assessment 28 investment process Advisor statement 31 Review of RPI targets: 2017-18 22 Carbon offsetting 31 Benchmarking performance against peers 23 Principles for Responsible Investment 23 GRESB ratings 24 Indirect and joint-venture funds 24 Environmental performance and outputs 25 4 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

SECTION 1

WHO WE ARE Outcomes beyond performance

Hermes Investment Management We are an asset manager with a difference. We believe that while our primary purpose is helping beneficiaries by providing world-class active investment management and stewardship services, our role goes further. We believe we have a duty to deliver holistic returns – outcomes for our clients that go far beyond the financial to consider the impact our decisions have on society, the environment and the wider world.

KEY FACTS1 £36bn £359bn 470 We manage £36bn on behalf of We help asset owners and asset We employ 470 talented institutional and retail investors managers actively engage on individuals across the group, based in 24 countries around the investments totalling over principally based in London, with world. Our investment capabilities £359bn. Our stewardship services other locations including span public and private equity collectively support more than Singapore and New York. and debt, infrastructure and 25m current and future pensioners real‑estate solutions. and savers.

1 Please note the total AUM figure includes £6.5bn of assets managed or under an advisory agreement by Hermes GPE LLP (“HGPE”), a joint venture between Hermes Fund Managers Limited ("HFM") and GPE Partner Limited. HGPE is an independent entity and not part of the Hermes group. £113.0m of total group AUM figure represents HFM mandates under advice. Source: Hermes as at 30 September 2018 with the exception of two portfolios totaling £3.3m valued as at 31 July 2018. HERMES INVESTMENT MANAGEMENT 5

Hermes Real Estate

Team consists of 21 property Investing since 1983 professionals: seven in fund management and 14 in asset management Offers client-focused property KEY FACTS investment solutions UK-based, with investments in the £7.6bn assets under management, UK, Europe, Americas, and the gross asset value (GAV)2 Asia-Pacific region

Our integrated responsible investment approach underlying fundamentals. We actively manage the assets and our exit strategies are executed in the context of the macroeconomic Hermes Real Estate is committed to acting consistently and clearly environment. This strategy draws on a clear understanding of the as stewards of the assets in which we invest, with the aim of drivers of future performance, including an in-depth awareness delivering investment excellence. With a strong focus on the income of how occupiers assess real estate, the needs of communities and component of total returns and a disciplined approach to risk, we of the evolving regulatory framework. We comply with all current seek to deliver consistent outperformance on a risk-adjusted basis to legislation, and demonstrate a preparedness for forthcoming deliver robust and repeatable performance in line with our fiduciary regulatory requirements. This approach enables us to anticipate and responsibility to clients. We see environmental, social and respond to market demands, and to maintain our reputation for governance (ESG) risks as business-critical to our funds, and are delivery. committed to embedding responsible-investment principles across our investment practices. Since 2008 we have been integrating responsibility principles across our investment and asset management processes, including: With a preference for directly held real estate assets, our investment investment, development, property management, and occupier and philosophy is to aim to secure liquid stock with strong performance community engagement. Through sector engagement and public characteristics, and to focus on stock picking and deal-led policy advocacy, we continuously work with the real-estate industry investments in order to exploit market opportunities. We target to support positive change through development tools and methods, marginally higher income yield, which is supported by strong and by challenging established views.

2 Source: Hermes Real Estate as at 30 September 2018, unless otherwise specified. 6 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

What we do: selected capabilities3 Hermes Real Estate manages segregated mandates, pooled funds and joint ventures for a range of institutional clients across asset classes in the UK and in international markets

Selected examples Pooled Hermes Property Exempt unauthorised UK property unit trust fund Unit Trust (HPUT) Clients: About 110 investors, primarily UK local authority and corporate pension funds and charities Gross asset valuation: > £1.5bn Hermes’ role: fund and asset manager Asset classes: office, retail, industrial, leisure and other Geography: pan-UK Performance: 2017 MSCI Best Performing Balanced Fund in the Property Funds Index in the UK Market Segregated Global Real Client: UK pension scheme mandate Estate Mandate Gross asset valuation: <£5.0bn Hermes’ role: fund and asset manager Asset classes: office, retail, industrial and residential Geography: international Performance: 2018 MSCI Best Performing Segregated Pension Fund in the UK market > £700m Joint Hermes Central Clients: Canada Pension Plan Investment Board and BT Pension Scheme venture London Gross asset valuation: > £0.5bn Hermes’ role: fund and asset manager Asset class: office Geography: city-specific Performance: 15.3% annualised return from inception to 30 September 2018, outperforming its MSCI benchmark by 2.0% pa

Current mandates

Segregated mandates UK pension scheme – global mandate (GAV <£5.0bn) Multi asset class

• UK (GAV <£3.5bn) Pan-UK commercial multi asset

• International (GAV >£1.0bn) International commercial multi asset

• UK senior debt (GAV <£500m) Senior debt

Funds Hermes Property Unit Trust (GAV >£1.5bn) Pan-UK commercial multi asset

Metro Property Unit Trust (GAV >£300m) Pan-UK commercial multi asset

Joint ventures Central London Partnership (GAV >£500m) Offices

Paradise Circus, Birmingham (GDV £800m) Regeneration

Wellington Place, Leeds (GDV £500m) Regeneration

Milton Park, Oxfordshire (GAV >£500m) Life sciences business park

Centre:MK, Milton Keynes (GAV >£650m) Retail

Further strategies Silverstone, Northamptonshire (GDV £500m) Innovation business park

NOMA, Manchester (GDV £800m) Regeneration

UK Regional PRS Assets (<£100m) Residential

King’s Cross, London (GDV £2.2bn) Regeneration

3 Source: Hermes Real Estate as at as at 30 September 2018., unless otherwise specified. HERMES INVESTMENT MANAGEMENT 7

Awards

Professional Pensions UK Pensions UK Pensions Awards 2016: Awards 2018: ESG Manager of Property Manager of the Year the year MSCI IPF UK Property Investment Professional Pensions UK Pensions Awards 2016 Awards 2018: Alternative And Investment Manager of the Year MSCI UK Property Investment GRESB global benchmark: three Awards 2018: Segregated Hermes strategies were ranked five Pension Fund – BTPS UK Portfolio stars in 2018 (See pg. 24) Pensions and Investment Provider Awards 2017: UK Property

Financial performance KEY FACTS4

£7.6bn £5.7bn Outperformance being generated assets under management, GAV Exceptionally strong deal flow: in client mandates excess of £5.9bn (GAV) in transactions over the last five years

Hermes UK Annualised Performance Figure 1. Hermes UK real-estate strategies: annualised performance

Blended Hermes UK Return5 UK Quarterly All Property6 Relative Difference 10 year 7.4% 7.4% 0.0% 7 year 11.1% 9.2% 1.8% 5 year 13.1% 10.8% 2.0% 3 year 8.6% 7.3% 1.2% 1 year 9.5% 8.2% 1.1%

• Over 1, 3, 5 and 7-year periods Hermes has outperformance the UK property benchmark • 10-year performance is impacted by the leverage incurred during the 2008-2011 downturn, which has since been reduced

Performance of strategies stated in sterling gross of fees. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Past performance is not a reliable indicator of future results and targets are not guaranteed.

4 Source: Hermes as at 30 September 2018. 5 Total returns gross of fees. Includes direct property, indirect investment vehicles, leverage and transaction fees. 6 Total returns gross of fees. Direct property standing investments only (exclusion of transactions and leverage). 8 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

SECTION 2

IMPACTFUL INTENT RPI in a time of transition

We believe that responsible property investment (RPI) can provide Our market has developed a language of its own in recent years both superior financial returns and a better, more sustainable society. and some of its jargon can be confusing. For instance, it’s important We invest actively and take a long-term approach to understanding to distinguish between concepts such as ESG integration, responsible the drivers of the changing real-estate landscape and the related investment and impact investment. shifts in demographics and lifestyle. In recent years, first ESG integration and then responsible Responsible investment has been at the heart of our real-estate investment and ownership have changed from outliers to entering investment strategy for many years, and our focus on generating the mainstream of modern investment strategies. A real-estate holistic returns commits us to delivering excellent long-term investor or fund manager with an ESG focus integrates their investment performance and stewardship while being acutely conscious assessment of these factors into their fundamental analysis of assets, of the impact that our activities have on communities and the use this as one of many inputs in understanding the risk and value environment. In the long run, businesses can only thrive if society and of an investment. A process-based approach, it aims to consider the economy do so as well and natural resources are not compromised. externalities in investment decisions. Our practice of responsible

Our holistic approach to investing is informed by the transformations that society is experiencing. These are driven by megatrends: geopolitics, technological change and digitisation; demographics and Our interpretation of an impactful urbanisation; the impact of a globalised workforce and migration; as investment approach is as follows: well as environmental stress, resource scarcity and climate change. to intentionally seek a defined positive environmental Real-estate markets are increasingly pricing in sustainability risks more accurately, including externalities and forcing participants to or social outcome in a particular place or market as rethink how investors need to fundamentally alter their operations. a core focus of the investment strategy, alongside That is why our RPI philosophy is based on employing patient capital strong risk-adjusted financial returns. to go beyond financial outperformance. Our place-making approach seeks to make buildings part of the community in order to develop meaningful cities, where people want to work and live, and in which they take great civic pride. investment goes further and ensures that we are the steward of the assets we manage, ensuring that our RPI principles are part and parcel of our investment strategies. The future of cities is about place and There have been, however, relevant queries about the limitations of these approaches in delivering measurable outcomes to the economy the individual, not buildings. Cities must and society. On the back of these concerns, impact and thematic work for everyone and have a positive investing has gained rapidly growing interest. impact on society at large Recognising that developing impact strategies in the real-estate market is a work in progress, the industry is making sense of this Chris Taylor, Head of Private Markets, new approach. We are contributing to this effort by working Hermes Investment Management with the Property Working Group of the United Nations Environment Programme – Finance Initiative (UNEP FI), developing common The wisdom of clearly defined terminology definitions and frameworks, assessment methodologies and impact- measurement indicators that can be applied in the industry. Socrates observed that “the beginning of wisdom is the defining of This year, we have also contributed to UNEP FI’s Positive Impact terms”. This insight, from one of history’s greatest thinkers, serves Initiative. By working with UNEP FI and its collaborating partners – us well as RPI practitioners. the Royal Institute of Chartered Surveyors, the Global Investor Coalition on Climate Change and the Principles for Responsible Investment – we have led a working group that drafted a new positive-impact investment framework for real-estate investments. HERMES INVESTMENT MANAGEMENT 9

An impactful approach to RPI supports this in many ways – from Positive-impact framework for real estate investment meaningful place-making that creates civic pride and nurtures healthy, engaged and productive communities, to delivering desirable social and environmental outcomes and achieving a just transition to a low-carbon economy to help prevent further climate change. Our integration of the SDGs is pragmatic, focused on specific sub- targets of the goals that relate directly to particular and achievable outcomes (see infographic on page 20).

CLARITY MARKET AND Through this process, we have identified our priorities and decided OF IMPACT SUSTAINABLE RETURNS to focus our efforts on three core impact themes that can addressed Identifying and creating impact No trade-off in financial results from investment activity while generating economic, social through RPI: and environmental benefits IMPACT ■ Meaningful place-making

ADDITIONAL FINANCE MEASUREMENT ■ Climate and resource efficiency AND/OR IMPACT FLOWS OF IMPACT To underserved products and Positive and negative attributes and markets; supporting physical and mitigating the negative; linking ex-ante ■ Health and wellbeing social factors that contribute to and ex-post intent with impact long-term economic performance Our impact classification is fluid and dynamic. We constantly consider the additionality of our actions – the positive impacts created purely by our involvement as investors – in order to determine whether we could, over time, expand our coverage of both investment and under-served needs in emerging markets, which are Source: UNEP FI et al. "Positive Impact Real Estate Investment Framework," not covered by our current mandates. We acknowledge the need to published November 2018. Accessed via: http://www.unepfi.org/wordpress/ assess how we could expand the range of SDG sub-targets that we wp-content/uploads/2018/11/Positive-Impact-Initiative_Real-Estate-Investment- address, deepening the feedback loop between our investment Framework_Nov-2018.pdf priorities and the needs captured by the SDGs.

We are therefore looking at ways to increase our impact through RPI. These include greater support of skills development, jobs growth and This is a tool aimed at investors and asset owners, providing a series labour rights. Acknowledging a clear gap in affordable and accessible of guiding questions they should ask themselves if they are housing, we are considering how we could work with local authorities interested in building an impact approach into their current to increase the amount of affordable housing in our developments, responsible-investment processes. and in assessing build-to-rent opportunities focused on young professionals in the middle-income bracket, providing them with Beyond bricks and mortar: accessible housing. Looking into our supply chains, we could engage Our impactful approach with occupiers to support their contributions to delivering the SDGs.

By investing for outperformance while aligning our strategy to the We have identified the following three potential future impact needs of society as it changes, rather than managing pure-play themes to pursue through our RPI approach: impact-investment products, we seek to help deepen the practice of responsible investment. This means using a purposeful framework to Labour, and jobs and skills development focus our real-estate operations on impact themes, and within these Affordable and accessible housing targeting activities with measurable environmental, economic and societal impacts. Intentionality, a conscious aim to create positive Tenant engagement impacts through investments, and transparency are key elements of Having identified the above themes, which we can integrate into this approach. our current mandates, the next step is to define our intentionality. This involves setting clear objectives about achieving real-world We have developed an impact-investment process to help identify outcomes and selecting metrics to accurately track progress and and prioritise impact themes and activities. Starting with the aligning the results with SDG sub-targets. classification of the positive outcomes we seek and are able to contribute to, and the people and environments that will be Through these themes we aim to deliver positive outcomes for impacted, we go on to identify the most relevant impact themes. tenants, local communities and the environment. For the latter, we We then implement a methodology for achieving them and a process focus on positively impacting natural capital: the world’s stock of for measuring outcomes. natural assets, including geology, soil, air, water and all lifeforms.

An important step in our process is assessing and reviewing how our We use key performance indicators (KPIs) and related performance approach and investment themes support the delivery of the targets to inform management strategies, and measure and report Sustainable Development Goals (SDGs), an ambitious set of targets on environmental performance. For socio-economic impacts, we seeking to end poverty, protect the planet and promote peace, combine qualitative and quantitative information to compile case equality and prosperity for all. Real-estate investors can play an studies that capture outcomes – such as those achieved for important role in the global push by governments, the private sector communities and natural capital through urban regeneration. and individuals to meet the goals. 10 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

Our impactful approach to RPI Hermes Real Estate WHAT? WHAT? WHO? HOW MUCH? CONTRIBUTION / ADDITIONALITY OUTCOMES Impact themes: Intentionality: Who experiences Outputs measured: The contribution that our investment makes SDGs we seek to contribute to. What outcomes we aim Do we have targets on the outcomes? Typical output indicators used to assess in addition to what the market would provide (See page 20 for details of targets) to contribute to? expected outcomes? and measure impact anyway / other key influencing stakeholders

1.Urban regeneration Quantitative Occupiers Total investment Local and regional public authorities Skill centres / recruitment centres 1 environmental targets URBAN Local communities Jobs created / local jobs Other investors REGENERATION Quantitative and Apprenticeships / skills training provided qualitative social Natural capital Training which led to certified skills The wider public and the media New education facilities objectives People accessing new education facilities Local communities Prevailing / living wages New homes / affordable / student accommodation NGOs and other public bodies Council-tax revenues / Business rates New public space Volunteers / youth club Green certification (LEED, BREAM, etc.) Energy and resource-efficiency indicators Provision of green, accessible space Support for biodiversity

Quantitative targets set in Occupiers Watts of energy conserved (kWh) Local and regional public authorities 2 Renewable energy generated (kWh) 2006 for energy, water, CLIMATE AND Local communities Tons of CO2 emissions avoided Other investors RESOURCE EFFICIENCY waste Urban infrastructure efficiency Quantitative and Natural capital Litres of waste saved The wider public and the media Tonnes of waste recycled and re-used qualitative requirements Use of recycled material NGOs and other public bodies set for refurbishment and Biodiversity protection developments: Green certification (LEED, BREAM, etc.) Contamination Innovation – net-zero energy buildings remediation, material and Access to energy waste management, energy, water, biodiversity

Quantitative and Occupiers Land de-contamination and the use of safe and healthy Other investors materials in development and refurbishment 3 qualitative objectives HEALTH AND WELLBEING OF Local communities Risk and safety measures in development, refurbishment The wider public and the media COMMUNITIES AND OCCUPIERS and property management Natural capital Wellbeing certification (Wellness; Reset) Local communities Active wellbeing management in properties through

measurement and management of CO, CO2, NGOs and other public bodies temperature humidity Initiatives promoting wellbeing among occupiers Initiatives to address the ageing population, chronic illness and obesity Projects to support healthy living for occupiers Projects to support community health

POTENTIAL IMPACT THEMES TO BE DEVELOPED IN THE FUTURE

Occupiers Skills training provided Local and regional public authorities 4 Training which led to certified skills JOBS AND SKILLS DEVELOPMENT Local communities New education facilities Other investors People accessing new education facilities Jobs created NGOs and other public bodies Prevailing/living wages

Occupiers Percentage of affordable/social housing delivered Local and regional public authorities 5 Units set aside for low-income residents AFFORDABLE AND ACCESSIBLE HOUSING Local communities Social-housing units Other investors NGOs and other public bodies

Occupiers List of occupiers by sectoral activities Other investors 6 Percentage of occupiers involved in activities identified as ENGAGEMENT ON TENANT ACTIVITIES having positive social and environmental impacts Other companies Percentage of occupiers with activities causing negative impacts (to be defined) HERMES INVESTMENT MANAGEMENT 11

1.Urban regeneration Quantitative Occupiers Total investment Local and regional public authorities Skill centres / recruitment centres environmental targets Local communities Jobs created / local jobs Other investors Quantitative and Apprenticeships / skills training provided qualitative social Natural capital Training which led to certified skills The wider public and the media New education facilities objectives People accessing new education facilities Local communities Prevailing / living wages New homes / affordable / student accommodation NGOs and other public bodies Council-tax revenues / Business rates New public space Volunteers / youth club Green certification (LEED, BREAM, etc.) Energy and resource-efficiency indicators Provision of green, accessible space Support for biodiversity

Quantitative targets set in Occupiers Watts of energy conserved (kWh) Local and regional public authorities Renewable energy generated (kWh) 2006 for energy, water, Local communities Tons of CO2 emissions avoided Other investors waste Urban infrastructure efficiency Quantitative and Natural capital Litres of waste saved The wider public and the media Tonnes of waste recycled and re-used qualitative requirements Use of recycled material NGOs and other public bodies set for refurbishment and Biodiversity protection developments: Green certification (LEED, BREAM, etc.) Contamination Innovation – net-zero energy buildings remediation, material and Access to energy waste management, energy, water, biodiversity

Quantitative and Occupiers Land de-contamination and the use of safe and healthy Other investors materials in development and refurbishment qualitative objectives Local communities Risk and safety measures in development, refurbishment The wider public and the media and property management Natural capital Wellbeing certification (Wellness; Reset) Local communities Active wellbeing management in properties through

POTENTIAL IMPACT THEMES TO BE DEVELOPED IN THE FUTURE

IMPACTFUL INVESTMENT THEMES 1. Meaningful place-making

Intrinsic to our ability to generate positive impacts within our mandate is the concept of meaningful cities: urban places where people want to work and live, in which they take great civic pride, and which they want to support through social, economic, leisure and community-based activities.

A meaningful city has excellent employment and skills-training opportunities, infrastructure and areas of public realm. It benefits Hermes’ meaningful place-making individuals, communities, businesses, local and regional authorities, developments in nine UK cities span and an inherent focus on sustainability helps preserve natural capital. A meaningful city is also capable of attracting global talent and a combined 19m sq ft and £13 billion financial capital. of capital value. It follows that meaningful place-making and sustainable urban regeneration contribute to the establishment and growth of these Chris Darroch, Director – Fund Management, cities. Hermes has purposefully taken on further developments Hermes Real Estate over the last six years, acquiring eight large urban-regeneration opportunities across the UK which span a combined 19m sq ft. These include the well-documented success story of King’s Cross in London, and Wellington Place in Leeds, NOMA in Manchester, Paradise Circus in Birmingham, Silverstone in West London, Cityscape in Glasgow and our more recent acquisition of St Mary Le Port in Bristol.

Glasgow Manchester Skypark NOMA

Northamptonshire Leeds Silverstone Wellington Place

Milton Keynes Liverpool & Manchester The Centre:MK Build-to-rent strategy

Birmingham Paradise Circus

Central London Oxford King’s Cross Milton Park HERMES INVESTMENT MANAGEMENT 13

Our place-making approach seeks to make buildings part of the Our place-making strategies are underpinned by strict attention community in ways that they previously were not. We respect to sustainability fundamentals, including carbon reduction, heritage and tradition, and undertake developments sensitively reduced energy and water consumption, flood-risk management to create places that resonate with communities and help create and increased recycling. We continue to promote the role of RPI cohesive neighbourhoods. For example, office-building courtyards in contributing to the transition to a low-carbon economy and, in form part of connected public realm and facilities, such as cafes on particular, its ability to accrue finance for energy-efficiency measures. the ground floors of buildings, are opened to the general public and thereby become amenities. For example, while climate change will undoubtedly disrupt global and local economies, a well-managed transition to a low-carbon Investing responsibly to support the development of meaningful economy could reduce or prevent the human and economic costs. cities is a dynamic process with many phases, rather than a single It should also improve growth, generate additional high-quality jobs event. World-class infrastructure is required, and the projects must be and reduce inequality. Place-making, with stakeholder engagement of a sufficiently large scale to deliver a positive impact that provides and sustainability at its core, supports the global effort to deliver further momentum. The integrity of each development is vital, and this ambitious outcome. management under single ownership allows a patient, unified and long-term approach governed by a clear vision. This approach also contributes to our aim of generating holistic returns. From a purely financial perspective, it helps to increase A force for holistic returns the value of properties, retain tenants and reduce vacancy periods, lower operating costs and ultimately generate stronger income We work with communities, local authorities and other public- for our clients. Seen more broadly, it creates tangible socio- sector partners to avoid the silo mentality that has characterised economic benefits for society in the form of healthier, happier less-sustainable developments in the past. Collaboration with all and more prosperous communities that benefit from job creation, stakeholders is vital to create a broadly felt sense of belonging – it skills development and attractive amenities and public realm. typically requires considering how the heritage of the location can Such outcomes beyond performance are evident in our NOMA be embraced, local culture enriched, educational facilities improved development in Manchester (see case study on pages 14-15). or expanded, community concerns addressed and the right mix of accessible housing – social, private and rented accommodation – achieved. In major developments and shopping centres, engagement with civic leaders and tenants is vital to ensure that we achieve the most benefit and do the least harm.

Securing a diverse mix of occupiers in buildings – from law firms and technology companies to fashion designers – contributes to a vibrant sense of place, contrasting with earlier inner-city developments comprising glass-and-steel buildings that were closed each weekend.

Any prudent property investor seeks to provide an environment that is conducive to strong occupier demand. We therefore engage with tenants to foster greater health and wellbeing in communities and workplaces.

King’s Cross: an exemplar of impactful £3bn construction spend involving 300 local place‑making suppliers, supporting 1,300 jobs in London and 500 in the immediate areas In December 2017, the King’s Cross Central Limited Partnership, of which Hermes is a member, released an 50% increase in jobs across the immediate vicinity extensive study carried out by Regeneris, “The Economic over five years, compared to an 18% rise in London and Social Story of King’s Cross". It details the positive social impacts of the transformative regeneration of the 97% commercial-property occupancy rate area, providing valuable quantitative data, such as the following highlights: 7.5m footfall and 163 events in 2016

This research enables a better understanding of the social and economic impacts of successful place-making. Having contributed to these achievements, we continue to learn from them. We have applied the this knowledge and experience to all of our urban-regeneration projects. 14 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

We are committed to making NOMA a place for successful enterprise with people and community firmly at its heart. HERMES INVESTMENT MANAGEMENT 15

CASE STUDY It is adjacent to Manchester Victoria station and in close proximity to major retail and leisure facilities, making it one of NOMA: embracing Manchester’s heritage, the best-connected city-centre locations in Manchester and inspiring its future therefore an attractive business hub and desirable place to work. As a natural extension of Manchester’s central business district, PURPOSE NOMA is a cohesive neighbourhood. Its major features include: A place to live, work and innovate Five historic buildings, which are undergoing or have been Innovative, commercial and responsible, NOMA is a 20-acre, refurbished: £800m scheme in central Manchester and the largest urban development outside south-east England. It is seen as one of the ––Hanover: a refurbished Edwardian Baroque property providing major engines of the Northern Powerhouse. 90,000 sq ft of office space, it is the confirmed headquarters of Amazon in Manchester ––Federation: an historic warehouse now offering 71,000 sq ft of ‘open-community’ workspace for about 30 creative, The place-making project puts the technology and digital businesses, from start-ups to national interests of the community at its heart. and international businesses ––Dantzic: an art-deco building adjoining Federation that Embracing the city’s heritage by featuring provides 65,000 sq ft of office space a unique mix of historic and new buildings, ––Old Bank: undergoing refurbishment, the property will offer NOMA is creating new homes, offices, 75,000 sq ft of office space fronted by a period facade ––Redfern: a Dutch Modernist property with 35,000 sq ft to be hotels, shops, restaurants and bars. refurbished for office, retail and leisure uses Angel Gardens, a 460-unit build-to-rent scheme targeting This neighbourhood-led approach to urban regeneration aims to young professionals provide an attractive, well-connected, productive and sustainable Significant areas of public realm – Sadler’s Yard, Angel Square and inner-city environment. City Park – which are threaded by wayfinding facilities. Sadler’s Yard, which was funded by the European Regional Development PLANNING Fund, is located at the heart of NOMA and supports an extensive Regeneration driven by commercial and events and community-engagement programme. community imperatives Outdoor space for workers, residents and visitors to relax and participate in high-profile cultural and community events. In Prior to the NOMA project, the area was fragmented, provided total, these have attracted more than 20,000 visitors and over limited public realm and wayfinding, had no prevailing sense of 750 volunteers since 2015. place and was not a coherent neighbourhood. PLANT NOMA, an open design studio and exhibition space The vision and masterplan for the regeneration were developed in the Redfern building, is linked to local schools, businesses, in 2009 by the Co-operative Group and approved by Manchester community groups and Manchester Metropolitan University. City Council. It pledged to deliver a new, innovative and The Pilcrow Pub, which is anchored to Sadler’s Yard and was commercial mixed-use city-centre neighbourhood generating built with support from 500 volunteers over an iterative about 15,000 jobs. Currently, 6,000 people work across the nine-month process. Its design and construction involved the development – achieving the target will mark a significant community at every stage and helped deliver skills training. milestone in fulfilling NOMA’s economic role. Within this, the NOMA sustainability strategy aimed to create a smart, connected NOMA has also been an important catalyst for the wider and sustainable neighbourhood with high-quality public realm Northern Gateway project, which seeks to improve accessibility, and amenities. This is underpinned by the preservation of local connections, housing and social infrastructure among seven heritage and integration of leading environmental technologies neighbourhoods north of Manchester city centre. and standards for urban development. Through the NOMA Community Fund, which was established in 2017 in partnership with Forever Manchester, the project PLACE supports grassroots community groups working with children and An evolving economic and social role young people aged 11-25 years within a five-mile radius of the NOMA was the site of Shudehill Mill, the 18th-century cotton development. To date, approximately £25,000 has been mill that accelerated Manchester’s development as an industrial awarded to 23 applicants. leader, and where the Co-op grew upon its distinctive values. These properties and spaces, the businesses and people they Respecting this heritage, we are committed to making NOMA a attract, in addition to aligned social and cultural initiatives, are place for successful enterprise with people and community firmly giving NOMA a new identity, deeper sense of community and at its heart. bringing more people to this part of central Manchester. 16 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

CASE STUDY

Wellington place: an economic and social hub FOCUS ON COMMUNITY AND SUSTAINABILITY Bringing together businesses and the community, the diverse and In Wellington Place, we have worked with developer numerous wellbeing and community initiatives throughout MEPC to ensure that the interests of people inspire Wellington Place embody the philosophy of the development. the buildings and open spaces we create. Street-food stalls and markets, musical performances and a The 20-acre site – originally part of Leeds Central railway station, summer barbecue attended by around 2,500 people are among which closed in 1967 – was converted into a green space in 2009. the events that have been held on the site. Weekly activities At this point, MEPC collaborated with the University of Leeds to include book clubs, history talks, a Wellington Place choir and survey local residents in order to understand what they would photography clubs. These amenities and events are welcomed by like a new mixed-use development in the area to provide. The employees, helping to generate consistently high satisfaction results showed an appetite for the development of a valuable and ratings of more than 95% in MEPC customer surveys. well-used community asset, providing: attractive employment opportunities and housing in modern, high-quality properties; The development also supports wellbeing in the community, with and new and secure public realm, football pitches, allotments and amenities and activities including free bike hire and bicycle green spaces. storage, health and fitness clubs, counselling, stress-management workshops and nutrition talks. Two-thirds of occupiers have ECONOMIC DEVELOPMENT reported in the MEPC survey that the amenities and activities on site had helped to improve the health and wellbeing of their staff. Development began in 2013, aiming to create a vibrant and sustainable mixed-use urban centre with 1.5m sq ft of office space in 14 buildings. To date, 334,000 sq ft has been delivered, with an TOWER SQUARE additional 550,000 sq ft due to be completed in the next two years. Wellington Place supports the wider regeneration of central Leeds by improving pedestrian routes for people living west of Wellington Place has become the largest and most prestigious the site, in turn creating an attractive and landscaped route to new business quarter in the city. There are 13 businesses on site, access the city centre through the heart of the development. employing 3,650 people – primarily in skilled, value-adding sectors which the Leeds City Region identifies as growth A major new feature of public realm, Tower Square, was opened priorities. As the selected new hub for both HM Revenue and in 2016. It is anchored by an 1850s Grade II-listed lifting tower, Customs and NHS Digital, the development will attract an which harnessed steam power to hoist railway wagons from the additional 6,000 employees by 2020. old passenger line to the goods yard, and is accompanied by one of the new office buildings. The boulevards radiating out from the All of the new buildings achieved an excellent BREEAM rating in tower now form one of the largest public areas in Leeds. It both the design and construction stages. The most recent includes landscaped trees and plants, picnic tables and outdoor buildings all target an Energy Performance Certificate rating of B, terraces from the surrounding restaurants, cafes and bars, and the second-highest rating for energy efficiency. provides the space needed for public events. The development has been instrumental in kick-starting new grade-A office construction in central Leeds, as strong occupier demand for workspaces in Wellington Place has instilled confidence in the office market and led to a number of other projects being brought forward.

Sources: Hermes and “Wellington Place: My kind of place,” accessed in November 2018 at www.wellingtonplace.co.uk HERMES INVESTMENT MANAGEMENT 17

The boulevards radiating out from the tower now form one of the largest public areas in Leeds. 18 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

across our properties. At Sovereign House, Reading, our CAPP 2. Climate and resource efficiency programme has identified a further 15% of annual savings through Buildings account for approximately one-third of the world’s energy energy- and carbon-efficiency measures. Another has been the consumption, global greenhouse gas (GHG) emissions and 30% of Christmas and Easter shutdowns undertaken at several of our sites natural-resource usage. Focusing on preventing further climate during 2017. Through this initiative, Cavendish Square saw a 51% change and maximising resource efficiency therefore form a reduction compared to a typical operating day and Abbey Gardens purposeful real-estate investment theme with significant potential to reduced its consumption by 74%. This also highlighted equipment contribute to a number of the SDGs, which we recognise in our that was not easily shut down, and further investigations aim to investment strategies (see infographic on pages 20-21). make our assets even more efficient.

Since 2006, our baseline year, Hermes Real Estate Investment A number of our best-performing properties have been sold in the Management (HREIM) has implemented a comprehensive climate past year. The strong long-term returns they generated demonstrate and resource-efficiency programme throughout the lifecycles of our the effectiveness of our active asset-management strategy in assets. It is driven by a detailed management plan and aims to increasing the value of buildings – which involves energy-efficiency achieve specific targets, with progress gauged according to metrics enhancements, among other efforts to make their operations more and qualitative assessments. sustainable – in addition to our correct understanding of occupiers’ demands and astute timing throughout the real-estate cycle. For example, we assess our impact in increasing energy efficiency and limiting climate change by measuring how much energy has been conserved, the amount of renewable energy generated, tonnes of Figure 2. The right kind of downward trend: reduced carbon carbon-dioxide emissions avoided, the energy-efficiency of urban emissions and greater energy efficiency throughout asset infrastructure, increased access to energy and the adoption of lifecycles contribute to outperformance innovations such as the conversion of buildings into properties with near-zero energy usage. Changes in absolute carbon emissions for landlord-controlled properties across the portfolio, that have delivered efﬁciency savings between 2006 and 2017 (tonnes CO2 emissions/year) These would measure our progress towards achieving targets for Percentage ﬁgures below compare 2017 with the acquisition year reducing energy and water usage, carbon emissions and waste. 4000

They would also capture our efforts to responsibly refurbish 3500 properties, which involves remediating sites to eliminate contamination, preserving biodiversity, and reducing waste, 3000

transport distances, waste and energy and water usage. The 2500 performance indicators for our assets provide a comprehensive 2000 range of detailed results for our resource-efficiency and climate- -44% -45% change programmes. Our performance outputs for climate and energy 1500 -72% efficiency include having, since the baseline year in 2006, achieved an average of 8% reduction in emissions every year on the Hermes’ like- 1000 -52% for-like portfolio and having delivered a significant improvement in 500 -47% energy efficiency by reducing the carbon intensity of offices by 66% -29% 0 since 2006 (see section three, starting page 22, for details). 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Crystal Peaks Shopping Centre: -52% Royal Victoria Place: -72% In addition to capital expenditure projects aiming to achieve energy Wimbledon Bridge House: -47% 2 Cavendish Square: -29% and carbon-emission reductions, we continue to emphasise ‘quick 242 Marylebone Road: -45% Aldgate House: -44% wins’ through best-practice sharing as part of our Responsible Property Management programme. One example is our Collaborative Source: Hermes as of December 2017. Asset Performance Programme (CAPP), which has been rolled out HERMES INVESTMENT MANAGEMENT 19

break-out spaces that foster interaction and relaxation, provide access 3. Health and wellbeing to educational and healthcare facilities, as well as shops, cafes and bars. In the adjoining external environments, transport infrastructure and public spaces can be designed to make the journey to and from work easy, safe, efficient and unpolluted.

We aim to positively impact the health and wellbeing of our occupiers and local communities through a range our activities during the life cycles of real-estate assets: Development and refurbishment: land de-contamination, the use of safe and healthy materials, and enforcing risk management and safety standards in development, refurbishment and property management. Asset management: actively managing wellbeing initiatives; attaining wellbeing certification, such as that provided by RESET; participating in or supporting initiatives that promote wellbeing among occupiers and communities by addressing the following concerns: the aging population, chronic illness and obesity; sustainable transport; healthy living among occupiers; community health; and implementing the UK Modern Slavery Act through our activities and supply chain. An average person will spend about 80% of their time indoors – either in homes, offices, or retail and industrial sites. This provides We piloted two wellbeing programmes in 2017-18, focused on real-estate investors with an excellent opportunity to create positive improving air quality and the comfort of building occupants. First, a social outcomes: to provide environments that help improve the wellbeing-focused CAPP programme, called CAPP+, targeted greater health and wellbeing of occupiers. Furthermore, it’s an impact that is occupier engagement, wellbeing and comfort; second, we earned directly aligned with SDG three, Good Health and Well-being. one of the earliest RESET Core and Shell Certification designations in Europe. As a result, we are retrofitting smart technologies into We aim to increase comfort, minimise pollution and enhance the properties that were tested, and are confident that this will liveability for occupants and to help improve the quality of life in the improve the quality of occupants’ experience while increasing energy communities in which our buildings exist. For example, to achieve this efficiency, thereby lowering costs and carbon emissions. within properties, we can improve the air-conditioning system, create

Figure 3. Active floor management following the wellbeing-focused CAPP+ programme

33 Glasshouse Street is the first project in Europe to receive air quality certification by RESET Air Core and Shell V2.0 project, and third in the world. 20 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

SDG TARGETS COVERED BY OUR IMPACTFUL INVESTMENT THEMES

Corporate Social Responsibility at Hermes Hermes Real Estate impact themes

0 HERMES CSR 1 MEANINGFUL CITIES

HERMES INVESTMENT MANAGEMENT

SDG targets 4.6 | 8.7 | 10.4

SDG targets 1.4 | 3.9 | 4.4 | 4.7 | 6.3 | 6.4 | 7.2 | 7.3 | 8.4 | 8.7 | 8.8 | 9.4 | 10.3 10.4 | 11.1 | 11.2 | 11.4 | 11.6 | 11.7 | 13.1 | 15.a | 12.2 | 12.4 | 12.5

2 CLIMATE & RESOURCES

SDG targets 6.3 | 6.4 | 7.2 | 7.3 | 8.4 | 9.4 | 12.2 | 12.4 | 12.5 | 13.1 | 15.a

3 HEALTH & WELLBEING

SDG targets 3.9 | 10.3 | 10.4 | 12.2 | 12.4 | 12.5 HERMES INVESTMENT MANAGEMENT 21

Potential future impact themes

4 LABOUR & SKILLS SDG TARGETS EXPLAINED

1.4 Ensure that all men and women have equal rights to economic resources 3.9 Substantially reduce the number of deaths and illnesses from hazardous substances 4.4 Substantially increase valuable skills and jobs for young people and adults 4.6 Ensure that all youth and many adults achieve literacy and numeracy SDG targets 4.7 Ensure that all people undergoing education learn the knowledge and 4.4 | 4.7 | 8.7 | 8.8 | 10.3 | 10.4 skills required for sustainable development 6.3 Improve water quality while halving untreated wastewater and increasing safe reuse 5 AFFORDABLE & ACCESSIBLE HOUSING 6.4 Increase water-use efficiency while reducing water scarcity 7.2 Substantially increase the use of renewable energy 7.3 Double the global rate of improvement in energy efficiency 8.4 Progressively improve global resource efficiency in production and consumption, and decouple economic growth from environmental degradation 8.7 Act urgently to eradicate forced labour, modern slavery, human trafficking and child labour 8.8 Promote labour rights and safe and secure working environments SDG targets 9.4 Upgrade infrastructure and retrofit industries to make 1.4 | 10.3 | 11.1 them sustainable 10.3 Ensure equal opportunity and reduce inequalities 10.4 Progressively achieve greater equality through fiscal, wage and social-protection policies 6 ENGAGEMENT ON TENANT ACTIVITIES 11.1 Ensure access for all to adequate, safe and affordable housing and basic services 11.2 Provide safe, affordable, accessible and sustainable transport systems for all 11.4 Strengthen efforts to protect and safeguard the world’s cultural and natural heritage 11.6 Reduce the adverse impact of people on cities by improving air and waste management 11.7 Provide universal access to safe, inclusive, accessible, green and public spaces 12.2 Sustainably manage and efficiently use resources 12.4 Manage chemicals and all wastes soundly throughout their life cycles 12.5 Substantially reduce waste generation through prevention, reduction, recycling and reuse SDG targets 12.6 Encourage companies, especially large and transnational companies, 3.9 | 6.3 | 6.4 | 7.2 | 7.3 | 8.4 | 8.7 | 8.8 | 9.4 | 12.2 | 12.4 | 12.5 to adopt and report regularly on sustainable practices 12.6 | 12.6.1 13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters 13.2 Integrate climate-change measures into national policies, strategies and planning 15.a Mobilise and significantly increase financial resources to conserve and sustainably use biodiversity and ecosystems

To read the full SDG targets, please visit: www.un.org/sustainabledevelopment/sustainabledevelopment-goals 22 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

SECTION 3

PERFORMANCE OUTPUTS Setting RPI targets within our investment process

Setting a clear intention to deliver specific outcomes through our These targets, and the tools and instruments used to implement and RPI programme since 2006, we have maintained a number of ESG monitor the outcomes, are reviewed on a regular basis by the Hermes targets throughout all of our investment processes. Our targets RPI steering group. We report on performance against these targets cover our directly managed UK properties over which we have on an annual basis. management control, which represent 70% of our total UK portfolio. Review of RPI targets: 2017-18

Progress

Corporate targets Ensure uptake of our supply-chain policy by all of our direct suppliers and share best practice. Achieved

Investment targets Ensure that our RPI acquisition due diligence is carried out on all potential acquisitions, and the results are integrated in the property management programme when a transaction is finalised. Achieved

Survey and assess RPI performance of all joint-venture partners and indirect investment on RPI issues. Achieved

Development targets BREEAM ratings: Ensure that all new developments and refurbishments in excess of £3m (construction cost) have independent BREEAM assessments completed, with the intention of obtaining at least an ‘Excellent’ rating. Ensure that all refurbishments in excess of £1m (construction cost) have independent BREEAM assessments completed, with the intention of obtaining at least a ‘Very Good’ rating. In progress

Energy Performance Certificate (EPC): Ensure that all new developments and refurbishments in excess of £3m (construction cost) have independent audits and achieve at least an EPC rating of ‘C’. Ensure that all refurbishments in excess of £100,000 (construction cost) have independent audits and achieve at least an Energy Performance Certificate rating of ‘D’. Achieved

Monitoring: Collect and record data against appropriate KPIs for all directly managed development and refurbishment projects. In progress

Management targets Distribute annually updated Responsible Property Management (RPM) Programme to Property Manager and tools to all Property Managers. Achieved

Property Managers to comply with contractual RPM requirements. Achieved

Risk and safety Ensure 92% of Risk Improvement Requirements arising from the Health & Safety risk management audit process are completed on time. Achieved

Flood risks: Review flood plans annually for assets at a high risk of flooding based on the environmental agency flood maps and guidance. Achieved

Review EPC risk exposure annually by portfolio and identify a mitigation strategy where relevant. Achieved HERMES INVESTMENT MANAGEMENT 23

Progress

Environmental Targets

CO2 emissions standing portfolio Not achieved due to Reduce landlord-controlled absolute carbon emissions by 40% of our directly managed standing portfolio by 2020 increase size of compared to our 2006 baseline*. portfolio

Reduce landlord-controlled emissions relative to floor area by 40% of our directly managed standing portfolio by 2020 compared to our 2006 baseline*. Achieved

CO2 and energy like for like Reduce by 5% the annual carbon emissions and the total energy consumption of our directly managed portfolio, adjusted for weather on a like-for-like basis. Achieved

Reduce by 5% the annual carbon emissions and the energy intensity of our directly managed portfolio adjusted for weather on a like-for-like basis. Achieved

Water Reduce landlord-controlled water consumption relative to floor area and adjusted to level of occupancy by 20% across our directly managed portfolio for our standing portfolio by 2010 compared to our 2006 baseline. Partially achieved

Waste Achieve an 80% recycling rate, following on-site segregation, documented recycling at materials recovery facilities, or incineration with energy recovery, across our directly managed portfolio of properties which measure waste by weight. Achieved

Transport Implement individual site travel plans at all Cat 1 properties. Achieved

Incorporate direct transport emissions into the reporting framework. In progress

Occupiers Engage with all occupiers during lease negotiations with the intention of including sustainability clauses in all lease agreements. Achieved

Engage with the top five occupiers in our retail and commercial sectors with regards to RPI. Achieved

Communities Ensure that all offices and shopping centres which are directly managed comply with Hermes' minimum standards for community engagement, as outlined in our Community and Occupiers Stakeholder Engagement Programme. Achieved

* Where we have the ability to delineate between owner and occupier’s areas, we report on owner data only. Where this is not possible, we have included occupier data.

Benchmarking performance against peers Principle for Responsible Investment

When monitoring and reporting the impact of our investment Hermes is a founding member and signatory of the Principles for initiatives, it is also important to assess and compare the relative Responsible Investment (PRI). In 2018, Hermes was rated A+ on effectiveness of our programme compared to a peer group of UK real- strategy and governance by the organisation, and Hermes Real Estate estate investors. was rated A in the property asset class and gained an A PRI property module rating, placing it in the top 25% of respondents. This positions us as a leading organisation in the management of the environmental and social performance of clients' portfolios. 24 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

GRESB ratings Under GRESB ratings Hermes Real Estate gained a five-star rating for three of its strategies, two of which were judged to be regional leaders. For all other strategies, we have seen improvements on historical scores.

Peer group Peer 2018 GRESB Fund Score 2018 average comparison star rating GREEN STAR GRESB peer group The Centre:MK 77 74 12th/16 4 Green Star United Kingdom/Retail/ Non‑listed BTPS 81 67 4th/22 4 Green Star Diversified – Office-Retail/ United Kingdom/Non-listed MetroPut 68 47 2nd/10 3 Green Star Diversified – Office/Industrial / United Kingdom/Non-listed HCLP 89 77 2nd/14 5 Green Star Diversified – Office/ Industrial/ United Kingdom/ Non-listed HPUT 76 63 10th/72 4 Green Star United Kingdom/Diversified/ Non-listed Real Estate Debt 82 55 1st/8 5 Not applicable Real Estate Debt

Indirect and joint-venture funds Indirect and joint-venture funds that we are involved with and are submitted to GRESB have continued to perform well under the benchmark. With four funds now rated five stars, Lionstone was ranked regional leader for 2018.

Portfolio overview MP IM Green- GRESB Performance v Performance v Entity name Score score score star? rating benchmark peer group Peer group Selection Weighted Average 75 85 72 8/9  N/A N/A

Lionstone Hermes Real Estate 92 91 92 Yes  United States Ventures Office Lionstone Investments Dexus Wholesale 91 100 87 Yes  Australia Property Fund Diversified – Dexus Office/Retail BlackRock Asia Property Fund 88 86 88 Yes  Asia Office III L.P. BlackRock 87 88 87 Yes Japan Office Nippon Building Fund Inc.  Nippon Building Fund Management Ltd. 81 96 75 Yes Asia M&G Asia Property Fund  Diversified M&G Real Estate 77 93 71 Yes United thecentre:mk LP  Kingdom Hermes Real Estate Retail 67 88 60 Yes United Hercules Unit Trust  Kingdom British Land Company Plc Retail Gotham Segregated 53 51 54 Yes  United States Account I Residential Sentinel 41 72 31 No United States HUH Fund  Residential Hermes Real Estate HERMES INVESTMENT MANAGEMENT 25

Environmental performance and outputs

Annual change in carbon emissions on a like-for-like basis for Changes in absolute carbon emissions (scope 1 and 2) for eight rolling quarters adjusted for heating degree days (%) landlord-controlled standing portfolio between 2006 and

2016 (tonnes CO2e/year). Percentage figures below compare 2017 with 2006 baseline.

15% 40,000 Coverage by No. of applicable properties All properties 10% Ofﬁces – Landlord controlled (excl occupier if submetered) 8% 35,000 Ofﬁces – consumption (incl occupier) Shopping Centres 5% 30,000 1% 0% ••% 25,000 -2% -2% -3% -3% -3% -5% -4% -4% -4% -4% -5% -5% -5% ••% -6% -6% -6% -6% 20,000 -7% -7% -7% -8% -8% -10% -9% -10% ••% -11% 15,000 Electricity -12% -15% Natural gas -16% -16% -16% -17% 10,000 CO2e -20% -18%

-22% 5,000 ••% -25% 38 Properties 59 Properties 61 Properties 45 Properties 45 Properties 44 Properties 45 Properties 68 Properties 60 Properties 64 Properties 64 Properties 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 to 2017 0 49 75 69 76 83 75 75 69 103 105 123 104 to to to to to to to to to to 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

straight years with like-for-like emissions decrease against 2006 baseline 11 emissions reductions 4%

emissions reductions across emissions reduction on 2016, largely due 17% the like-for-like portfolio 26% to the decrease in portfolio size

the average emissions reduction per 8% year since the baseline year of 2006

Since the baseline year in 2006, Hermes’ like-for-like portfolio has Over the course of 2017, several high-profile assets were sold, achieved a reduction in emissions every year, at an average of 8% per including HFO retail park and CIS Tower at NOMA. With few energy- year. In 2017, the like-for-like portfolio has seen a 17% reduction in intensive new acquisitions coming into the portfolio over the course of emissions which can be attributed in part to the 15% decrease in the the year, the overall trend was a decrease in emissions. This was also electricity emissions factor relative to 2016, alongside numerous accompanied by the continued implementation and development of efficiency projects that have been implemented across the portfolio. energy-saving initiatives across the portfolio, such as CAPP and Asset Analytics. Offices account for 63% of overall portfolio emissions, When normalising for weather based on heating degree days, there compared with 22% for shopping centres, while retail and industrial has been a decline in natural-gas use of 16% on 2016, while for properties account for 13%. electricity, consumption has decreased by 2% on the 2016 figure. This shows the reductions in consumption due to our continued actions on efficiency (see page 16 for more details). 26 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

Changes in carbon intensity for shopping centres and offices Changes in water intensity for landlord-controlled like-

between 2006 and 2017 (kg CO2e/m2/year). Percentage for-like portfolio between 2006 and 2017 (m3/m2/year) figures below compare 2017 with 2006 baseline6

200 Coverage by number of applicable properties 80 1.20 Shopping centres Ofﬁces – landlord-controlled (excl occupier if submetered) Shopping centres Ofﬁces – consumption (incl occupier) 180 70 1.00 160 60 140 0.80 120 50

100 40 0.60 -37% 80 30 0.40 60 -66% -1% 20 40 0.20 20 10 -52% 0 44 42 44 44 36 34 43 39 59 62 68 51 0 0.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 35 35 36 35 27 24 34 35 39 36 47 35 Properties Properties Properties Properties Properties Properties Properties Properties Properties Properties Properties Properties

reduction achieved by offices since 2006 decrease among offices 66% 37% since 2006

reduction recorded by shopping centres decrease recorded by shopping 52% since 2006 1% centres since 2006

reduction among offices (including 16% occupiers) since 2016

Carbon intensity by lettable floor area is an important metric to Water intensity has seen a decrease for both offices and shopping monitor as it signifies the progress made in sustainable lettings centres from 2016. Offices have seen a decrease of 37% from the across the portfolio. In 2017, the same downward trend in intensity 2006 baseline. This contrasts with the increase in water intensity for for offices and shopping centres seen over the past two years offices by 11% between 2015 and 2016. Year-on-year reductions continued, with a 14% reduction on 2016. Of the like-for-like at several high-consuming assets, including Aldgate House (-17%) portfolio between 2016 and 2017, 82% of the properties have and Wimbledon Bridge House (-4%), account for this decrease. seen a decrease in carbon intensity. Shopping centres have seen a water-intensity decrease of 16% year- Our offices in particular have benefitted from the roll out of CAPP. In on-year. This can be attributed to reductions at the sites recording the 2017 we implemented CAPP in 14 of our offices (the current figure is greatest consumption, with The Centre:MK seeing a 14% consumption 10, with 4 assets being sold) and have achieved measured and decrease as a result of the Deer Walk reconfiguration that delivered verified savings of more than £55,000, with more than £120,000 of ‘best in class’ guest facilities, including a new suite of toilets, and further savings identified. Crystal Peaks Shopping Centre cutting consumption by 5%.

6 Note: only assets with a full year's worth of consumption are included in this chart. Many other assets in the portfolio have also continued to reduce water consumption through active management. Sovereign House in Reading saw a 26% fall, due in part to the replacement of urinals with more water-efficient units. HERMES INVESTMENT MANAGEMENT 27

The proportion of waste by disposal route for the standing of waste recycled, re-used or portfolio, measuring waste by mass year-on-year (%). composted on site Weight (kg) is presented in 2017. 26%

of recycling carried out off site

100% 38% Direct to landﬁll or 447kg 90% Incineration without energy recovery 80% of waste incinerated with energy 2,392kg 70% Sent to materials recovery recovery facility but recovery 30% 60% method unknown

50% Incineration with

40% 2,989kg energy recovery Onsite recycling remains a priority for all our assets. The Centre:MK

30% Offsite recovery (at materials is a key shopping centre in our portfolio, and in Q4 2016 undertook recovery facility) 20% a strategic review of its waste-management performance. Since

10% Segregated onsite January 2017, The Centre:MK has raised its total monthly rate of 2,007kg for recycling, re-use 0% or composting recycling from an average of 55% to 72%. This is due in part to the 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 following initiatives: coffee grounds are collected form the 30 cafes at the centre and are used on the landscaping and local farm. Working with retailers, the Centre:MK team has worked with its 12,000 key retailers on their waste strategies and improved their Direct to landﬁll or segregation of waste. Finally, a change of waste carrier has reduced Incineration without 10,000 energy recovery the amount of contamination previously seen and furthered the

Sent to materials recovery training of the staff at the centre. 8,000 facility but recovery method unknown Similar initiatives are being undertaken at all our assets and waste- 6,000 Incineration with management programmes continue to improve, through tenant energy recovery and employee engagement and ever-improving data quality. 4,000 Offsite recovery (at materials recovery facility) 2,000 Segregated onsite for recycling, re-use 0 or composting 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 28 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

SECTION 4

REPORTING AND CERTIFICATION

GRI G4 assessment

This report has been prepared in accordance with, and aligned to, the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines at the Core level. A detailed GRI index for material indicators is provided below.

GRI G4 materiality assessment

G4 General Standard Disclosures Reporting Indicator Include? Description Page Section Boundary STRATEGY AND ANALYSIS

G4-1 Yes (Mandatory) Statement from the most senior decision-maker about the relevance of sustainability Portfolio Wide 8-10 Who we are: Outcome Beyond Performance

G4-2 Yes (Mandatory) Description of key impacts, risks and opportunities Portfolio Wide 2 Report Coverage

ORGANISATIONAL PROFILE

G4-3 Yes (Mandatory) Name of the organisation Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-4 Yes (Mandatory) Primary brands, products and services Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-5 Yes (Mandatory) Location of the organisation’s headquarters Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-6 Yes (Mandatory) Countries in which the organisation operates Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-7 Yes (Mandatory) Nature of ownership and legal form Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-8 Yes (Mandatory) Markets served Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-9 Yes (Mandatory) Scale of the organisation Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-10 Yes (Mandatory) Employment profile Portfolio Wide Not reported

G4-11 Yes (Mandatory) Percentage of total employees covered by collective bargaining agreements Portfolio Wide 0%

G4-12 Yes (Mandatory) Description of the supply chain Portfolio Wide 2 Report Coverage

G4-13 Yes (Mandatory) Significant changes during the reporting period Portfolio Wide 2 Report Coverage

G4-14 Yes (Mandatory) Report whether and how the precautionary approach or principle is addressed Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-15 Yes (Mandatory) Externally developed economic, environmental and social principles that are supported Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-16 Yes (Mandatory) Memberships of associations and national or international advocacy organisations Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17 Yes (Mandatory) Entities included and excluded in the consolidated financial statements Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-18 Yes (Mandatory) Process for defining the report content and the aspect boundaries Portfolio Wide 2 Report Coverage

G4-19 Yes (Mandatory) Material aspects identified in the process for defining report content Portfolio Wide 2 Report Coverage

G4-20 Yes (Mandatory) Material aspects and boundaries within the organisation Portfolio Wide 2 Report Coverage

G4-21 Yes (Mandatory) Material aspects and boundaries outside the organisation Portfolio Wide 2 Report Coverage

G4-22 Yes (Mandatory) Any restatements of information provided in previous reports Portfolio Wide N/A No restatements

G4-23 Yes (Mandatory) Significant changes from previous reporting periods in the scope and Aspect Boundaries Portfolio Wide 2 Report Coverage HERMES INVESTMENT MANAGEMENT 29

GRI G4 materiality assessment

G4 General Standard Disclosures continued Reporting Indicator Include? Description Page Section Boundary STAKEHOLDER ENGAGEMENT Directly Managed G4-24 Yes (Mandatory) Stakeholder groups engaged 8-21 Advocacy: Improving the Pricing of Risks Portfolio Directly Managed G4-25 Yes (Mandatory) Basis for identification and selection of stakeholders with whom to engage 2 Report Coverage Portfolio Directly Managed G4-26 Yes (Mandatory) Approach to stakeholder engagement 2 Report Coverage Portfolio Advocacy: Improving the Pricing of Risks, Directly Managed 8-21 G4-27 Yes (Mandatory) Key topics and concerns that have been raised Positive Impact Investing: How to Apply it to Portfolio 22-27 Real Estate REPORT PROFILE

G4-28 Yes (Mandatory) Reporting period for information provided Portfolio Wide 2 Report Coverage

G4-29 Yes (Mandatory) Date of most recent previous report Portfolio Wide 2 Report Coverage

G4-30 Yes (Mandatory) Reporting cycle Portfolio Wide 2 Report Coverage Hermes Report Website: www.hermes-invest- G4-31 Yes (Mandatory) Contact point for questions regarding the report or its contents Portfolio Wide 32 ment.com/ukw/capabilities/real-estate/responsible-property-investment/ The ‘in accordance’ option the organisation has chosen and reference to the External Assurance G4-32 Yes (Mandatory) Portfolio Wide 31 Report G4-33 Yes (Mandatory) Policy and current practice with regard to seeking external assurance for the report Portfolio Wide 2 Report Coverage

GOVERNANCE

G4-34 Yes (Mandatory) Governance structure of the organisation Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-35 Yes (Optional) Process for delegating responsibility for economic, environmental and social topics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance Whether an executive-level position has responsibility for economic, environmental and social G4-36 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance topics Processes for consultation between stakeholders and the highest governance body on economic, G4-37 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance environmental and social topics G4-38 Yes (Optional) Composition of the highest governance body and its committees Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-39 Yes (Optional) Whether the chair of the highest governance body is also an executive officer Portfolio Wide 4-7 Who we are: Outcome Beyond Performance Processes for the highest governance body to ensure conflicts of interest are avoided and G4-41 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance managed G4-42 Yes (Optional) Report the highest governance body’s and senior executives’ roles Portfolio Wide 4-7 Who we are: Outcome Beyond Performance Measures taken to develop and enhance the highest governance body’s collective knowledge of G4-43 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance economic, environmental and social topics Processes for evaluation of the highest governance body’s performance with respect to govern- G4-44 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance ance of economic, environmental and social topics Highest governance body’s role in the identification and management of economic, environ- G4-45 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance mental and social impacts, risks, and opportunities Highest governance body’s role in reviewing the effectiveness of the organisation’s risk-manage- G4-46 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance ment processes for economic, environmental and social topics Frequency of the highest governance body’s review of economic, environmental and social G4-47 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance impacts, risks, and opportunities Highest committee or position that formally reviews and approves the organisation’s sustaina- G4-48 Yes (Optional) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance bility report, and ensures that all material aspects are covered ETHICS AND INTEGRITY Describe the organisation’s values, principles, standards and norms of behaviour, such as codes G4-56 Yes (Mandatory) Portfolio Wide 4-7 Who we are: Outcome Beyond Performance of conduct and ethics Specific Standard Disclosures

DISCLOSURES ON MANAGEMENT APPROACH

G4-DMA Yes Management Approach Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

CATEGORY: ECONOMIC

G4-EC1 Yes Direct economic value generated and distributed Portfolio Wide 4-7 Who we are: Outcome Beyond Performance Advocacy: Improving the pricing of risks, Financial implications and other risks and opportunities for the organisation’s activities due to 8-21 G4-EC2 Yes Portfolio Wide Positive Impact Investing: How to Apply it to climate change 22-27 Real Estate Advocacy: Improving the pricing of risks, 8-21 G4-EC7 Yes Development and impact of infrastructure investments and services supported Portfolio Wide Positive Impact Investing: How to Apply it to 22-27 Real Estate 8-21 Who we are: Outcome Beyond Performance, G4-EC8 Yes Significant indirect economic impacts, including the extent of impacts Portfolio Wide 22-27 Advocacy: Improving the pricing of risks, 30 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

GRI G4 materiality assessment

G4 General Standard Disclosures continued Reporting Indicator Include? Description Page Section Boundary CATEGORY: ENVIRONMENTAL Directly Managed G4-EN1 Materials used by weight or volume Not recorded Portfolio Directly Managed G4-EN2 Percentage of materials used that are recycled input materials Not recorded Portfolio Directly Managed Measuring Qualitative Environmental G4-EN3 Yes Energy consumption within the organisation 25-27 Portfolio Performance Directly Managed Measuring Qualitative Environmental G4-EN4 Yes Energy consumption outside the organisation 25-27 Portfolio Performance Directly Managed Measuring Qualitative Environmental G4-EN5 Yes Energy intensity 25-27 Portfolio Performance Directly Managed Measuring Qualitative Environmental G4-EN6 Yes Reduction of energy consumption 25-27 Portfolio Performance Directly Managed Measuring Qualitative Environmental G4-EN8 Yes Total water withdrawal by source 25-27 Portfolio Performance Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high Directly Managed G4-EN11 Yes No such areas identified in portfolio biodiversity value outside protected areas Portfolio Description of significant impacts of activities, products, and services on biodiversity in protect- Directly Managed G4-EN12 Yes N/A as per above ed areas and areas of high biodiversity value outside protected areas Portfolio Directly Managed G4-EN13 Yes Habitats protected or restored Not measured Portfolio Directly Managed Measuring Qualitative Environmental G4-EN15 Yes Direct greenhouse gas (GHG) emissions (Scope 1) 25-27 Portfolio Performance Directly Managed Measuring Qualitative Environmental G4-EN16 Yes Energy indirect greenhouse gas (GHG) emissions (Scope 2) 25-27 Portfolio Performance Directly Managed Measuring Qualitative Environmental G4-EN23 Yes Total weight of waste by type and disposal method 25-27 Portfolio Performance G4-EN32 Yes Percentage of new suppliers that were screened using environmental criteria Portfolio Wide 2 Report Coverage Significant actual and potential negative environmental impacts in the supply chain and actions G4-EN33 Yes Portfolio Wide 2 Report Coverage taken CATEGORY: SOCIAL – LABOUR PRACTICES AND DECENT WORK Percentage of total workforce represented in formal joint management–worker health and G4-LA5 Yes Portfolio Wide 100% safety committees that help monitor and advise on occupational health and safety programs Lost day rate: 2.21 per year per employee av- Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total G4-LA6 Yes Portfolio Wide erage; absentee rate (exc Long Term Sickness): number of work-related fatalities, by region and by gender 0.85% G4-LA9 Yes Average hours of training per year per employee by gender, and by employee category Portfolio Wide Not available

G4-LA14 Yes Percentage of new suppliers that were screened using labour practices criteria Portfolio Wide None Significant actual and potential negative impacts for labour practices in the supply chain and G4-LA15 Yes Portfolio Wide None actions taken Number of grievances about labour practices filed, addressed, and resolved through formal G4-LA16 Yes Portfolio Wide None grievance mechanisms CATEGORY: SOCIAL – HUMAN RIGHTS

G4-HR10 Yes Percentage of new suppliers that were screened using human rights criteria Portfolio Wide Report Coverage

CATEGORY: SOCIAL – SOCIETY Positive Impact Investing: How to Apply it to G4-SO2 Yes Operations with significant actual and potential negative impacts on local communities Portfolio Wide 8-21 Real Estate G4-SO9 Yes Percentage of new suppliers that were screened using criteria for impacts on society Portfolio Wide 2 Report Coverage Significant actual and potential negative impacts on society in the supply chain and actions G4-SO10 Yes Portfolio Wide 2 Report Coverage taken HERMES INVESTMENT MANAGEMENT 31

ADVISOR STATEMENT Carbon-neutral certification Hermes' RPI programme was supported by Carbon Credentials in Hermes Investment Management 2017-18. Carbon Credentials continued its role in collating, validating has offset its operational carbon and reporting the RPI sustainability performance data and property emissions by working with Trees characteristics for 2017. for Cities. For every one tonne of Carbon Credentials’ independent audit team has verified, in greenhouse gas (GHG) emissions accordance with the ISO 16064-3 standard, the greenhouse-gas that Hermes generates from its day- emissions and energy and water data presented within this report. to-day operations and its business travel, it purchases verified carbon offset from Trees for This year has seen a reduction in consumption of energy and water Cities, which guarantees an equivalent amount of GHG across the portfolio, in part due to the rolling out of CAPP. This has emissions is reduced from the atmosphere. The offsets have been a significant feature of the Hermes RPI programme in 2017 and been generated by planting 2,942 trees in the urban fringe has produced greater data-driven insight at a more granular level for area of Odda Bank Quarry, a former quarry site on the border some of the key sites in the portfolio. This additional level of data between Leeds and Bradford. The trees will offset the carbon analysis has supplemented the RPI programme as it continues to emissions produced through the business activities of provide a framework for all stakeholders to better understand the Hermes, but they will also absorb pollutant gases produced strategy and outcomes of each asset. by urban transportation, provide new habitats for biodiversity, aid flood alleviation and bring interest to The RPI programme provided the structure to ensure Hermes this previously uninspiring green area. complied with all relevant legislation, in particular the Minimum Energy Efficiency Scheme (MEES) that came into effect on 1 April. Through effective strategy dissemination and robust monitoring and validation, the risk associated with MEES was well managed and mitigated where necessary.

There have been a number of sales from the portfolio in 2017 but a keen focus on the asset lifecycle has resulted in the RPI programme maintaining its effectiveness up to the point of sale. This is a fundamental aspect of the programme and will also support the speed with which new assets into the portfolio can realise the benefits of the RPI programme in 2018.

Joe Pigott, Associate Director, Carbon Credentials HERMES INVESTMENT MANAGEMENT We are an asset manager with a difference. We believe that, while our primary purpose is to help savers and beneficiaries by providing world class active investment management and stewardship services, our role goes further. We believe we have a duty to deliver holistic returns – outcomes for our clients that go far beyond the financial – and consider the impact our decisions have on society, the environment and the wider world. Our goal is to help people invest better, retire better and create a better society for all.

Our investment solutions include: Why Hermes Real Estate? Private markets Hermes Real Estate is one of the largest real estate investment 1 Infrastructure, private debt, private equity, commercial and managers in the UK, with over £7.9bn Gross Asset Value (GAV) residential real estate of assets under management in both UK and International portfolios. It offers client-focused, property investment solutions through High active share equities segregated and pooled structures. Asia, global emerging markets, Europe, US, global, 1 Hermes Real Estate as at 31 March 2017 small and mid-cap and impact

Credit Absolute return, global high yield, multi strategy, global investment grade, unconstrained, real estate debt and direct lending

Stewardship Active engagement, advocacy, intelligent voting and sustainable development

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For professional investors only. This document does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments; nor does it constitute an offer to purchase securities to any person in the United States or to any US Person as such term is defined under the US Securities Exchange Act of 1933. It pays no regard to the investment objectives or financial needs of any recipient. No action should be taken or omitted to be taken based on this document. Tax treatment depends on personal circumstances and may change. This document is not advice on legal, taxation or investment matters so investors must rely on their own examination of such matters or seek advice. Before making any investment (new or continuous), please consult a professional and/or investment adviser as to its suitability. This document is not investment research and is available to any investment firm wishing to receive it.

Any opinions expressed may change. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Any investments overseas may be affected by currency exchange rates. Past performance is not a reliable indicator of future results and targets are not guaranteed. Investing in Property is an illiquid investment and may result in deferment of redemption of units. The value of the property is a matter of a valuer's opinion rather than fact. All figures, unless otherwise indicated, are sourced from Hermes. For more information please read any relevant Offering Documents or contact Hermes.

Issued and approved by Hermes Investment Management Limited (“HIML”) which is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. HIML and Hermes Alternative Investment Management Limited (“HAIML”) currently carry out regulated activities associated with Hermes Real Estate Investment Management Limited (“HREIML”). HIML is a registered investment adviser with the United States Securities and Exchange Commission (“SEC”). Telephone calls will be recorded for training and monitoring purposes. Potential investors in the United Kingdom are advised that compensation will not be available under the United Kingdom Financial Services Compensation Scheme.

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