ANNUAL ESG REPORT 2019 - Baltic Horizon
ANNUAL ESGREPORT 2019
Annual ESG Report 2019CONTENTS23781316Statement from the Fund ManagerBaltic Horizon Fund and ESG in 2019Baltic Horizon Fund and ESG in 2020Global Reporting Initiative (GRI) DisclosuresGRI Content IndexDefinitions of Key Terms and Abbreviations1
Annual ESG Report 2019STATEMENT FROM THE FUND MANAGERReal estate industry is facing an increasing scrutiny frompublic to increase its focus to sustainability by being oneof the largest contributors to increasing risk of climatechange: according to EU Commission about 36% of allgreenhouse gas emissions and about 40% of all energyconsumption can be attributed to building use orprocesses of construction, renovation or demolition. Thisputs owners of real estate at the forefront of thesustainability movement commanding an everincreasing focus to be put on topic of sustainable realestate asset management.Baltic Horizon being one of the largest listed real estatefunds in the Baltics is committed to being a responsibleasset owner. We think that prioritizing ESG issues in ourdaily activities can create even further value to allstakeholder groups and bring a positive changemomentum to the larger society. While the adoption ofESG principles in our real estate portfolio brings a host ofchallenges, we believe that long-term benefits of ESGcommitment will generate additional value for ourunitholders and create a better and more resilient realestate market.At Baltic Horizon Fund (the “Fund” or “Baltic Horizon”),we acknowledge that our business activities affect thesociety and environment around us, and that we have anopportunity and an implicit duty to ensure this impact ispositive. And even more so – efficient and sustainableoperations is a necessity for long-term value creation.Taking that in mind, we incorporate environmental, socialand governance (ESG) considerations in our investmentdecision making and ownership and adjust our longterm goals accordingly. During the 2019, Baltic Horizonhas made advancements in ensuring that our ESGcommitment is not just a promise but an actionablestrategy initiative: we completed our first GRESBassessment and determined our improvement areas,focused on needs and development of our staff andimplemented various property level ESG initiatives. OurESG strategy is taking shape and we acknowledge theimportance of it in our everyday business. We believethat our sustainable goals will strengthen our alreadystrong cash flow operations and stable dividenddistributions to investors.The idea of emphasizing topics of ESG is still in the earlyyears of its infancy in the Baltics. Yet we believe that thissustainability report will not only help Baltic Horizonstrengthen its commitment to ESG but will bring themessage of sustainability and importance of ESG issuesto the wider Baltic real estate market. It is imperative thatthe spread of sustainability principles becomes a marketwide initiative and Baltic Horizon is excited to be a partof this sustainability movement.Fund Manager of Baltic Horizon Fund,Tarmo Karotam2
Annual ESG Report 2019BALTIC HORIZON FUND AND ESG IN 20192019 for Baltic Horizon Fund marked a year where topicsof ESG were pushed to the limelight of strategicimportance issues. This part of the Baltic HorizonSustainability Report will provide an in-depth overview ofkey sustainability developments that the managementteam worked on in 2019 as well as provide a look atproperty level consumption data.the technical assessments has to be expanded inorder to address a wider spectrum of potential ESGrelated risks.GRESBS Real Estate Assessment provides a greatunderlying framework upon which further ESG initiativescan be built. Baltic Horizon plans to utilize the GRESBreporting tools in future development of its ESG strategy.Since 2019 assessment was the first for Baltic Horizon, theFund opted to participate in the assessment under GracePeriod rules so no results where publicly published.Grace Period evaluation provided Baltic Horizon with keyinsights in order to improve the reporting for theupcoming assessment cycles. Baltic Horizon is planningto participate in GRESB Real Estate Assessment annually.GRESB Real Estate AssessmentIn 2019, for the first time Baltic Horizon Fund participatedin GRESB Real Estate Assessment. GRESB was establishedin 2009 by a group of large pension funds who wantedto have access to comparable and reliable data on theESG performance of their investments. GRESB has grownto become the leading ESG benchmark for real estateand infrastructure investments across the world. GRESBESG data covers USD 4.5 trillion in real estate andinfrastructure value and is used by more than 100institutional and financial investors to make decisionsthat are leading to a more sustainable real asset industry.More information on GRESB could be found on:https://gresb.com/.Investment UnderwritingAn important update in the investment underwritingprocess of Baltic Horizon was introduction of a detailedESG checklist. While specific property related ESG issuessuch as energy efficiency, contamination risks and otherfactors were already part of every investmentunderwriting process, the ESG checklist will give us anopportunity for a more structured approach towardsanalysing ESG related risks. The checklist acts as anadditional support for the already existing technical duediligence aspect, but dives in greater detail to such topicsas energy supply sources, energy ratings, more detailedenvironmental and social risks assessment and others.Participating in GRESB Real Estate Assessment indicatedkey areas of improvement for Baltic Horizon: Stakeholder Engagement: Baltic Horizon hasestablished regular engagement channels withselected stakeholder groups, by way of regularmeetings and reporting initiatives with investorsand property managers. However, GRESB RealEstate Assessment indicated that a more structuredapproach to tenant engagement is necessary. Oneof the focal points of 2019 ESG agenda wasincreasing tenant engagement directly and viaproperty managers. More information regardingtenant engagement is provided in section ESGInitiatives. Risks & Opportunities: while the Fund already hasa rigorous risk assessment framework in placekeeping up with high governance standards, BalticHorizon needs to establish a more ESG focused riskand opportunity assessment framework at propertylevel. The primary tool exercised to manageproperty level risks is the annual property inspectionundertaken by facility managers. The goal of theseinspections is to evaluate physical standing of thebuildings and identify any risks arising frommaintenance side of properties. It is important tomention that these property inspections werealready undertaken in most of the properties evenbefore GRESB submission, however, the scope ofThe first investment case to utilize the ESG checklist wasMeraki office development project. Addition of the ESGchecklist allowed to tailor existing investmentunderwriting process to be more oriented to relevantESG issues and identify potential opportunities. The ESGchecklist will continue to remain an important aspect ofall investment considerations by Baltic Horizon byproviding a more in depth understanding of potentialESG risks related to a particular investment project.ESG InitiativesOne of the focal ESG implementation points of 2019 forBaltic Horizon was a more direct approach to ESG issuehandling at property level. This has taken a form of thefollowing initiatives:3
Annual ESG Report 2019 Property inspections: regular property inspectionsare a common practice in the real estate market.During these inspections, facility managers performthorough engineering and technical equipmentaudits and checks in each property to ensure properoperation of these systems. A series of theseproperty inspections have been performed atproperties across portfolio of Baltic Horizon in 2019.However, from 2020 Baltic Horizon Fund will beputting even more emphasis on identifyingefficiency measures during property inspections inorder to improve environmental aspect of its realestate portfolio.Tenant satisfaction surveys: the 2019 GRESBsubmission indicated that tenant engagement isone of the areas where Baltic Horizon needs toshow improvement. With this feedback in mindduring the second half of 2019 all properties in theportfolio of Baltic Horizon have undertaken tenantsatisfaction surveys. The collected feedbackprovided useful insights to the property managersand assisted in understanding how tenants feelabout premises, greenery, lighting, services,communication loop and other key areas. We willcontinue monitoring tenant satisfaction levels in thefuture as well.ESG communication to property managers: whilethe term “environmental sustainability” is quite wellknown and understood in the Baltic market, theterm ESG is still quite new. Management team ofBaltic Horizon seeing an increasing importance ofESG topics is trying to bring the conversation andthe knowledge to the wider market and involve ourbusiness partners in the same discussion. We arekeeping in constant contact with our businesspartners and the property managers are one of thekey service suppliers to our business. During 2019management team of Baltic Horizon paid extraattention by bringing topics of ESG to the meetingswith property managers to advance our sustainablebusiness agenda and assist us in our ESG initiatives:property managers provide critical support withtenant engagement, consumption data collectionand property oversight.Budgeting for ESG items in 2020: in 2020 the Fundmanagement team decided to earmark a specificportion of annual CAPEX budget specifically forsustainable investment purposes: sustainabilityrelated CAPEX works make approximately 27% of allcapital expenditures budget in 2020. This amountprimarily covers various maintenance items and should help Baltic Horizon to make marginal gainsin resource consumption reduction and efficiency.Employee development and satisfaction: largepart of Baltic Horizon’s success hinges on thesuccessful development and growth of our staff. In2019 staff of Baltic Horizon participated in anemployee satisfaction survey that identified highlevel of employee trust and personal job fit withinthe company. To ensure continued performancesuccess and personal development, colleagues alsoparticipated in 360-feedback process (which is partof annual performance review) and had individualperformance dialogues to discuss successes andchallenges colleagues had to face in 2019. Moreinformation on employee development can befound in GRI disclosures 103-1-3.Consumption DataIn 2019 Baltic Horizon Fund started collecting propertylevel consumption data for all properties in its portfolio.In order to optimize this process and increase integrity ofcollected data, in 2020 Baltic Horizon is planning toacquire a consumption data storage and managementsolution that will enable the Fund to provide deeperanalytical insights and will guide Baltic Horizon to a moretransparent long-term consumption management. Keyinsights from consumption data of 2019 are providedbelow.EnergyTotal portfolio level energy consumption in 2019amounted to ca. 41,576 MWh increasing by ca. 16% over2018 level. However, larger part of the increase in totalenergy consumption could be attributed to 3 newacquisitions made by Baltic Horizon in 2019 – Duetto II,North Star and especially Galerija Centrs. Comparinglike-for-like portfolio and excluding acquisitions made in2019, energy consumption has remained at a similar leveland in 2019 has decreased by less than 1% compared to2018.The portfolio level energy consumption data providesoverview of energy consumed by the buildings in theBaltic Horizon’s portfolio over the last two-year period.However, portfolio level energy consumption data onlydisplays portfolio level consumption from the date ofacquisition closing of a particular asset. The dataprovided in this section of the report includes both thelandlord and tenant-controlled areas with certainexceptions for individual assets (in case of Upmalas Birojienergy consumption for tenant areas could not beobtained). The energy consumption is split into three4
Annual ESG Report 2019categories: electricity (incl. cooling), district heating andfuels for properties that are using alternative methods forproperty heating.Energy intensity in 2019 reached ca. 229 kWh/psqm anddecreased by 10% compared to 2018. Decrease in energyintensity is primarily linked to decrease in district heatingconsumption between 2018 and 2019 due to milderwinter season in 2019. Unlike the portfolio levelconsumption data, intensities are calculated by includingconsumption data for full year 2018 and 2019 if such datafor the property is available. Energy use intensity isestimated by dividing total energy use of the portfolio bytotal gross area of the portfolio (incl. parking).Water use intensity in 2019 reached ca. 652 litres/psqmand decreased by 6% compared to 2018. Water useintensity decrease could be primarily explained by newacquisitions made in 2019: while like-for-like portfoliointensity in 2019 remained very similar to 2018 level andreached 686 litres/psqm, new acquisitions made in 2019displayed lower water use intensity levels whencompared to portfolio resulting in a positive change.Unlike the portfolio level consumption data, intensitiesare calculated by including consumption data for fullyear 2018 and 2019 if such data for the property isavailable. Water use intensity is estimated by dividingtotal water use of the portfolio by total gross area of theportfolio (excl. parking).Portfolio Level Energy Consumption (MWh) & EnergyUse Intensity (kWh/psqm)Portfolio Level Water Consumption (m 3) & Water UseIntensity 018800600400200-20192018Electricity (incl. cooling)WaterDistrict Heating2019Intensity (RHS, litres / psqm)Source: Baltic Horizon FundFuelsIntensity (RHS, kWh / psqm)WasteCollection of waste data is one of the most challengingfactors in consumption data collection for Baltic Horizon.Waste management firms in the Baltics that serviceproperties of Baltic Horizon use different measurementmethodologies or in certain cases cannot provideinformation regarding quantity of waste generated atspecific properties leading to a situation where onlyhandful of properties in the portfolio report actual wastegeneration data. As a result of this, we cannot providereliable waste generation data on a portfolio level for thisreport. Baltic Horizon will investigate additional ways toincrease transparency and accuracy of waste generationdata in 2020.Source: Baltic Horizon FundWaterTotal portfolio level water consumption in 2019amounted to ca. 106,142 m3 increasing by ca. 20% over2018 level. As in the case with energy consumption,increase in total consumption could be attributed to 3new acquisitions made in 2019. Comparing like-for-likeportfolio and excluding acquisitions made in 2019, waterconsumption in 2019 has increased by about 2%compared to 2018.The portfolio level water consumption data providesoverview of water consumed in the buildings of BalticHorizon Fund over the last two years. However, portfoliolevel water consumption data only displays portfolio levelconsumption from the date of acquisition closing of aparticular asset. The data provided in this section of thereport includes both the landlord and tenant-controlledareas. Currently no assets in Baltic Horizon’s portfolioutilize water recycling systems.However, for the 2020 GRESB Real Estate Assessmentcycle a mixture of reported data and estimates of wastegeneration for the remainder of the portfolio will beused. The estimates are derived by using data providedby the property managers such as type of waste bins(general waste, paper, etc.), volume of waste bins in m 3and frequency of service. Using these variables and5
Annual ESG Report 2019applying specific conversion factors based on type ofwaste we can approximate expected waste generation inthe property. However, one major flaw of this method isassuming that serviced waste bins are completely fullwhich might yield excessive estimates of wastegeneration.GHG emissions were calculated by applying a locationbased methodology when calculating electricity factorswith different factors applied for different reportingyears. This reflects the changing proportion of the energytypes in the national grid of the Baltic states (e.g.percentage of renewables and percentage of natural gas,etc.), leading to annual variations: GHG factors haveimproved significantly in Latvia and Lithuania between2018-2019 and have decreased by 42.6% and 39.0%accordingly. This factor to a large degree led to asignificant decrease of portfolio level GHG emissions in2018-2019 period. Factors to estimate GHG emissionswere sourced from 2019 International Energy AgencyDatabase.GHGTotal portfolio GHG emissions, expressed in tonnes ofCO2 in 2019 reached 13,344 and were ca. 4% lowercompared to 2018, despite new acquisitions made in2019. Comparing like-for-like portfolio and excludingacquisitions made in 2019, portfolio level GHG emissionscontracted by ca. 9%. Emission intensity measured inkilograms of CO2 per square meter reached 68 in 2019and was ca. 40% lower compared to 2018. Decrease inGHG emissions over 2018-2019 period resulted from acombination of factors such as milder winter seasonsresulting in lower heating consumption, positive changesin occupier and tenant behaviour, property energyefficiency improvements, different GHG estimationfactors and others. Portfolio level GHG emissions dataonly displays portfolio level consumption from the dateof acquisition closing of a particular asset. Unlike theportfolio level consumption data, intensities arecalculated by including consumption data for full year2018 and 2019 if such data for the property is available.Emission intensity is estimated by dividing total portfoliolevel emissions by area of the portfolio (incl. parking).GHG Emission Factors (g/CO2eq/kWh)Electricity Estonia875.7864.42018201920182019247.0240.0Source: International Energy AgencyGHG Emissions (tonnes of CO2) & GHG Intensity (kgof CO2/psqm)15,000Country2019Scope 3Scope 2Scope 1Intensity (RHS, kg of CO2 / psqm)Source: Baltic Horizon Fund6NaturalGas
Annual ESG Report 2019BALTIC HORIZON FUND & ESG IN 2020While in 2019 improvements were made in stakeholderengagement, investment underwriting and riskmanagement, 2020 is looking to be an important year forBaltic Horizon to continue delivering on its sustainabilitycommitment. The focal points of 2020 will cover thefollowing items.Increased Stakeholder Engagement2019 GRESB Real Estate Assessment for Baltic Horizonindicated that stakeholder engagement was one of theproblem areas in the array of ESG issues. In 2020 BalticHorizon aims to further improve communication with allstakeholder groups with particular focus on tenantcommunication via tenant satisfaction surveys.Additionally, Baltic Horizon is planning to implementmateriality analysis to identify key ESG issues that matterthe most for key stakeholder groups of the Fund. Theresults of materiality analysis will act as a strategic guideallowing Baltic Horizon to focus on core ESG issues mostrelevant for its stakeholders.Consumption Data Tracking SoftwareIn 2020 Baltic Horizon is planning to employ a softwaresolution designed specifically to track consumption data.This software tool should help Baltic Horizon to increaseproperty level data integrity and provide powerfulanalytical tools that will guide Baltic Horizon to moresustainable real estate operations.ESG Risk AssessmentIn 2020 management team of Baltic Horizon will considerimplementation of recommendations of the Task Forceon Climate-related Financial Disclosures (TCFD) to thefinancial reporting of Baltic Horizon for upcomi
unitholders and create a better and more resilient real estate market. The idea of emphasizing topics of ESG is still in the early years of its infancy in the Baltics. Yet we believe that this sustainability report will not only help Baltic Horizon strengthen its commitment to ESG but will bring the message of sustainability and importance of ESG issues to the wider Baltic real estate market .
ESG PORTFOLIO EXTENDED SUMMARY REPORT December 03, 2020 Portfolio Benchmark Weighted Avg ESG Score 6.20 6.03 Adjustment ESG Trend Positive 4.74% 15.81% LAGGARD AVERAGE LEADER Distribution of MSCI ESG Fund Ratings Universe Adjustment Total 0.81% 0.88% Score Adjustment 0.05 - ESG Trend Negative 2.02% 7.49% - ESG Laggards 1.91% 7.44% ESG Quality .
stated to apply to ESG ratings providers may apply to ESG data products providers, and vice versa. 1. The term ESG ratings and data products providers, as used in this report, covers providers who offer ESG ratings and/or ESG data products. Where there is a need to single out ESG data products providers who
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ESG quality, from the asset allocation mix, a question similarly posed by Schroders [2019]7. DWS Approach to ESG in SAA On the aforementioned point of inclusive versus exclusive ESG SAA approaches, we take the more inclusive approach. First, ‘ESG integration’ as for PRI is primarily a risk
Portion of cases where ESG affected portfolio construction LE 6.1 150/150 Pre-investment phase ESG risk management Compliance processes for negative screening LE 8 200/200 Post-investment phase ESG risk management Incorporation of ESG in regular reviews LE 9 150/150 Post-investment phase ESG risk management Identification of ESG incidents LE .
May 15, 2019 · ESG Industry Report Card: Power Generation May 13, 2019 (Editor's Note: Our ESG Industry Report Cards include an analysis of ESG factors for a selection of companies. We intend to expand our ESG Industry Report cards to include more companies throughout the year.) Key Takeaways - The tra
ESG and financial variables is interpreted as ESG being the cause and financial value the effect, however the transmission can be interchanged. COMPONENTS/CRITERIONS OF ESG: 3 key components of ESG are - Environmental, Social and (corporate) Governance aspects. Since ESG factors are often interrelated, there may be scenarios
The standards are neither curriculum nor instructional practices. While the Arizona English Language Arts Standards may be used as the basis for curriculum, they are not a curriculum. Therefore, identifying the sequence of instruction at each grade - what will be taught and for how long- requires concerted effort and attention at the local level. Curricular tools, including textbooks, are .
