Real Estate Switzerland Sustainability Report 2017/2018 Contents Sustainability reporting 3 Using sustainable construction materials 23 Interview with Daniel Brüllmann 4 Contaminated sites 23 Our approach 6 Year-on-year KPI comparison 24 Our definition of sustainability 8 Social responsibility 25 Our sustainability strategy 8 Ensuring a high level of comfort 25 Sustainability secures long-term returns 9 Safeguarding security 25 Sustainability is embedded in our processes 9 Data confidentiality 26 Ongoing progress evaluation 11 Involving the local community 26 Sustainability organization and responsibilities 11 Influence on the local economy and infrastructure 26 Joint commitment with our Guidelines on implementing the sustainability business partners 11 strategy for contractors 26 Dialog with our stakeholders 12 Employee education and training 27 Identifying key sustainability topics 14 Spotlight on «Grossmatte» 28 Guidelines for responsible Reporting principles 30 real estate management 14 Transparent communication 32 Responsible real estate management 16 Reporting in accordance with GRI Standards 32 Economic responsibility 18 The benefits of recognized standards 32 Choosing sustainable locations 18 GRESB – Global Real Estate Sustainability Benchmark 32 Diverse lifestyles call for flexible building structures 19 GRI Content Index 33 Integral planning 19 Optimizing lifecycle costs 19 Publisher Languages Compliance protects the core business 20 UBS Fund Management German and English (Switzerland) AG Agreed approach to fighting corruption 20 Real Estate Switzerland Contact Environmental responsibility 21 Aeschenplatz 6 UBS Fund Management CH-4002 Basel (Switzerland) AG Real estate as a focal point Real Estate Switzerland of Energy Strategy 2050 21 Consulting & Editing Aeschenplatz 6 Sustainserv, Zurich and CH-4002 Basel Energy and CO 21 2 Boston [email protected] Reducing water consumption 23 Concept & Design Cover photo Reducing waste 23 Kammann Rossi GmbH, «2000-watt» community, Cologne, Germany Grossmatte in Lucerne 2 Real Estate Switzerland – Sustainability Report 2017/2018 Sustainability reporting Real Estate Switzerland, along with the legally separate investment products, pub- lishes detailed information about its activities in the field of sustainability by way of nine sustainability reports. The mandate which was acquired in 2017 is not part of 2017/2018 sustainability reporting for Real Estate Switzerland. The comprehensive sustainability report for Real Estate Switzerland meets the stan- dards set out by the Global Reporting Initiative (GRI). The GRI is the leading standard worldwide for transparent sustainability reporting (www.globalreporting.org). Reports for the real estate funds UBS Direct Urban, UBS Direct Residential, UBS «Foncipars», UBS «Sima», UBS «Anfos» and UBS «Swissreal», as well as the two real estate investment groups of the UBS Foundation for the Investment of Pension Fund Assets, UBS AST Real Estate Switzerland and AST Commercial Real Estate Switzerland, are published in the «Sustainability» section of our website https://www.ubs.com/ch/en/asset-management/real-estate.html. These sustainability reports are updated at the same times as the annual reports and also comply with GRI Standards. The sustainability report for Real Estate Switzerland is a component of comprehensive sustainability reporting for Real Estate Switzerland. UBS «Foncipars» UBS «Swissreal» UBS «Sima» UBS DirectNachhaltigkeitsbericht Urban 2017 Nachhaltigkeitsbericht 2017 Nachhaltigkeitsbericht 2017 UBS AST Kommerzielle Nachhaltigkeitsbericht 2016/2017 Immobilien Schweiz UBS Direct Residential Nachhaltigkeitsbericht 2016/2017Real Estate Switzerland Nachhaltigkeitsbericht 2016/2017 Sustainability Report 2016/2017 UBS AST Immobilien Schweiz Nachhaltigkeitsbericht 2016/2017 UBS «Anfos» Nachhaltigkeitsbericht 2016/2017 Real Estate Switzerland – Sustainability Report 2017/2018 3 Interview with Daniel Brüllmann « We strive to make sure that everything we do benefits future generations.» Daniel Brüllmann – Head of Real Estate Switzerland What issues did Real Estate Switzerland focus on in been concentrating on capturing growth through our existing the past year? real estate. We are very privileged to have a vast portfolio – containing an array of different properties: there are properties Generally speaking, we’re seeing some major changes in Swiss from almost every decade in the last century – including in real estate. High levels of construction and a drop in immigra- some very good locations. This allows us to work toward devel- tion have altered the demand for space. Vacancy rates are opment projects as a means to generate growth. rising – including for residential properties. That said, there is still very high demand for real estate as a form of investment. Our long-term approach is also reflected in the sustain- While in the past we have been able to reliably generate in- ability strategy. What progress has already been made in creases in value, we’re now shifting our main focus to main- terms of sustainability? taining existing cash flows and generating new ones in future. – There has been a lot of activity recently. One of the key mile- You mentioned that vacancy rates are increasing – par- stones was the publication of our first ever sustainability ticularly in rural areas. As ever, demand for more living report. We now have the opportunity to provide our investors space is high and supply short in urban areas. What with transparent information about our commitment in this strategy is Real Estate Switzerland pursuing to «build for area. Another important step was the transfer of many issues the market» and remain successful in the long term? to ongoing business operations that had previously been – addressed through project work, such as operational optimiza- We have opted for a selective investment strategy. Although tions. We are also working hard to establish sustainability as we’ll continue to buy real estate, we’re going to be very a fixed element in all our activities for renovation projects and careful in our choices and will not simply pay the asking price. new builds. Based on the swathes of data we’ve gathered over This way, we can ensure that our portfolios remain solid in many years in relation to energy and CO2 emissions, we were the long term. We see ourselves as «buy-and-manage inves- in a position to generate initial projections as a step toward tors». In other words, we buy property to keep it, not to trade defining a path to reduce CO2. Additionally, our tenant survey it away. That’s why each investment comes with an outlook on exploring matters of safety and comfort, which was conducted the next few decades. For several years now, we’ve also in late 2017, paved the way to systematic and ongoing devel- opment as regards the social aspects of our sustainability strat- egy. This direct feedback from tenants delivered a diverse range of insights that we plan to incorporate in our future decisions. 4 Real Estate Switzerland – Sustainability Report 2017/2018 Why is Real Estate Switzerland focusing on sustainable Why are the real estate investment products offered by real estate management? Real Estate Switzerland a good option for investors who – aim to achieve solid returns in the long term while also In German, that’s a one-word answer: Enkeltauglichkeit. taking into account environmental and social aspects? What this means is that we want to build a future that is fit for – our grandchildren, and for future generations, to live in. All As an asset class, real estate obviously already includes a activities relating to our real estate portfolio must be designed long-term component. For investors whose personal convic- so that they not only make sense for us, but also for the next tions lead them to invest in sustainable products, our real generation and the generation after that. We are confident estate investment products are even more attractive thanks that sustainable real estate management is essential to long- to our «buy-and-manage» approach and comprehensive sus- term business success. tainability strategy. We also have our sustainability commit- ment audited by external third parties, for example, by way of People often say that sustainability increases costs. the GRESB – the Global Real Estate Sustainability Benchmark. How are you planning to reconcile profitability with We are proud of the fact that all our real estate investment environmental and social aspects? products have been awarded «Green Star» status, and that – UBS «Anfos» has been named Switzerland’s most sustainable Countless studies have already concluded that sustainability real estate fund. is not associated with higher costs, but rather that it can boost returns. Based on my own practical experience I can say that, What are your priorities with regard to sustainability from a financial perspective, sustainability at least contributes over the next few years? to minimizing risk. If we’re careful to ensure that our proper- – ties are attractive in the long run, it becomes even more certain We want to continue embedding the topic of sustainability, that we’ll be able to continue renting out those spaces in in all its facets, into our organizational DNA. Our goal is not to future, thus generating rental revenue. «paint» individual portfolios «green,» but rather to focus all our activities on realizing sustainable impact. Acting sustain- ably will become a matter of course. Real Estate Switzerland – Sustainability Report 2017/2018 5 Our