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IMPACTFUL INTENT Creating positive outcomes through real estate investment2018 Responsible Property Investment report

Hermes Real Estate December 2018

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/

SECTION 2 08SECTION 1 04

SECTION 3 SECTION 422 28

WHO WE ARE Outcomes beyond performanceHermes Investment Management 04

Hermes Real Estate 05

Segregated and unitised solutions 06

Awards 06

Financial performance 07

IMPACTFUL INTENT RPI in a time of transitionImpactful intent 08

The wisdom of clearly defined terminology 08

Beyond bricks and mortar: our impactful approach 09

Our impactful approach to RPI 10

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

PERFORMANCE OUTPUTS Setting RPI targets within our investment processReview of RPI targets: 2017-18 22

Benchmarking performance against peers 23

Principles for Responsible Investment 23

GRESB ratings 24

Indirect and joint-venture funds 24

Environmental performance and outputs 25

Reporting and certificationsGRI G4 assessment 28

Advisor statement 31

Carbon offsetting 31

HERMES INVESTMENT MANAGEMENT 3

WHO WE AREOutcomes beyond performance

SECTION 1

We manage £36bn on behalf of institutional and retail investors based in 24 countries around the

world. Our investment capabilities span public and private equity and debt, infrastructure and

real-estate solutions.

We help asset owners and asset managers actively engage on

investments totalling over £359bn. Our stewardship services

collectively support more than 25m current and future pensioners

and savers.

We employ 470 talented individuals across the group,

principally based in London, with other locations including Singapore and New York.

£36bn £359bn 470

Hermes Investment ManagementWe 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.

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.

KEY FACTS1

RESPONSIBLE PROPERTY INVESTMENT REPORT 20184

Our integrated responsible investment approachHermes Real Estate is committed to acting consistently and clearly as stewards of the assets in which we invest, with the aim of delivering investment excellence. With a strong focus on the income component of total returns and a disciplined approach to risk, we seek to deliver consistent outperformance on a risk-adjusted basis to deliver robust and repeatable performance in line with our fiduciary responsibility to clients. We see environmental, social and governance (ESG) risks as business-critical to our funds, and are committed to embedding responsible-investment principles across our investment practices.

With a preference for directly held real estate assets, our investment philosophy is to aim to secure liquid stock with strong performance characteristics, and to focus on stock picking and deal-led investments in order to exploit market opportunities. We target marginally higher income yield, which is supported by strong

underlying fundamentals. We actively manage the assets and our exit strategies are executed in the context of the macroeconomic environment. This strategy draws on a clear understanding of the drivers of future performance, including an in-depth awareness of how occupiers assess real estate, the needs of communities and of the evolving regulatory framework. We comply with all current legislation, and demonstrate a preparedness for forthcoming regulatory requirements. This approach enables us to anticipate and respond to market demands, and to maintain our reputation for delivery.

Since 2008 we have been integrating responsibility principles across our investment and asset management processes, including: investment, development, property management, and occupier and community engagement. Through sector engagement and public policy advocacy, we continuously work with the real-estate industry to support positive change through development tools and methods, and by challenging established views.

Hermes Real Estate

2 Source: Hermes Real Estate as at 30 September 2018, unless otherwise specified.

Investing since 1983Team consists of 21 property professionals: seven in fund

management and 14 in asset management

Offers client-focused property investment solutions

UK-based, with investments in the UK, Europe, Americas, and the

Asia-Pacific region£7.6bn assets under management,

gross asset value (GAV)2

KEY FACTS


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 fund

Hermes Property Unit Trust (HPUT)

Exempt unauthorised UK property unit trustClients: About 110 investors, primarily UK local authority and corporate pension funds and charitiesGross asset valuation: > £1.5bnHermes’ role: fund and asset managerAsset classes: office, retail, industrial, leisure and otherGeography: pan-UKPerformance: 2017 MSCI Best Performing Balanced Fund in the Property Funds Index in the UK Market

Segregated mandate

Global Real Estate Mandate

Client: UK pension schemeGross asset valuation: <£5.0bnHermes’ role: fund and asset managerAsset classes: office, retail, industrial and residentialGeography: internationalPerformance: 2018 MSCI Best Performing Segregated Pension Fund in the UK market > £700m

Joint venture

Hermes Central London

Clients: Canada Pension Plan Investment Board and BT Pension SchemeGross asset valuation: > £0.5bnHermes’ role: fund and asset managerAsset class: officeGeography: city-specificPerformance: 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.


Awards

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).

Financial performance

Outperformance being generated in client mandatesassets under management, GAV Exceptionally strong deal flow:

excess of £5.9bn (GAV) in transactions over the last five years

£7.6bn £5.7bn

KEY FACTS4

�� Professional Pensions UK Pensions Awards 2018: ESG Manager of the year�� Professional Pensions UK Pensions Awards 2018: Alternative Investment Manager of the Year�� MSCI UK Property Investment Awards 2018: Segregated Pension Fund – BTPS UK Portfolio Pensions and Investment Provider Awards 2017: UK Property

�� UK Pensions Awards 2016: Property Manager of the Year�� MSCI IPF UK Property Investment Awards 2016

And

GRESB global benchmark: three Hermes strategies were ranked five stars in 2018 (See pg. 24)

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.

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

Blended Hermes UK Return5 UK Quarterly All Property6 Relative Difference10 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


We believe that responsible property investment (RPI) can provide both superior financial returns and a better, more sustainable society. We invest actively and take a long-term approach to understanding the drivers of the changing real-estate landscape and the related shifts in demographics and lifestyle.

Responsible investment has been at the heart of our real-estate investment strategy for many years, and our focus on generating holistic returns commits us to delivering excellent long-term investment performance and stewardship while being acutely conscious of the impact that our activities have on communities and the environment. In the long run, businesses can only thrive if society and the economy do so as well and natural resources are not compromised.

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 urbanisation; the impact of a globalised workforce and migration; as well as environmental stress, resource scarcity and climate change.

Real-estate markets are increasingly pricing in sustainability risks more accurately, including externalities and forcing participants to rethink how investors need to fundamentally alter their operations.

That is why our RPI philosophy is based on employing patient capital 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.

The future of cities is about place and the individual, not buildings. Cities must work for everyone and have a positive impact on society at large Chris Taylor, Head of Private Markets, Hermes Investment Management

The wisdom of clearly defined terminologySocrates observed that “the beginning of wisdom is the defining of terms”. This insight, from one of history’s greatest thinkers, serves us well as RPI practitioners.

Our market has developed a language of its own in recent years and some of its jargon can be confusing. For instance, it’s important to distinguish between concepts such as ESG integration, responsible investment and impact investment.

In recent years, first ESG integration and then responsible investment and ownership have changed from outliers to entering the mainstream of modern investment strategies. A real-estate investor or fund manager with an ESG focus integrates their assessment of these factors into their fundamental analysis of assets, use this as one of many inputs in understanding the risk and value of an investment. A process-based approach, it aims to consider externalities in investment decisions. Our practice of responsible

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.

There have been, however, relevant queries about the limitations of these approaches in delivering measurable outcomes to the economy and society. On the back of these concerns, impact and thematic investing has gained rapidly growing interest.

Recognising that developing impact strategies in the real-estate market is a work in progress, the industry is making sense of this new approach. We are contributing to this effort by working with the Property Working Group of the United Nations Environment Programme – Finance Initiative (UNEP FI), developing common definitions and frameworks, assessment methodologies and impact- measurement indicators that can be applied in the industry. This year, we have also contributed to UNEP FI’s Positive Impact Initiative. By working with UNEP FI and its collaborating partners – 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.

IMPACTFUL INTENTRPI in a time of transition

SECTION 2

Our interpretation of an impactful investment approach is as follows: to intentionally seek a defined positive environmental or social outcome in a particular place or market as a core focus of the investment strategy, alongside strong risk-adjusted financial returns.


This is a tool aimed at investors and asset owners, providing a series of guiding questions they should ask themselves if they are interested in building an impact approach into their current responsible-investment processes.

Beyond bricks and mortar: Our impactful approachBy investing for outperformance while aligning our strategy to the needs of society as it changes, rather than managing pure-play impact-investment products, we seek to help deepen the practice of responsible investment. This means using a purposeful framework to focus our real-estate operations on impact themes, and within these targeting activities with measurable environmental, economic and societal impacts. Intentionality, a conscious aim to create positive impacts through investments, and transparency are key elements of this approach.

We have developed an impact-investment process to help identify and prioritise impact themes and activities. Starting with the classification of the positive outcomes we seek and are able to contribute to, and the people and environments that will be impacted, we go on to identify the most relevant impact themes. We then implement a methodology for achieving them and a process for measuring outcomes.

An important step in our process is assessing and reviewing how our approach and investment themes support the delivery of the Sustainable Development Goals (SDGs), an ambitious set of targets seeking to end poverty, protect the planet and promote peace, equality and prosperity for all. Real-estate investors can play an important role in the global push by governments, the private sector and individuals to meet the goals.

An impactful approach to RPI supports this in many ways – from 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).

Through this process, we have identified our priorities and decided to focus our efforts on three core impact themes that can addressed through RPI:

■ Meaningful place-making ■ Climate and resource efficiency ■ Health and wellbeing

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 not covered by our current mandates. We acknowledge the need to assess how we could expand the range of SDG sub-targets that we address, deepening the feedback loop between our investment 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 labour rights. Acknowledging a clear gap in affordable and accessible housing, we are considering how we could work with local authorities to increase the amount of affordable housing in our developments, and in assessing build-to-rent opportunities focused on young professionals in the middle-income bracket, providing them with accessible housing. Looking into our supply chains, we could engage with occupiers to support their contributions to delivering the SDGs.

We have identified the following three potential future impact themes to pursue through our RPI approach:

�� Labour, and jobs and skills development

�� Affordable and accessible housing

�� Tenant engagement

Having identified the above themes, which we can integrate into our current mandates, the next step is to define our intentionality. This involves setting clear objectives about achieving real-world outcomes and selecting metrics to accurately track progress and aligning the results with SDG sub-targets.

Through these themes we aim to deliver positive outcomes for tenants, local communities and the environment. For the latter, we focus on positively impacting natural capital: the world’s stock of natural assets, including geology, soil, air, water and all lifeforms.

We use key performance indicators (KPIs) and related performance targets to inform management strategies, and measure and report on environmental performance. For socio-economic impacts, we combine qualitative and quantitative information to compile case studies that capture outcomes – such as those achieved for communities and natural capital through urban regeneration.

Positive-impact framework for real estate investment

Source: UNEP FI et al. "Positive Impact Real Estate Investment Framework," published November 2018. Accessed via: http://www.unepfi.org/wordpress/wp-content/uploads/2018/11/Positive-Impact-Initiative_Real-Estate-Investment-Framework_Nov-2018.pdf

CLARITY OF IMPACTIdentifying and creating impact from investment activity

MARKET AND SUSTAINABLE RETURNSNo trade-off in financial results while generating economic, social and environmental benefits

ADDITIONAL FINANCE AND/OR IMPACT FLOWSTo underserved products and markets; supporting physical and social factors that contribute to long-term economic performance

MEASUREMENT OF IMPACTPositive and negative attributes and mitigating the negative; linking ex-ante and ex-post intent with impact

IMPACT


http://www.unepfi.org/wordpress/wp-content/uploads/2018/11/Positive-Impact-Initiative_Real-Estate-Investment-Framework_Nov-2018.pdf

Our impactful approach to RPI

Hermes Real Estate

WHAT? Impact themes: What outcomes we aim to contribute to?

WHAT? Intentionality: Do we have targets on expected outcomes?

WHO? Who experiences the outcomes?

HOW MUCH? Outputs measured: Typical output indicators used to assess and measure impact

CONTRIBUTION / ADDITIONALITY The contribution that our investment makes in addition to what the market would provide anyway / other key influencing stakeholders

OUTCOMES SDGs we seek to contribute to. (See page 20 for details of targets)

1.Urban regeneration Quantitative environmental targets Quantitative and qualitative social objectives

Occupiers

Local communities

Natural capital

�� Total investment�� Skill centres / recruitment centres�� Jobs created / local jobs �� Apprenticeships / skills training provided�� Training which led to certified skills�� New education facilities�� People accessing new education facilities �� Prevailing / living wages�� New homes / affordable / student accommodation�� 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

Local and regional public authorities

Other investors

The wider public and the media

Local communities

NGOs and other public bodies

Quantitative targets set in 2006 for energy, water, waste Quantitative and qualitative requirements set for refurbishment and developments: Contamination remediation, material and waste management, energy, water, biodiversity

Occupiers

Local communities

Natural capital

�� Watts of energy conserved (kWh)�� Renewable energy generated (kWh)�� Tons of CO2 emissions avoided�� Urban infrastructure efficiency �� Litres of waste saved�� Tonnes of waste recycled and re-used�� Use of recycled material �� Biodiversity protection�� Green certification (LEED, BREAM, etc.)�� Innovation – net-zero energy buildings �� Access to energy


Other investors



Quantitative and qualitative objectives

Occupiers

Local communities

Natural capital

�� Land de-contamination and the use of safe and healthy materials in development and refurbishment�� Risk and safety measures in development, refurbishment

and property management�� Wellbeing certification (Wellness; Reset)�� Active wellbeing management in properties through

measurement and management of CO, CO2, 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

Other investors


Local communities


POTENTIAL IMPACT THEMES TO BE DEVELOPED IN THE FUTURE

4 JOBS AND SKILLS DEVELOPMENT

Occupiers

Local communities

�� Skills training provided�� Training which led to certified skills�� New education facilities�� People accessing new education facilities �� Jobs created�� Prevailing/living wages


Other investors


5 AFFORDABLE AND ACCESSIBLE HOUSING

Occupiers

Local communities

�� Percentage of affordable/social housing delivered�� Units set aside for low-income residents�� Social-housing units


Other investors


6 ENGAGEMENT ON TENANT ACTIVITIES

Occupiers �� List of occupiers by sectoral activities�� Percentage of occupiers involved in activities identified as

having positive social and environmental impacts�� Percentage of occupiers with activities causing negative

impacts (to be defined)

Other investors

Other companies

2 CLIMATE AND RESOURCE EFFICIENCY

3 HEALTH AND WELLBEING OF COMMUNITIES AND OCCUPIERS

1 URBAN REGENERATION


Our impactful approach to RPI

Hermes Real Estate

WHAT? Impact themes: What outcomes we aim to contribute to?

WHAT? Intentionality: Do we have targets on expected outcomes?

WHO? Who experiences the outcomes?

HOW MUCH? Outputs measured: Typical output indicators used to assess and measure impact

CONTRIBUTION / ADDITIONALITY The contribution that our investment makes in addition to what the market would provide anyway / other key influencing stakeholders

OUTCOMES SDGs we seek to contribute to. (See page 20 for details of targets)

1.Urban regeneration Quantitative environmental targets Quantitative and qualitative social objectives

Occupiers

Local communities

Natural capital

�� Total investment�� Skill centres / recruitment centres�� Jobs created / local jobs �� Apprenticeships / skills training provided�� Training which led to certified skills�� New education facilities�� People accessing new education facilities �� Prevailing / living wages�� New homes / affordable / student accommodation�� 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


Other investors


Local communities


Quantitative targets set in 2006 for energy, water, waste Quantitative and qualitative requirements set for refurbishment and developments: Contamination remediation, material and waste management, energy, water, biodiversity

Occupiers

Local communities

Natural capital

�� Watts of energy conserved (kWh)�� Renewable energy generated (kWh)�� Tons of CO2 emissions avoided�� Urban infrastructure efficiency �� Litres of waste saved�� Tonnes of waste recycled and re-used�� Use of recycled material �� Biodiversity protection�� Green certification (LEED, BREAM, etc.)�� Innovation – net-zero energy buildings �� Access to energy


Other investors



Quantitative and qualitative objectives

Occupiers

Local communities

Natural capital

�� Land de-contamination and the use of safe and healthy materials in development and refurbishment�� Risk and safety measures in development, refurbishment

and property management�� Wellbeing certification (Wellness; Reset)�� Active wellbeing management in properties through

measurement and management of CO, CO2, 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

Other investors


Local communities


POTENTIAL IMPACT THEMES TO BE DEVELOPED IN THE FUTURE

4 JOBS AND SKILLS DEVELOPMENT

Occupiers

Local communities

�� Skills training provided�� Training which led to certified skills�� New education facilities�� People accessing new education facilities �� Jobs created�� Prevailing/living wages


Other investors


5 AFFORDABLE AND ACCESSIBLE HOUSING

Occupiers

Local communities

�� Percentage of affordable/social housing delivered�� Units set aside for low-income residents�� Social-housing units


Other investors



Occupiers �� List of occupiers by sectoral activities�� Percentage of occupiers involved in activities identified as

having positive social and environmental impacts�� Percentage of occupiers with activities causing negative

impacts (to be defined)

Other investors

Other companies


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 individuals, communities, businesses, local and regional authorities, and an inherent focus on sustainability helps preserve natural capital. A meaningful city is also capable of attracting global talent and financial capital.

It follows that meaningful place-making and sustainable urban regeneration contribute to the establishment and growth of these cities. Hermes has purposefully taken on further developments 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.

IMPACTFUL INVESTMENT THEMES

Manchester NOMA

Glasgow Skypark

Liverpool & Manchester Build-to-rent strategy

Milton Keynes The Centre:MK

Leeds Wellington Place

Northamptonshire Silverstone

Birmingham Paradise Circus

Oxford Milton Park

Central London King’s Cross

Hermes’ meaningful place-making developments in nine UK cities span a combined 19m sq ft and £13 billion of capital value. Chris Darroch, Director – Fund Management, Hermes Real Estate

12 RESPONSIBLE PROPERTY INVESTMENT REPORT 2018

Our place-making approach seeks to make buildings part of the community in ways that they previously were not. We respect heritage and tradition, and undertake developments sensitively to create places that resonate with communities and help create cohesive neighbourhoods. For example, office-building courtyards form part of connected public realm and facilities, such as cafes on the ground floors of buildings, are opened to the general public and thereby become amenities.

Investing responsibly to support the development of meaningful cities is a dynamic process with many phases, rather than a single event. World-class infrastructure is required, and the projects must be of a sufficiently large scale to deliver a positive impact that provides further momentum. The integrity of each development is vital, and management under single ownership allows a patient, unified and long-term approach governed by a clear vision.

A force for holistic returns

We work with communities, local authorities and other public-sector partners to avoid the silo mentality that has characterised less-sustainable developments in the past. Collaboration with all stakeholders is vital to create a broadly felt sense of belonging – it typically requires considering how the heritage of the location can be embraced, local culture enriched, educational facilities improved 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.

Our place-making strategies are underpinned by strict attention to sustainability fundamentals, including carbon reduction, reduced energy and water consumption, flood-risk management and increased recycling. We continue to promote the role of RPI in contributing to the transition to a low-carbon economy and, in particular, its ability to accrue finance for energy-efficiency measures.

For example, while climate change will undoubtedly disrupt global and local economies, a well-managed transition to a low-carbon economy could reduce or prevent the human and economic costs. It should also improve growth, generate additional high-quality jobs and reduce inequality. Place-making, with stakeholder engagement and sustainability at its core, supports the global effort to deliver this ambitious outcome.

This approach also contributes to our aim of generating holistic returns. From a purely financial perspective, it helps to increase the value of properties, retain tenants and reduce vacancy periods, lower operating costs and ultimately generate stronger income for our clients. Seen more broadly, it creates tangible socio-economic benefits for society in the form of healthier, happier and more prosperous communities that benefit from job creation, skills development and attractive amenities and public realm. Such outcomes beyond performance are evident in our NOMA development in Manchester (see case study on pages 14-15).

King’s Cross: an exemplar of impactful place-makingIn December 2017, the King’s Cross Central Limited Partnership, of which Hermes is a member, released an extensive study carried out by Regeneris, “The Economic and Social Story of King’s Cross". It details the positive social impacts of the transformative regeneration of the area, providing valuable quantitative data, such as the following highlights:

�� £3bn construction spend involving 300 local suppliers, supporting 1,300 jobs in London and 500 in the immediate areas

�� 50% increase in jobs across the immediate vicinity over five years, compared to an 18% rise in London

�� 97% commercial-property occupancy rate

�� 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.


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


NOMA: embracing Manchester’s heritage, inspiring its future

PURPOSE A place to live, work and innovateInnovative, commercial and responsible, NOMA is a 20-acre, £800m scheme in central Manchester and the largest urban development outside south-east England. It is seen as one of the major engines of the Northern Powerhouse.

The place-making project puts the interests of the community at its heart. Embracing the city’s heritage by featuring a unique mix of historic and new buildings, NOMA is creating new homes, offices, hotels, shops, restaurants and bars.

This neighbourhood-led approach to urban regeneration aims to provide an attractive, well-connected, productive and sustainable inner-city environment.

PLANNING Regeneration driven by commercial and community imperativesPrior to the NOMA project, the area was fragmented, provided limited public realm and wayfinding, had no prevailing sense of place and was not a coherent neighbourhood.

The vision and masterplan for the regeneration were developed in 2009 by the Co-operative Group and approved by Manchester City Council. It pledged to deliver a new, innovative and commercial mixed-use city-centre neighbourhood generating about 15,000 jobs. Currently, 6,000 people work across the development – achieving the target will mark a significant milestone in fulfilling NOMA’s economic role. Within this, the NOMA sustainability strategy aimed to create a smart, connected and sustainable neighbourhood with high-quality public realm and amenities. This is underpinned by the preservation of local heritage and integration of leading environmental technologies and standards for urban development.

PLACE An evolving economic and social roleNOMA was the site of Shudehill Mill, the 18th-century cotton mill that accelerated Manchester’s development as an industrial leader, and where the Co-op grew upon its distinctive values. Respecting this heritage, we are committed to making NOMA a place for successful enterprise with people and community firmly at its heart.

It is adjacent to Manchester Victoria station and in close proximity to major retail and leisure facilities, making it one of the best-connected city-centre locations in Manchester and therefore an attractive business hub and desirable place to work.

As a natural extension of Manchester’s central business district, NOMA is a cohesive neighbourhood. Its major features include:

�� Five historic buildings, which are undergoing or have been refurbished:

– Hanover: a refurbished Edwardian Baroque property providing 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, technology and digital businesses, from start-ups to national and international businesses – Dantzic: an art-deco building adjoining Federation that provides 65,000 sq ft of office space – Old Bank: undergoing refurbishment, the property will offer 75,000 sq ft of office space fronted by a period facade – Redfern: a Dutch Modernist property with 35,000 sq ft to be refurbished for office, retail and leisure uses

�� Angel Gardens, a 460-unit build-to-rent scheme targeting young professionals

�� Significant areas of public realm – Sadler’s Yard, Angel Square and City Park – which are threaded by wayfinding facilities. Sadler’s Yard, which was funded by the European Regional Development Fund, is located at the heart of NOMA and supports an extensive events and community-engagement programme.

�� Outdoor space for workers, residents and visitors to relax and participate in high-profile cultural and community events. In total, these have attracted more than 20,000 visitors and over 750 volunteers since 2015.

�� PLANT NOMA, an open design studio and exhibition space in the Redfern building, is linked to local schools, businesses, community groups and Manchester Metropolitan University.

�� The Pilcrow Pub, which is anchored to Sadler’s Yard and was built with support from 500 volunteers over an iterative nine-month process. Its design and construction involved the community at every stage and helped deliver skills training.

NOMA has also been an important catalyst for the wider Northern Gateway project, which seeks to improve accessibility, connections, housing and social infrastructure among seven neighbourhoods north of Manchester city centre.

Through the NOMA Community Fund, which was established in 2017 in partnership with Forever Manchester, the project supports grassroots community groups working with children and young people aged 11-25 years within a five-mile radius of the development. To date, approximately £25,000 has been awarded to 23 applicants.

These properties and spaces, the businesses and people they attract, in addition to aligned social and cultural initiatives, are giving NOMA a new identity, deeper sense of community and bringing more people to this part of central Manchester.

CASE STUDY


Wellington place: an economic and social hub

In Wellington Place, we have worked with developer MEPC to ensure that the interests of people inspire the buildings and open spaces we create.The 20-acre site – originally part of Leeds Central railway station, which closed in 1967 – was converted into a green space in 2009. At this point, MEPC collaborated with the University of Leeds to survey local residents in order to understand what they would like a new mixed-use development in the area to provide. The results showed an appetite for the development of a valuable and well-used community asset, providing: attractive employment opportunities and housing in modern, high-quality properties; and new and secure public realm, football pitches, allotments and green spaces.

ECONOMIC DEVELOPMENTDevelopment 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 additional 550,000 sq ft due to be completed in the next two years.

Wellington Place has become the largest and most prestigious new business quarter in the city. There are 13 businesses on site, employing 3,650 people – primarily in skilled, value-adding sectors which the Leeds City Region identifies as growth priorities. As the selected new hub for both HM Revenue and Customs and NHS Digital, the development will attract an additional 6,000 employees by 2020.

All of the new buildings achieved an excellent BREEAM rating in both the design and construction stages. The most recent buildings all target an Energy Performance Certificate rating of B, the second-highest rating for energy efficiency.

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.

FOCUS ON COMMUNITY AND SUSTAINABILITYBringing together businesses and the community, the diverse and numerous wellbeing and community initiatives throughout Wellington Place embody the philosophy of the development.

Street-food stalls and markets, musical performances and a summer barbecue attended by around 2,500 people are among the events that have been held on the site. Weekly activities include book clubs, history talks, a Wellington Place choir and photography clubs. These amenities and events are welcomed by employees, helping to generate consistently high satisfaction ratings of more than 95% in MEPC customer surveys.

The development also supports wellbeing in the community, with amenities and activities including free bike hire and bicycle storage, health and fitness clubs, counselling, stress-management workshops and nutrition talks. Two-thirds of occupiers have reported in the MEPC survey that the amenities and activities on site had helped to improve the health and wellbeing of their staff.

TOWER SQUAREWellington Place supports the wider regeneration of central Leeds by improving pedestrian routes for people living west of the site, in turn creating an attractive and landscaped route to access the city centre through the heart of the development.

A major new feature of public realm, Tower Square, was opened in 2016. It is anchored by an 1850s Grade II-listed lifting tower, which harnessed steam power to hoist railway wagons from the old passenger line to the goods yard, and is accompanied by one of the new office buildings. The boulevards radiating out from the tower now form one of the largest public areas in Leeds. It includes landscaped trees and plants, picnic tables and outdoor terraces from the surrounding restaurants, cafes and bars, and provides the space needed for public events.

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

CASE STUDY


The boulevards radiating out from the tower now form one of the largest public areas in Leeds.


2. Climate and resource efficiency Buildings account for approximately one-third of the world’s energy consumption, global greenhouse gas (GHG) emissions and 30% of natural-resource usage. Focusing on preventing further climate change and maximising resource efficiency therefore form a purposeful real-estate investment theme with significant potential to contribute to a number of the SDGs, which we recognise in our investment strategies (see infographic on pages 20-21).

Since 2006, our baseline year, Hermes Real Estate Investment Management (HREIM) has implemented a comprehensive climate and resource-efficiency programme throughout the lifecycles of our assets. It is driven by a detailed management plan and aims to achieve specific targets, with progress gauged according to metrics and qualitative assessments.

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 carbon-dioxide emissions avoided, the energy-efficiency of urban infrastructure, increased access to energy and the adoption of innovations such as the conversion of buildings into properties with near-zero energy usage.

These would measure our progress towards achieving targets for reducing energy and water usage, carbon emissions and waste. They would also capture our efforts to responsibly refurbish properties, which involves remediating sites to eliminate contamination, preserving biodiversity, and reducing waste, transport distances, waste and energy and water usage. The performance indicators for our assets provide a comprehensive range of detailed results for our resource-efficiency and climate-change programmes. Our performance outputs for climate and energy efficiency include having, since the baseline year in 2006, achieved an average of 8% reduction in emissions every year on the Hermes’ like-for-like portfolio and having delivered a significant improvement in energy efficiency by reducing the carbon intensity of offices by 66% since 2006 (see section three, starting page 22, for details).

In addition to capital expenditure projects aiming to achieve energy and carbon-emission reductions, we continue to emphasise ‘quick wins’ through best-practice sharing as part of our Responsible Property Management programme. One example is our Collaborative Asset Performance Programme (CAPP), which has been rolled out

across our properties. At Sovereign House, Reading, our CAPP programme has identified a further 15% of annual savings through energy- and carbon-efficiency measures. Another has been the Christmas and Easter shutdowns undertaken at several of our sites during 2017. Through this initiative, Cavendish Square saw a 51% reduction compared to a typical operating day and Abbey Gardens reduced its consumption by 74%. This also highlighted equipment that was not easily shut down, and further investigations aim to make our assets even more efficient.

A number of our best-performing properties have been sold in the past year. The strong long-term returns they generated demonstrate the effectiveness of our active asset-management strategy in increasing the value of buildings – which involves energy-efficiency enhancements, among other efforts to make their operations more sustainable – in addition to our correct understanding of occupiers’ demands and astute timing throughout the real-estate cycle.

Figure 2. The right kind of downward trend: reduced carbon emissions and greater energy efficiency throughout asset lifecycles contribute to outperformance

Crystal Peaks Shopping Centre: -52%Wimbledon Bridge House: -47%242 Marylebone Road: -45%

Royal Victoria Place: -72%2 Cavendish Square: -29%Aldgate House: -44%

4000

3500

3000

2500

2000

1500

1000

500

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Changes in absolute carbon emissions for landlord-controlled properties across theportfolio, that have delivered efficiency savings between 2006 and 2017(tonnes CO2 emissions/year)Percentage figures below compare 2017 with the acquisition year

-44% -45% -72%

-29% -47% -52%

Source: Hermes as of December 2017.


3. Health and wellbeing

An average person will spend about 80% of their time indoors – either in homes, offices, or retail and industrial sites. This provides real-estate investors with an excellent opportunity to create positive social outcomes: to provide environments that help improve the health and wellbeing of occupiers. Furthermore, it’s an impact that is directly aligned with SDG three, Good Health and Well-being.

We aim to increase comfort, minimise pollution and enhance liveability for occupants and to help improve the quality of life in the communities in which our buildings exist. For example, to achieve this within properties, we can improve the air-conditioning system, create

break-out spaces that foster interaction and relaxation, provide access 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.

We piloted two wellbeing programmes in 2017-18, focused on improving air quality and the comfort of building occupants. First, a wellbeing-focused CAPP programme, called CAPP+, targeted greater occupier engagement, wellbeing and comfort; second, we earned one of the earliest RESET Core and Shell Certification designations in Europe. As a result, we are retrofitting smart technologies into the properties that were tested, and are confident that this will improve the quality of occupants’ experience while increasing energy efficiency, thereby lowering costs and carbon emissions.

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.

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


SDG TARGETS COVERED BY OUR IMPACTFUL INVESTMENT THEMESCorporate Social Responsibility at Hermes Hermes Real Estate impact themes

0 HERMES CSR

SDG targets

4.6 | 8.7 | 10.4

3 HEALTH & WELLBEING

SDG targets

3.9 | 10.3 | 10.4 | 12.2 | 12.4 | 12.5

1 MEANINGFUL CITIES

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


HERMES INVESTMENT MANAGEMENT

SDG TARGETS EXPLAINED

Potential future impact themes

4 LABOUR & SKILLS

SDG targets

4.4 | 4.7 | 8.7 | 8.8 | 10.3 | 10.4

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

4.7 Ensure that all people undergoing education learn the knowledge and skills required for sustainable development

6.3 Improve water quality while halving untreated wastewater and increasing safe reuse

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

9.4 Upgrade infrastructure and retrofit industries to make them sustainable

10.3 Ensure equal opportunity and reduce inequalities

10.4 Progressively achieve greater equality through fiscal, wage and social-protection policies

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

12.6 Encourage companies, especially large and transnational companies, to adopt and report regularly on sustainable practices

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

5 AFFORDABLE & ACCESSIBLE HOUSING

SDG targets

1.4 | 10.3 | 11.1


SDG targets

3.9 | 6.3 | 6.4 | 7.2 | 7.3 | 8.4 | 8.7 | 8.8 | 9.4 | 12.2 | 12.4 | 12.5 12.6 | 12.6.1

To read the full SDG targets, please visit: www.un.org/sustainabledevelopment/sustainable-development-goals


http://www.un.org/sustainabledevelopment/sustainable-development-goals

Setting a clear intention to deliver specific outcomes through our RPI programme since 2006, we have maintained a number of ESG targets throughout all of our investment processes. Our targets cover our directly managed UK properties over which we have management control, which represent 70% of our total UK portfolio.

These targets, and the tools and instruments used to implement and monitor the outcomes, are reviewed on a regular basis by the Hermes RPI steering group. We report on performance against these targets on an annual basis.

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

PERFORMANCE OUTPUTSSetting RPI targets within our investment process

SECTION 3


Progress

Environmental TargetsCO2 emissions standing portfolio Reduce landlord-controlled absolute carbon emissions by 40% of our directly managed standing portfolio by 2020 compared to our 2006 baseline*.

Not achieved due to increase size of 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 peersWhen monitoring and reporting the impact of our investment initiatives, it is also important to assess and compare the relative effectiveness of our programme compared to a peer group of UK real-estate investors.

Principle for Responsible Investment

Hermes is a founding member and signatory of the Principles for Responsible Investment (PRI). In 2018, Hermes was rated A+ on strategy and governance by the organisation, and Hermes Real Estate 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.


GRESB ratingsUnder 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.

Fund Score 2018Peer group

averagePeer

comparison 2018 GRESB

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 fundsIndirect 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

Entity name ScoreMP

scoreIM

scoreGreen-

star?GRESB rating

Performance v benchmark

Performance v peer group Peer group

Selection Weighted Average 75 85 72 8/9 N/A N/A

Lionstone Hermes Real Estate Ventures Lionstone Investments

92 91 92 Yes United States Office

Dexus Wholesale Property Fund Dexus

91 100 87 Yes Australia Diversified – Office/Retail

BlackRock Asia Property Fund III L.P. BlackRock

88 86 88 Yes Asia Office

Nippon Building Fund Inc. Nippon Building Fund Management Ltd.

87 88 87 Yes Japan Office

M&G Asia Property Fund M&G Real Estate

81 96 75 Yes Asia Diversified

thecentre:mk LP Hermes Real Estate

77 93 71 Yes United Kingdom Retail

Hercules Unit Trust British Land Company Plc

67 88 60 Yes United Kingdom Retail

Gotham Segregated Account I Sentinel

53 51 54 Yes United States Residential

HUH Fund Hermes Real Estate

41 72 31 No United States Residential


Environmental performance and outputs

Annual change in carbon emissions on a like-for-like basis for eight rolling quarters adjusted for heating degree days (%)

Changes in absolute carbon emissions (scope 1 and 2) for landlord-controlled standing portfolio between 2006 and 2016 (tonnes CO2e/year). Percentage figures below compare 2017 with 2006 baseline.

-3%-5%

-7%

-5%

1%

-18%

-3%

-7%-6%

-4%

-2%

-6%

-8%

-11%

8%

-22%

-6% -7%

-16%

-3%

-6%

-16%

-4%-5%

-8%

-2%

-4%

-16%

-4%

-9%-10%

-12%

-17%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

38 Properties 59 Properties 61 Properties 45 Properties 45 Properties 44 Properties 45 Properties 68 Properties 60 Properties 64 Properties 64 Properties

2006to

2007

2007to

2008

2008to

2009

2009to

2010

2010to

2011

2011to

2012

2012to

2013

2013to

2014

2014to

2015

2015 to

2016

2016 to 2017

Electricity

Natural gas

CO2e

49 75 69 76 83 75 75 69 103

105

123

104

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Coverage by No. of applicable properties All properties Offices – Landlord controlled (excl occupier if submetered) Offices – consumption (incl occupier) Shopping Centres

••%

••%

••%

••%

straight years with like-for-like emissions reductions

emissions reductions across the like-for-like portfolio

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

1117%8%

emissions decrease against 2006 baseline

emissions reduction on 2016, largely due to the decrease in portfolio size26%

4%

Since the baseline year in 2006, Hermes’ like-for-like portfolio has achieved a reduction in emissions every year, at an average of 8% per year. In 2017, the like-for-like portfolio has seen a 17% reduction in emissions which can be attributed in part to the 15% decrease in the electricity emissions factor relative to 2016, alongside numerous efficiency projects that have been implemented across the portfolio.

When normalising for weather based on heating degree days, there has been a decline in natural-gas use of 16% on 2016, while for 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).

Over the course of 2017, several high-profile assets were sold, including HFO retail park and CIS Tower at NOMA. With few energy-intensive new acquisitions coming into the portfolio over the course of the year, the overall trend was a decrease in emissions. This was also accompanied by the continued implementation and development of energy-saving initiatives across the portfolio, such as CAPP and Asset Analytics. Offices account for 63% of overall portfolio emissions, compared with 22% for shopping centres, while retail and industrial properties account for 13%.


Changes in carbon intensity for shopping centres and offices between 2006 and 2017 (kg CO2e/m2/year). Percentage figures below compare 2017 with 2006 baseline6

0

10

20

30

40

50

60

70

80

0

20

40

60

80

100

120

140

160

180

200

-52%

-66%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Coverage by number of applicable properties Shopping centres Offices – consumption (incl occupier)

44 42 44 44 36 34 43 39 59 62 68 51

Carbon intensity by lettable floor area is an important metric to monitor as it signifies the progress made in sustainable lettings across the portfolio. In 2017, the same downward trend in intensity for offices and shopping centres seen over the past two years continued, with a 14% reduction on 2016. Of the like-for-like portfolio between 2016 and 2017, 82% of the properties have seen a decrease in carbon intensity.

Our offices in particular have benefitted from the roll out of CAPP. In 2017 we implemented CAPP in 14 of our offices (the current figure is 10, with 4 assets being sold) and have achieved measured and verified savings of more than £55,000, with more than £120,000 of further savings identified.

6 Note: only assets with a full year's worth of consumption are included in this chart.

reduction achieved by offices since 2006

reduction recorded by shopping centres since 2006

reduction among offices (including occupiers) since 2016

52%16%

66%

Changes in water intensity for landlord-controlled like-for-like portfolio between 2006 and 2017 (m3/m2/year)

Water intensity has seen a decrease for both offices and shopping centres from 2016. Offices have seen a decrease of 37% from the 2006 baseline. This contrasts with the increase in water intensity for offices by 11% between 2015 and 2016. Year-on-year reductions at several high-consuming assets, including Aldgate House (-17%) and Wimbledon Bridge House (-4%), account for this decrease.

Shopping centres have seen a water-intensity decrease of 16% year-on-year. This can be attributed to reductions at the sites recording the greatest consumption, with The Centre:MK seeing a 14% consumption decrease as a result of the Deer Walk reconfiguration that delivered ‘best in class’ guest facilities, including a new suite of toilets, and Crystal Peaks Shopping Centre cutting consumption by 5%.

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.

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

35Properties

35Properties

36Properties

35Properties

27Properties

24Properties

34Properties

35Properties

39Properties

36Properties

47Properties

35Properties

Offices – landlord-controlled (excl occupier if submetered) Shopping centres

-37%

-1%

decrease among offices since 2006

decrease recorded by shopping centres since 2006

37%1%


The proportion of waste by disposal route for the standing portfolio, measuring waste by mass year-on-year (%). Weight (kg) is presented in 2017.

Onsite recycling remains a priority for all our assets. The Centre:MK is a key shopping centre in our portfolio, and in Q4 2016 undertook a strategic review of its waste-management performance. Since January 2017, The Centre:MK has raised its total monthly rate of recycling from an average of 55% to 72%. This is due in part to the 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 key retailers on their waste strategies and improved their segregation of waste. Finally, a change of waste carrier has reduced the amount of contamination previously seen and furthered the training of the staff at the centre.

Similar initiatives are being undertaken at all our assets and waste- management programmes continue to improve, through tenant and employee engagement and ever-improving data quality.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2,00

7kg

2,98

9kg

2,39

2kg

447k

g

Direct to landfill or Incineration without energy recovery

Sent to materials recovery facility but recovery method unknown

Incineration with energy recovery

Offsite recovery (at materials recovery facility)

Segregated onsite for recycling, re-useor composting

0

2,000

4,000

6,000

8,000

10,000

12,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Direct to landfill or Incineration without energy recovery

Sent to materials recovery facility but recovery method unknown

Incineration with energy recovery

Offsite recovery (at materials recovery facility)

Segregated onsite for recycling, re-useor composting

of waste incinerated with energy recovery30%

of waste recycled, re-used or composted on site

of recycling carried out off site

26%38%


GRI G4 materiality assessmentG4 General Standard Disclosures

Indicator Include? Description Reporting Boundary Page Section

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

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.

REPORTING AND CERTIFICATION

SECTION 4

GRI G4 assessment


GRI G4 materiality assessmentG4 General Standard Disclosures continued


STAKEHOLDER ENGAGEMENT

G4-24 Yes (Mandatory) Stakeholder groups engaged Directly Managed Portfolio 8-21 Advocacy: Improving the Pricing of Risks

G4-25 Yes (Mandatory) Basis for identification and selection of stakeholders with whom to engage Directly Managed Portfolio 2 Report Coverage

G4-26 Yes (Mandatory) Approach to stakeholder engagement Directly Managed Portfolio 2 Report Coverage

G4-27 Yes (Mandatory) Key topics and concerns that have been raised Directly Managed Portfolio

8-21 22-27

Advocacy: Improving the Pricing of Risks, Positive Impact Investing: How to Apply it to 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

G4-31 Yes (Mandatory) Contact point for questions regarding the report or its contents Portfolio Wide 32Hermes Report Website: www.hermes-invest-ment.com/ukw/capabilities/real-estate/respon-sible-property-investment/

G4-32 Yes (Mandatory) The ‘in accordance’ option the organisation has chosen and reference to the External Assurance Report Portfolio Wide 31

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

G4-36 Yes (Optional) Whether an executive-level position has responsibility for economic, environmental and social topics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-37 Yes (Optional) Processes for consultation between stakeholders and the highest governance body on economic, environmental and social topics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

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

G4-41 Yes (Optional) Processes for the highest governance body to ensure conflicts of interest are avoided and managed Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-42 Yes (Optional) Report the highest governance body’s and senior executives’ roles Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-43 Yes (Optional) Measures taken to develop and enhance the highest governance body’s collective knowledge of economic, environmental and social topics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-44 Yes (Optional) Processes for evaluation of the highest governance body’s performance with respect to govern-ance of economic, environmental and social topics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-45 Yes (Optional) Highest governance body’s role in the identification and management of economic, environ-mental and social impacts, risks, and opportunities Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-46 Yes (Optional) Highest governance body’s role in reviewing the effectiveness of the organisation’s risk-manage-ment processes for economic, environmental and social topics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-47 Yes (Optional) Frequency of the highest governance body’s review of economic, environmental and social impacts, risks, and opportunities Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

G4-48 Yes (Optional) Highest committee or position that formally reviews and approves the organisation’s sustaina-bility report, and ensures that all material aspects are covered Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

ETHICS AND INTEGRITY

G4-56 Yes (Mandatory) Describe the organisation’s values, principles, standards and norms of behaviour, such as codes of conduct and ethics Portfolio Wide 4-7 Who we are: Outcome Beyond Performance

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

G4-EC2 Yes Financial implications and other risks and opportunities for the organisation’s activities due to climate change Portfolio Wide 8-21

22-27

Advocacy: Improving the pricing of risks, Positive Impact Investing: How to Apply it to Real Estate

G4-EC7 Yes Development and impact of infrastructure investments and services supported Portfolio Wide 8-2122-27

Advocacy: Improving the pricing of risks, Positive Impact Investing: How to Apply it to Real Estate

G4-EC8 Yes Significant indirect economic impacts, including the extent of impacts Portfolio Wide 8-2122-27

Who we are: Outcome Beyond Performance, Advocacy: Improving the pricing of risks,


GRI G4 materiality assessmentG4 General Standard Disclosures continued


CATEGORY: ENVIRONMENTAL

G4-EN1 Materials used by weight or volume Directly Managed Portfolio Not recorded

G4-EN2 Percentage of materials used that are recycled input materials Directly Managed Portfolio Not recorded

G4-EN3 Yes Energy consumption within the organisation Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN4 Yes Energy consumption outside the organisation Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN5 Yes Energy intensity Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN6 Yes Reduction of energy consumption Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN8 Yes Total water withdrawal by source Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN11 Yes Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

Directly Managed Portfolio No such areas identified in portfolio

G4-EN12 Yes Description of significant impacts of activities, products, and services on biodiversity in protect-ed areas and areas of high biodiversity value outside protected areas

Directly Managed Portfolio N/A as per above

G4-EN13 Yes Habitats protected or restored Directly Managed Portfolio Not measured

G4-EN15 Yes Direct greenhouse gas (GHG) emissions (Scope 1) Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN16 Yes Energy indirect greenhouse gas (GHG) emissions (Scope 2) Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN23 Yes Total weight of waste by type and disposal method Directly Managed Portfolio 25-27 Measuring Qualitative Environmental

Performance

G4-EN32 Yes Percentage of new suppliers that were screened using environmental criteria Portfolio Wide 2 Report Coverage

G4-EN33 Yes Significant actual and potential negative environmental impacts in the supply chain and actions taken Portfolio Wide 2 Report Coverage

CATEGORY: SOCIAL – LABOUR PRACTICES AND DECENT WORK

G4-LA5 Yes Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs Portfolio Wide 100%

G4-LA6 Yes Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender Portfolio Wide

Lost day rate: 2.21 per year per employee av-erage; absentee rate (exc Long Term Sickness): 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

G4-LA15 Yes Significant actual and potential negative impacts for labour practices in the supply chain and actions taken Portfolio Wide None

G4-LA16 Yes Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms Portfolio Wide None

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

G4-SO2 Yes Operations with significant actual and potential negative impacts on local communities Portfolio Wide 8-21 Positive Impact Investing: How to Apply it to Real Estate

G4-SO9 Yes Percentage of new suppliers that were screened using criteria for impacts on society Portfolio Wide 2 Report Coverage

G4-SO10 Yes Significant actual and potential negative impacts on society in the supply chain and actions taken Portfolio Wide 2 Report Coverage


Carbon-neutral certificationHermes Investment Management has offset its operational carbon emissions by working with Trees for Cities. For every one tonne of greenhouse gas (GHG) emissions that Hermes generates from its day-to-day operations and its business

travel, it purchases verified carbon offset from Trees for Cities, which guarantees an equivalent amount of GHG emissions is reduced from the atmosphere. The offsets have been generated by planting 2,942 trees in the urban fringe area of Odda Bank Quarry, a former quarry site on the border between Leeds and Bradford. The trees will offset the carbon emissions produced through the business activities of Hermes, but they will also absorb pollutant gases produced by urban transportation, provide new habitats for biodiversity, aid flood alleviation and bring interest to this previously uninspiring green area.

ADVISOR STATEMENT

Hermes' RPI programme was supported by Carbon Credentials in 2017-18. Carbon Credentials continued its role in collating, validating and reporting the RPI sustainability performance data and property characteristics for 2017.

Carbon Credentials’ independent audit team has verified, in accordance with the ISO 16064-3 standard, the greenhouse-gas emissions and energy and water data presented within this report.

This year has seen a reduction in consumption of energy and water across the portfolio, in part due to the rolling out of CAPP. This has been a significant feature of the Hermes RPI programme in 2017 and has produced greater data-driven insight at a more granular level for some of the key sites in the portfolio. This additional level of data analysis has supplemented the RPI programme as it continues to provide a framework for all stakeholders to better understand the strategy and outcomes of each asset.

The RPI programme provided the structure to ensure Hermes 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


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. BD02652 11/18 0004876

Why Hermes Real Estate?Hermes Real Estate is one of the largest real estate investment managers in the UK, with over £7.9bn Gross Asset Value (GAV)1 of assets under management in both UK and International portfolios. It offers client-focused, property investment solutions through segregated and pooled structures.1 Hermes Real Estate as at 31 March 2017

For more information, visit www.hermes-investment.com or connect with us on social media:

Our investment solutions include:Private marketsInfrastructure, private debt, private equity, commercial and residential real estate

High active share equitiesAsia, global emerging markets, Europe, US, global, small and mid-cap and impact

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

StewardshipActive engagement, advocacy, intelligent voting and sustainable development

Offices London | New York | Singapore | Denmark

HERMES INVESTMENT MANAGEMENTWe 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.