Keynote interview: taking on sustainability from top to bottom
One of the UK’s longest established real estate funds is working hard to continuously improve its sustainability performance with a top-down and bottom-up approach. Sustain talks to Eleanor Jukes, deputy fund manager at the Schroders Capital UK Real Estate Fund (SCREF), about the fund’s sustainability initiatives and challenges.
The Fund was launched in 1971, making it one of the oldest real estate investment vehicles in the world. An open-ended fund with a core/core-plus risk profile, SCREF has more than 180 institutional investors and owns UK real estate assets with a total value of around £2 billion ($2.5 billion).
Eleanor Jukes is deputy fund manager at the Schroders Capital UK Real Estate Fund
How big a challenge is improving sustainability in a portfolio with more than £2 billion in assets and 50 years of history?
There's a lot of legacy data, there's a lot of heritage and I think we have at least a couple of assets that have been with us since 1971. That has presented some interesting challenges for how to make these buildings appropriate for the sustainability demands of modern occupiers and investors. We have 51 buildings and around 665 tenants so it's a big job trying to keep on top of all those assets and customers. What this means for sustainability is that we must use both a top- down and bottom-up approach to reach our goals.
We have our Schroders sustainability objectives and guidelines, such as the net zero pathway, which flow down, but we must also engage from the bottom up, otherwise it would just be an impossible job. We have some outstanding external property management teams who do a huge amount of work alongside our in-house asset managers to make sure that we’re delivering best-in-class sustainable assets. That means getting service level agreements right, but also making sure they are empowered to use their initiative to deliver improvements on the ground.
Talk us through some of those bottom-up initiatives….
Our Mermaid Quay retail and leisure centre in Cardiff [pictured above] is close to a district which is high on the deprivation index. The team at the centre has started some great outreach initiatives to engage the local community, with food donation programmes or providing theatre and cinema tickets for children in that area. We also run wider-ranging community and sustainability initiatives like our water bottle refilling programme. Closer to London, managers at our town centre development in Bracknell work with woodlands and bees charities and recently they won an award for placemaking initiatives.
And what are the top-down initiatives from Schroders Capital?
We have a real estate with sustainable impact mantra, which is something we work hard to ensure is embedded across all our funds. We have four pillars of sustainability in real estate: people, planet, place and prosperity, derived from the UN Sustainable Development Goals.
SCREF is also a SFDR Article 8-equivalent fund, which means we need to consistently demonstrate improvement in our sustainability characteristics to be able to market ourselves as a fund that promotes sustainability. Ensuring that we hit or exceed our sustainability objectives is a huge part of my role as the deputy fund manager, an important one, and one which is constantly changing.
What are the accreditation and certification objectives for the fund and what are the obstacles to achieving them?
Recently, we have been checking our coverage of Energy Performance Certificates is aligned with the regulation that came in April, which states that all commercial rented properties must achieve an EPC rating of E or better for leasing deals. That was a huge effort across a portfolio of this size, because we've got a lot of assets and a lot of units that need certifying. The team has also worked on the coverage of Green Building Certificates this year. For example, 90% of the SCREF office portfolio is certified and we were proud to have been awarded a WiredScore portfolio award. This sits alongside our 4* GRESB rating.
Our fund, asset, property, and sustainability teams put a lot of work into hitting our sustainability aspirations, because it is very difficult to achieve accreditations across a large diverse portfolio. The industry needs accreditations that are rigorous, but also consider the challenges of managing a multi-asset portfolio with a huge number of tenants with different aspirations. So it would be great to see some progress within the wider sector to make sure sustainability accreditation is aligned with what the market and tenant base needs.
How do you use technology to boost sustainability in the portfolio?
We make effective use of technology to help us meet our goals. For example, we have a partnership with Deepki, who have built a bespoke product to be rolled out across Schroder Capital real estate funds that enables us to suck up data for all our sustainable data points: EPCs, certificates, net zero carbon audits, all our tenant data. This will provide us with a clear sustainability profile of the units, the assets, the buildings in the fund and how well we’re doing against our objectives.
It’s taken a huge onboarding process: about six months to get everything onto this platform for SCREF alone. It's not been easy, but we have finally got there and it's been really illuminating where we do well and where the gaps are. For example, we need to do better in automating the collection of tenant information. We will be able to use it in a more proactive way and start building it into the business planning process, ensuring that we're tracking all those different objectives, particularly as we start to do more work on net zero carbon over the next couple years.
The other piece of technology we're proud of is called S:connect, a proprietary app built for us by CBRE that we use in nine of our assets. Anyone who uses one of these buildings can use it, and it enables us to have a two-way dialogue with users. We primarily use it as a social value initiative - there is a rolling calendar of initiatives, such reducing food waste, mental health or encouraging use of public transport.
Do you have any renewable energy initiatives?
Our self-storage portfolio has been a surprising leader in this regard. We have five self-storage units in London, where we have installed EV chargers and we are now rolling out the installation of solar PV and battery storage to power those chargers.
What’s the next sustainability challenge for the fund?
We have biodiversity net gain requirements for new developments coming up in November this year and we are working towards achieving that in a thoughtful and impactful way. However, I think biodiversity is something which hasn't received a huge amount of attention yet in the industry. So it'll be interesting to see how people tackle the challenge.