2015 SUSTAINABILITY REPORT

Transcription

1 2015 SUSTAINABILITY REPORT 1

2 ABOUT THIS REPORT This report covers the calendar year ending 31st December 2015 and is intended to be read alongside our Annual Financial Report Through this report, we aim to provide our stakeholders with a more detailed account of the key activities which we have undertaken to date to improve the environmental and social performance of our business and assets, whilst focusing on value creation. This report also charts the evolution of our sustainability strategy since its launch in 2013; explains how its key objectives are aligned with our values and business activities and outlines our plans and targets for the future. In keeping with our commitment to transparency as a fundamental pillar of our business approach, this report has been developed in accordance with the Core G4 guidelines of the Global Reporting Initiative (GRI) and the Construction and Real Estate Sector Disclosures (CRESD), as well as the European Public Real Estate Association s Sustainability Best Practice Reporting guidelines (EPRA sbpr). In compiling the information required for the GRI standard disclosure and aspect-specific indicators, we have included data on Beni Stabili s subsidiaries where it was not possible to extract financial and non-financial data. For further information on the scope of the report, see GRI indicator G4-17 on page 32. For further information about the Global Reporting Initiative, see default.aspx For further information about the EPRA Sustainability BPR, see CONTENTS CEO STATEMENT OUR BUSINESS SUSTAINABILITY TRANSPARENCY PROFESSIONAL EXPERTISE INNOVATION OUR SUSTAINABILITY PERFORMANACE EPRA TABLES GLOBAL REPORTING INITIATIVE ADVISOR S STATEMENT ASSURANCE STATEMENT For further information regarding Beni Stabili s Sustainability Strategy and achievements, please contact: Simone Pinoli sostenibilità@benistabili.it

3 2015 PERFORMANCE HIGHLIGHTS TRANSPARENCY PROFESSIONAL EXPERTISE INNOVATION Set target to increase our green-certified portfolio to 50% by 2020 Set a public target to reduce our like-for-like carbon emissions by 5% (vs our 2013 emissions) by 2016 Obtained GOLD LEED-CS Precertification for the first Symbiosis building Green-certified 22% of Beni Stabili s entire portfolio by market value through BRaVe certification 86% of our tenants are satisfied with Beni Stabili s services and buildings Committed to invest 37.8 million renovating Telecom Italia s offices Obtained 119 new EPCs - 90% of our portfolio now has an EPC All the electricity supplied at our managed portfolio is now 100% certified green electricity Launched an investment program of 60 million over two years Improved our CDP disclosure score from 25% to 87% Increased our electric cars and bicycles fleet at our Milan headquarters Received a Gold Award for exceptional compliance with the European Public Real Estate Association (EPRA) Sustainability Best Practice Recommendations (sbpr) Publicly endorsed the City of Milan to apply for EU funding under the European Commission s Smart Cities and Communities largescale demonstration ( lighthouse ) programme through the project Sharing Cities. Our Symbiosis project played a prominent role in Milan s candidacy for this funding

4 Complesso Garibaldi

5 A MESSAGE FROM OUR CEO During 2015 we ve seen substantial changes at Beni Stabili. We decided to accelerate change and position Beni Stabili to take full advantage of a recovering real estate market. We also reinforced the way we work together to achieve our ambitious goals, through several workshop sessions and training of 100% of the company on our essential process. So what are our goals? Our 2020 goals are simple: a greater focus on Milan (80% compared to 45% today); a greater diversification of tenants (20% Telecom Italia compared to 41% today); and more green buildings (50% compared to 22% today). I am proud of the progress we have made in all these areas throughout 2015, and particularly for how we accelerated the pace of greening our real estate portfolio this year. For example we started construction on our Symbiosis regeneration project in Milan. Eventually it will deliver 12 new cutting-edge, sustainable and highperformance offices. The first building has already obtained GOLD LEED-CS Pre-certification. Symbiosis fits perfectly with our asset rotation strategy which aims to continually improve the quality of our portfolio to help grow rental income and values over the long term. Although new developments offer an opportunity to get it right from the start, our biggest challenge lies in enhancing the performance of our existing assets, which represent over 95% of our portfolio. Significantly, this year we signed a new framework agreement with our main tenant Telecom Italia (which occupies nearly 50% of our portfolio). This among other things commits us to carrying out an exciting raft of renovation projects worth 37.8 million. Over the next few years, 13 prime assets will be renovated in line with ambitious sustainability, smart working and wellbeing objectives. The first tranche of renovations will serve as pilots for testing and identifying solutions replicable at other buildings. This new agreement with Telecom Italia puts Beni Stabili in a strong position for over half of our portfolio, but now we must find ways to enhance the performance of the rest. In 2015 we embarked on an ambitious 60 million two year investment program targeting underperforming and vacant assets. This is expected to create 14 million in new rental agreements and 16 million net recurring income and will improve energy efficiency. Lastly we are thrilled to receive a Gold Award from the European Public Real Estate Association (EPRA) for the second year running. Gold Awards are given to companies that successfully implement EPRA s Sustainability Best Practices Recommendations (sbpr) for non-financial reporting. This accolade is a testament to the significant progress we have made towards sharing our sustainability progress with our stakeholders in a transparent way. Christophe Kullmann Chief Executive Officer 1

6 OUR BUSINESS Beni Stabili is the leading property player in the Italian real estate market with total assets of 3.9 billion. Our assets are situated in key locations of major cities, within north and central Italy and consist mainly of offices. Beni Stabili pursues the appreciation of its assets to increase profitability and create value for its clients, partners and shareholders. As a major player in office investment and development, we foster pioneering solutions to improve the environmental performance of our buildings for the wellbeing of our tenants. With this in mind, we are developing a new business area dedicated to smart working in Milan: Symbiosis. Beni Stabili is listed on the Milan and Paris Stock Exchanges and operates through headquarters based in Milan and Rome. Beni Stabili belongs to the Foncière des Régions group, a leading real estate player in Europe that owns and manages an 18 billion portfolio located in the most attractive Our Shareholders 48.5% 5.7% 45.8% The shareholding structure of the Company consists of 48.5% by Foncière des Régions one of Europe s leading property companies and about 5.7% by Credit Agricole SA, while the free float is around 45.8% and includes a number of foreign instituational investors. Data at 31st December 2015 Foncière des Régions Credit Agricole SA Market metropolitan cities of France, Germany and Italy. Our assets consist largely of offices; which represent 91% of our total portfolio. This strategy continues to drive success across the real estate portfolio which now has a 92.8% occupancy rate and an average lease term of 9.8 years. Assets are leased to top-tier tenants, including Intesa Sanpaolo, Maire Tecnimont, the Italian Government, Auchan, Luxottica and Telecom Italia (which accounts for 52% of Beni Stabili s annualised rents). 1 Besides our investment activity, Beni Stabili also provides asset and property management and develops environmentally ambitious new offices through our development team. Our sustainable development strategy is based around three concepts: transparency, professional expertise and innovation and is described later in this report. OUR MANAGEMENT Six of our nine Board Directors since 7th April, 2016, are independent directors and one third of the directors are women, in compliance with Italian laws and regulations for listed companies. Several Board Directors are also members of special committees that direct and supervise specific aspects of corporate management. The Remuneration Committee, consisting of independent directors, is responsible for setting executive performance objectives and for verifying the actual achievement of these. Performance-related bonuses are based on an assessment of results achieved, using benchmarks and a consideration of the economic context. The Control and Risks Committee assists the Board of Directors in verifying the adequacy and effective functioning of internal controls and the risk management system. This is a comprehensive set of rules, procedures and organisational arrangements to prevent or limit the consequences of the main risks identified by our corporate risk model. It enables the achievement of strategic and operating objectives, compliance with applicable laws and regulations and accurate and transparent reporting internally and to the market. Essential to this is our Code of Ethics and Conduct, which sets out the values we aspire to in the running of our business. The Supervisory Authority monitors observance of the Code of Ethics and staff training on the important topics of corporate risk management. The Code of Ethics and Conduct is regularly updated and integrated within the Group s management procedures and can be found on our website: it. Beni Stabili s Sustainability Committee was established in 2013 and is chaired by the CEO. The committee meets on a quarterly basis. 1 Occupancy rate refers to financial occupancy on core + dynamic portfolio 2

7 OUR PORTFOLIO All of our assets are located in Italy. 91% is invested in office properties, with a focus on high-standing tenants in Milan and Rome, and 9% in diversified retail. OTHERS 14% ROME 7% NORTH OF ITALY (OTHERS CITIES) 24% TURIN 4% MILAN 45% DEVELOPMENT 6% Note: percentages are based on market values on 31st December 2015 and occupancy rates refer to physical occupancy. Predominantly Offices Mainly Prime & High Quality Assets RETAIL 9% OFFICE 91% We invest primarily in office properties, with a balanced, diversified retail portfolio and a number of qualified real estate development activities. Beni Stabili has full management control of 28 of its assets (representing 21.6% of total market value), and is therefore responsible for their energy use and associated greenhouse gas (GHG) emissions. We report on environmental performance data for 100% of these assets and the data is provided in the section Our Sustainability Performance, page 26. DYNAMIC 3% DEVELOPMENT 6% CORE 91% The portfolio is divided into the following three management categories according to the investment strategy for each property. Over 90% of the portfolio includes prime properties, let to quality tenants with medium to long term leases: Core portfolio consists of 203 prime properties, with a book value of 3,554.7 million, representing 91.1% of the portfolio. Average yield of 5.5% and average occupancy rate of 95.5%. Dynamic portfolio consists of 34 assets with varying quality and yields, with a book value of 97.8 million, representing 3% of the portfolio. The average occupancy rate is 20.7%. Development portfolio consists of three projects located in Milan and Turin, with a book value of 250 million, representing 6% of the portfolio. 3

8 OUR TENANTS The largest tenant in our office portfolio is Telecom Italia (52%), followed by Intesa Sanpaolo (9%), Maire Tecnimont (6%) and government (4%). These are followed closely by key retail tenants Auchan (4%), Luxottica (2%) and Coin (2%). The occupancy rate at 31st December 2015 of the core and dynamic portfolio, whose leasable area amounted to 1.7 million m 2, was 92.8%. The annual rental income was million and corresponds to a gross return on the market value of 5.4% (5.7% topped-up). The average remaining term of the lease contracts across the portfolio is approximately 10 years. This has improved thanks to an agreement signed in 2015 with Telecom Italia which doubled the duration of leases with Beni Stabili s main tenant. We are now focused on improving the occupancy rate of the non-telecom Italia portfolio, which is currently 86.1%. This will be achieved with an ambitious investment program of 60 million over two years, targeting 14 million of new rentals and 16 million net recurring income. BENI STABILI ACHIEVES RENT TARGETS IN COMPETITIVE MARKET In 2015 Beni Stabili successfully signed new rental agreements worth 5.6 million in annualised rents. It also re-let 11.5 vacant floors in Garibaldi Tower A at the same rent per metre squared. Energy efficiency and innovation feature prominently in the Garibaldi Towers, specifically through bioclimatic architectural principles and an outdoor air pre-cooling system utilising geothermal technologies. Green electricity is also produced on-site by over 800m 2 of solar panels. Beni Stabili is currently working with tenants at this location to customize their spaces, and to create hi-tech, efficient spaces, using smart technologies. It has developed apps for tablets, enabling tenants to access information about the Garibaldi Towers, including their environmental credentials. 41 new contracts for 5.6m annualised rents 11.5 floors re-let 6,522 m 2 at the same rent per m 2 Complesso Garibaldi BENI STABILI EXTENDS PARTNERSHIP WITH TELECOM ITALIA Our Tenants % Tenant Rent/yr ( /100) 52% Telecom Italia % Intesa San Paolo Bank % Tecnimont % Government % Auchan % Luxottica % Coin % Itedi (LaStampa) % Legance % Agos-Ducato % Others In 2015 Beni Stabili signed a framework agreement to extend and enhance its partnership with Telecom Italia, its main tenant. This, among other things increased the average maturity of Telecom Italia s lease agreements from 6.4 years to over 15 years in exchange for a 6.9% reduction in rent. Doubling the duration of leases with its main tenant puts Beni Stabili in a strong position for over half of its portfolio. Improved visibility on each asset Increasing Beni Stabili s total portfolio average maturity to 9.8 years Capex plan for 37.8 million to be spent by Beni Stabili in 2/3 years, mainly on core assets, benefitting from the extension of lease maturity Disposals of 2 assets in the suburbs of Rome for million 5 assets million value under study with potential redevelopment opportunities 4

9 OUR REAL ESTATE STRATEGY In 2015 the Board of Directors appointed Christophe Kullmann as CEO to accelerate the execution of our strategic priorities; positioning us to take full advantage of the anticipated recovery of the Italian real estate market. Our value creation strategy aims to continually improve the quality of the portfolio to help grow rental income and values over the long term. In particular, we have established three ambitious goals for 2020: a greater focus on Milan (80% compared to 45% today); more green buildings (50% compared to 22% today); and greater diversification of tenants (20% Telecom Italia compared to 52% today in terms of rental income). In 2015, we made substantial progress in these areas. Construction of 12 new smart and sustainable offices commenced in the Symbiosis regeneration area in Milan. We also acquired two office buildings in downtown Milan to transform into Class A, sustainable space. Indeed much of the focus in 2016 will be on improving the quality of the portfolio by upgrading ( 60 million of Capex) offices while disposing of Telecom Italia and non-core assets was already a record-breaking year in this respect with 257 million of disposals and sale agreements achieved. In 2016 Beni Stabili plans to expand and strengthen its real estate capabilities, building a stronger and more cohesive team poised to lead the recovery of the market and to achieve these ambitious goals. OUR STRATEGIC GOALS 2020 TARGETS 80% Milan focus More diversified tenant base (20% TI) BENI STABILI STRATEGIC POSITIONING A leading property player in Italy... Preferred Properties PORTFOLIO 3.9Bn FOCUS ON MILAN 1.9Bn FOCUS ON QUALITY = Green + * yield on core + dynamic portfolio Smart Working YIELD * 5.4% FOCUS ON OFFICE 91% ASSET ROTATION STRATEGY IN ACTION 50% Green Buildings...with a renewed ambition Improved market conditions 2015 was a record year with 257 million of disposals and sale agreements achieved. At the same time, 81 million was spent acquiring offices in the centre of Milan. Two properties in particular - Corso Italy 19 and Via Principe Amedeo 5 (which together have a gross floor area of approximately 22,445m 2 ) - present significant value creation potential and we will invest approximately 25 million to refurbish them. These two assets fit perfectly into Beni Stabili s rotation strategy, aimed at increasing the component of sustainable, Class A offices, in the heart of Milan, where we already own more than half of our total portfolio. Our asset rotation strategy will continue in 2016 as disposals help with new strategic acquisitions and our goal to green our portfolio. + Acceleration of the real estate strategy = Better portfolio Higher upside Medium-term growth Via Principe Amedeo Corso Italia 5

10 OUR EMPLOYEES Beni Stabili has 61 registered employees who are spread evenly between offices in Milan and Rome. On 31 December 2015, 97% of employees were employed on a permanent basis, and 49% were female. There are a fairly equal number of males and females across all levels of the organisation, even at Executive Level (33.3%). The age of the workforce is also fairly evenly spread but the greatest concentration of staff is found within the age group between 45 and 55 years (35.6%). Beni Stabili continues to benefit from a high rate of retention. 62.7% of the workforce has worked for the company for five or more years. During 2015, the size of the workforce fell by a third, from 90 employees in 2013 to 61 today. This was a result of the reorganisation completed in the first few months of 2015 following separation of Beni Stabili Gestioni SGR and the subsequent reorganisation completed in the first few months of These changes were necessary to create a significantly leaner, more flexible and competitive organisation. Whilst eight people resigned during 2015, nine new people were hired. We will also be improving how we work together so we can leverage the advantages of being in a relatively small but experienced team; from pulling in resources project by project, to communicating more easily and effectively while encouraging high autonomy and innovation. We provide all our employees with the opportunity to develop within our company. Through training, we aim to increase our employees know-how, enhance the potential for innovation, as well as increase employee retention and attract new talent. In 2015, we offered individual and group language classes, courses in Building Information Modelling (BIM) and online Masters. In 2016, we will create a formal employee training policy and training program to identify all our employees training needs and to prioritise these based on our organisational needs. We are also keen to share our knowledge and expertise beyond our employees. Several of our staff regularly present at international conferences (such as the ICSC European Conference) and teach in academic courses at prestigious universities in Italy ( Such as the Polytechnic University and Bocconi University of Milan). Each year, we also support individual students who want to carry out their undergraduate thesis on topics regarding real estate in which we are ideally placed to support them. In 2015, we employed 11 undergraduate and Masters students as interns, who used the experience as research material for their theses. Beni Stabili s HR strategy is based on respect for nationwide collective bargaining and the importance of work-life balance. Our remuneration policy is tailored to each individual and business ethics are communicated to employees via the Code of Ethics. We have a health and safety policy in place and monitor any workplace accidents or cases of work-related illness (none were reported in 2015). Number of employees by contract type Number of employees % of total workforce Permanent % Fixted-Term 1 1.7% Apprentice 1 1.7% TOTAL % We have all the expertise required to make Beni Stabili a key player in the recovery of the Italian real estate market. Our steadfast ambition is to be recognised as a market leader by our tenants, our investors and our employees. Christophe Kullmann CEO Beni Stabili 6

11 Length of Service YRS 4 employees (7%) YRS 18 employees (30%) 6-10 YRS 15 employees (28%) 0-5 YRS 22 employees (35%) Employee Gender Balance Non- Managers 17 (53%) WOMEN 15 (47%) MEN Middle Managers 8 (53%) WOMEN 7 (47%) MEN Executive Managers 4 (44%) WOMEN 8 (66%) MEN Age Profile >55 YRS YRS 6 employees (10%) 8 employees (13%) YRS 14 employees (23%) YRS 12 employees (20%) YRS YRS 25-29YRS 6 employees (10%) 9 employees (15%) 5 employees (9%) 7

12 SUSTAINABILITY Piazza San Fedele THE ITALIAN CONTEXT Italy is party to both the United Nations Framework Convention on Climate Change and the Kyoto Protocol. Together with the other EU member states, Italy has set tough targets to reduce energy use and carbon emissions and to promote renewable energy. Moreover, the substantial energy reduction opportunity within the real estate sector is widely recognised. There is growing momentum on the policy front to address this, driven by key European directives including the Energy Performance of Buildings (EPBD). Italian regulations require Energy Performance Certificates (ACEs), the counterpart of EPCs in UK, if a building is sold, constructed or rented. These were strengthened in 2015 and the government is still under pressure from the European Commission to take further action to ensure that from 2021 all new buildings will be nearly zeroenergy. Also in 2015 under the European Energy Efficiency Directive (EEED), the Italian government required all large enterprises and certain energyintensive enterprises, including Beni Stabili, to independently audit their energy use and identify energy saving opportunities. At the same time, international companies are also impacting the market through their determination to achieve high environmental quality and comfort levels. We are already seeing the Italian property market shift in favour of green buildings, namely those which are BREEAM, HQE and LEED certified, particularly in prime real estate. Lastly, as mainstream investors begin to recognise the real value at risk, we are seeing more action from some investors who request disclosure through mechanisms such as the Carbon Disclosure Project (CDP) and the Global Real Estate Sustainability Benchmark (GRESB). This is supported by the Italian Government who has requested Italy s largest companies and cities disclose to CDP. Italy s regulations & incentives Italy s regulatory framework, together with financial incentives affecting the Italian property sector include: Incentives for renewable energy through feed in tariffs (white certificates) Promoting the use of cogeneration and district heating in industry Minimum energy efficiency standards for new buildings, or buildings subject to heavy renovations in the civil and service sectors Requirements for new construction and major renovation to use a certain amount of energy (heat) from renewable sources, rising to 50% in 2017 Incentives for energy efficiency improvements in existing buildings through a 65% tax deduction/credit. These regulations and incentives can result in either increased refurbishment costs for Beni Stabili or the devaluation of assets which do not meet the minimum standards. 8

13 OUR SUSTAINABILITY STRATEGY Beni Stabili s sustainability strategy was developed following a rigorous materiality review to identify the most important sustainability risks and opportunities facing our business. To do this we analysed our current operations, engaged with our internal stakeholders, and mapped industry best practice, investor expectations and anticipated regulatory requirements against a universe of material issues for the real estate sector. The resultant sustainability strategy is based around three major focus areas: transparency, professional expertise and innovation. The sustainability topics identified in our materiality review have been mapped against each theme which has enabled us to formulate a framework for managing our key sustainability risks and opportunities. OUR VISION Our vision is to create a professional and transparent real estate market open to the global challenge, able to add to the wellbeing of the country and the community TRANSPARENCY PROFESSIONAL EXPERTISE INNOVATION We are as open about our achievements as we are about where we can improve. We are consistent credible in our reporting. We aim to manage our assets sustainably, and have the expertise to do so We use innovation to drive our actions and create inspirational places that integrate cutting-edge environmental design solutions to serve customers and community Product labelling Governance Employees Energy Water Waste Health & Safety Tenants Product labelling Energy Water Waste Tenants Enhancement of the public realm Community well-being Sustainable procurement 9

14 SUSTAINABILITY GOVERNANCE Beni Stabili s Sustainability Committee was established in The committee consists of members of the senior management team and Board of Directors and is headed by Beni Stabili s CEO. The committee meets on a quarterly basis. BENI STABILI S SUSTAINABILITY COMMITTEE Committee members Responsibilities Christophe Kullmann Chief Executive Officer Marion Pignol Review performance and monitor progress against targets and key initiatives. General Secretary Manager Allocate internal responsibilities and pull in external support as required. Guido Giannetta Asset Management Offices Consider social, environmental and ethical risks, and the mitigating actions Manager that are in place. Anna di Gironimo Sustainability & Product Innovation Manager Simone Pinoli Sustainability & Product Innovation Davide Vichi Chief Operating Officer of Revalo Review sustainability communications activity. Present any proposed changes in sustainability strategy to the Board of Directors for approval. Meet regularly with business units and project teams to share best practice and review performance. Provide quarterly updates on sustainability to the Board. Via Lugaro 10

15 Via Unione From 2016, Beni Stabili's sustainability agenda will align closely with Foncière des Region's sustainability agenda, as we aim to broaden our perspective from a national to an international one. As such, we will develop new policies and an ambitious set of targets up to 2020". Anna di Gironimo Head of product innovation and green buildings 11

16 2015 SUSTAINABILITY TARGETS In 2014, Beni Stabili set out an ambitious roadmap of 29 annual targets to be achieved between 2014 and These targets aligned closely with our material issues and the three focus areas of our sustainability strategy. Over the past 12 months Beni Stabili has achieved 8/11 (73%) of those requiring completion in 2015 and one target which was not achieved in In addition, we achieved our 2016 Energy and Carbon target ahead of schedule, as by December 2015, 100% of our managed portfolio procured 100% green electricity TARGETS Focus area Target Status Product Labelling Following analysis of portfolio EPC risk, approve and implement an EPC upgrade plan across the portfolio. Achieved Governance Become a signatory of the UN Global Compact. Postponed to 2016 Energy and Carbon; Water; Waste Monitor energy, water consumption, GHG emissions and waste generation and report publically (on an annual basis) and internally (on a quarterly basis) on progress made, including cost savings achieved as a result of efficiency measures. Achieved Energy and Carbon; Water; Waste (2014 target) Energy and Carbon Health and Safety Tenants Sustainable Procurement Sustainable Procurement Establish baseline data for annual energy consumption; GHG emissions; water consumption and waste generation (split by destination) at all relevant owned and managed assets and use this data to set public targets to improve performance. Implement at least one energy reduction project with at least one tenant in at least 20% of buildings (by number or floor area) where Beni Stabili is responsible for purchasing utilities. Conduct at least two annual health and safety audits on our development projects and in all managed assets, focusing on ensuring that minimum health and safety procedures have been effectively implemented and that accurate and up-to-date records are available. Set up Environmental Working Groups in three major buildings and in all new developments, to identify where we can work together with tenants to make improvements and report in their achievements annually. Ensure that 100% of bids and contracts with all property management service suppliers (cleaning, security and maintenance) include clauses for minimum requirements in relation to safety, social and environment standards. Review our supply chain to assess how we can increase the procurement of locally or regionally-based goods and services. Partially achieved 2 Achieved Achieved Achieved Achieved Partially achieved Community and Wellbeing Enhancement of the Public Realm Be continuously involved in academic studies and support at least one academic research work every year. Carry out at least one example of an enhancement to the public realm (e.g. through architectural integration, community infrastructure, biodiversity, or public art). Achieved Achieved 2 We set a public target to reduce carbon emissions by 5% by 2016, that will be achieved through the continuous upgrading of the energy efficiency and the reduction in consumption of our portfolio. We have yet to set a target for the consumption of water, but the use of technologies aimed at reducing water in new development and refurbishment is already part of our internal procedures; We collaborated with Revalo, our facilities provider to improve waste data. Although the 2015 data is still estimated, our estimation methodology has significantly improved. 12

17 2016 SUSTAINABILITY TARGETS In 2016, we aim to achieve the final set of the 29 targets we set ourselves in We will also develop a new roadmap of annual targets up to Our 2016 targets can be found below TARGETS Focus area Product Labelling Energy and Carbon; Water; Waste Water Water Energy & Carbon (Achieved early - December 2015) Tenants Target Trial LEED Silver or equivalent for existing buildings in at least one building. Set property-specific reduction targets for energy, water and waste. Carry out post-occupancy monitoring of energy and water consumption where Beni Stabili is responsible for purchasing utilities, in order to measure the success of our designs and influence the design of future schemes. Where feasible, include water saving systems such as rainwater or greywater harvesting in new developments. Review contracts across the portfolio and, where feasible (within 5% of current cost and depending on contract), procure the greatest extent of electricity from renewable sources. Pilot an exemplar sustainable fit-out with one tenant. Corso Ferrucci 13

18 14 Via Amedei

19 TRANSPARENCY A transparent business that is open, consistent and credible At a building level Italian regulations require Energy Performance Certificates (ACEs) if a building is sold, constructed or rented. And in future, it will be unlawful for landlords to let space below a minimum ACE standard. At the same time, we are increasingly seeing market demand for voluntary energy labels and our customers expect prime offices to be greencertified. Investors are also becoming more alive to these issues. Many expect us to comply with voluntary non-financial reporting standards and participate in industry benchmarking exercises. OUR APPROACH We focus our efforts in three main areas: Corporate Disclosure We follow standardised (or at least compatible) reporting frameworks and take a consistent approach to reporting our non-financial corporate information. Like our 2013 and 2014 Sustainability Reports, this report follows GRI G4 and the Construction and Real Estate Sector Disclosure guidelines. We also support EPRA and report in line with its Sustainability Best Practice Recommendations issued in To give our stakeholders greater confidence, elements of the data included in this report have been independently assured by Bureau Veritas to AA1000 Moderate Standard. This includes energy use, GHG emissions and water use. For more information see the Assurance Statement on page 41. We also participate in a number of significant investor-led surveys such as the Global Real Estate Sustainability Benchmark (GRESB) and the Carbon Disclosure Project (CDP), which enable us to compare our performance with our peers. We are highly trusted, particularly by our tenants, banks and shareholders. This is clear from the success of the capital increases and fundraising achieved through the issue of bonds. Product Labelling & Green Building Certifications An assessment of regulatory risks and opportunities including ACEs has informed our acquisition policy and asset improvement plans. Further opportunities lie in the acquisition, development and management of strongly rated properties such as BREEAM, LEED and ACEs. We continue to require LEED Gold, BRaVe AA and EPC A on all new office developments and a BRaVe rating of A and EPC rating of B on all refurbishments. We aim to certify 50% of our portfolio by 2020, starting with our plan to obtain 20 BREEAM certifications by These may positively affect the future value of our portfolio and provide opportunities for higher rents and quicker take up of lettings, contributing to reduced void rates and increased investment yields. With a commercial property portfolio worth almost 4 billion and a gross rental income of million in 2015, this is a large opportunity for Beni Stabili. Governance and Management We aim to be an exemplar in terms of corporate integrity and transparency. Our corporate governance system has been developed to ensure effective risk management and transparency. It is supported by our Code of Ethics and Conduct which is supported by robust procedures, the implementation of which is monitored and evaluated by our Ethics Officer and Internal Control Committee. Robust procedures are in place to guarantee that tenders are conducted in a fair, open and transparent manner, and that contractors meet all contractual obligations and hit agreed performance requirements including those relating to energy efficiency. 15

20 Via Montebello 2015 PROGRESS First Symbiosis building in Milan gets Gold LEED-CS Pre-certification: This provides a clear indication of the project s expected LEED-CS Certification level (75 point Gold range: 60-79) and demonstrates our intention to pursue unique and valuable green features. Symbiosis will deliver 12 next generation offices over the next decade and is a key element of Milan s Smart City strategy described on page 25. Renovation of the Corso Ferrucci Complex in Turin gets ITACA Precertification: ITACA is a method of assessing the sustainability of buildings, and is required by the Italian Municipality of Turin. Green-certifications cover 22% of the portfolio s value: In 2015 we rated 13 additional properties against the BRaVe sustainability standard. Using this system we have been able to greencertify 22% of Beni Stabili s entire portfolio by market value and we plan to increase this to 50% by 2020 using BRaVe or an equivalent rating system such as LEED or BREEAM. Over 90% of Beni Stabili s buildings are ACE-rated: In 2015 we obtained 119 new ACEs - the Italian counterpart of EPCs. So far we have ACE-rated 90% of the buildings in our entire portfolio, ensuring we are ahead of new letting standards. In 2015 we also undertook a complete ACE review of our managed portfolio to understand our exposure to E, F and G rated assets. This confirmed that 11 buildings have low ACE ratings and we have evaluated the measures required and the likely costs to improve these. Over the next two years Beni Stabili plans to invest 60 million to upgrade existing offices and attract 16 million of new rentals. This will lead to a general increase in the ACE ratings across the managed portfolio, as we aim to meet a minimum ACE rating of B for all new refurbishments. Gold Award from EPRA: In 2015 Beni Stabili was presented with a Gold Award from the European Public Real Estate Association (EPRA) for the second year running. Gold Awards are given to companies that successfully implement EPRA s Sustainability Best Practices Recommendations (sbpr) for non-financial reporting. This accolade is a testament to the significant progress we have made towards our goal of greater transparency. On pages we summarise how our reporting complies with EPRA s latest guidelines. CDP score significantly improves: In 2015 we participated in GRESB and the Carbon Disclosure Project (CDP) for the second time, scoring 31% and 87% respectively. We are particularly proud of our CDP disclosure score which improved by 25% this year, indicating the quality and completeness of our response to this survey. Despite this encouraging progress, there is still much more to do - the CDP assessment also looked at the actions that we have taken to mitigate and adapt to climate change, and placed us below our peer group average in this area. It is a similar story with GRESB and in 2016 we will be looking at ways to boost our performance in both surveys. Two leading rating agencies audit our ESG performance: In 2015 Vigeo and oekom Research analysed and rated our ESG performance against multiple sector-specific criteria, founded on international conventions and globally recognised standards from international organisations (UN, ILO, OECD and so on). These assessments have given us a valuable yardstick, and added stimulus for further integrating environmental and social concerns into our company s management. We have already developed an action plan to address key shortfalls highlighted by Vigeo and oekom, which we will be implementing in

21 BENI STABILI TO GREEN - CERTIFY 50% OF ITS PORTFOLIO BY 2020 BRaVe is a certification scheme which Beni Stabili has been developing in collaboration with the Polytechnic University of Milan since BRaVe differs from other certifications like BREEAM, LEED and so on because it identifies and prioritises measures based on resultant economic and environmental benefits. The ultimate goal is to help the user identify which interventions to invest in, based on greatest projected energy savings and financial returns. BRaVe evaluates the overall efficiency score for the building before and after various interventions. It can be used to evaluate options during the planning, refurbishment and management of buildings. Over time Beni Stabili intends to BRaVe-rate the entire portfolio. To date 14 buildings (22% of our portfolio by market value) have been BRaVe-rated indivdually, and this part of the portfolio has been awarded an overall rating (package score) of BBB. In 2015 Beni Stabili commissioned independent experts to benchmark and compare the BRaVe methodology against BREEAM In-Use criteria. The assessment found that the BRaVe methodology takes into consideration sufficient sustainability information to provide a sound basis on which to evaluate the sustainability performance of a building. The outcomes of this review not only add credibility to the BRaVe rating but will also allow it to be used to identify candidate buildings for BREEAM certification. Beni Stabili plans to obtain BREEAM certification for at least 20 existing buildings in use and 5 BREEAM or LEED sustainability certifications for refurbishment projects by Via Lugaro LIST OF CERTIFIED MANAGED ASSETS BUILDING GLA m 2 CERTIFICATION & LEVEL DATE Garibaldi Complex - Torre B 16,567 BRaVe A (74,8) 26 July 2010 Cinisello Balsamo 6,912 BRaVe B (41,18) 23 December 2015 Boscovich 17,044 BRaVe B (47,5) 23 December 2015 Cornaggia 10,517 BRaVe BB (58,23) 23 December 2015 Dante 6,199 BRaVe BB (58,57) Green Rating (I:6,1 - P:6,9) San Fedele 5,129 BRaVe A (70,20) Green Rating (I:6,4 - P:6,8): pre-refurbishment label 23 December July December June 2012 Sempione 3,686 BRaVe BB (50,68) 23 December 2015 Unione - Torino 7,157 BRaVe BB (55,06) 23 December 2015 Via dell'arte 6,400 BRaVe BBB (63,90) 23 December 2015 Lugaro 25,423 BRaVe A (71,69) 23 December 2015 Marconi 18,826 BRaVe B (48,76) 23 December 2015 Garibaldi Complex - Torre A 22,298 BRaVe A (74,8) 23 December 2015 Garibaldi Complex - Corpo C 5,784 BRaVe A (74,8) 23 December 2015 Cadorna 11,705 BRaVe A (74,8) 23 December 2015 Symbiosis - Building A 11,650 Pre-certified LEED Gold (75) ongoing Ferrucci 49,591 ITACA pre-certified GOOD/VERY GOOD ongoing 17

22 Corso Vittorio Emanuele 18

23 PROFESSIONAL EXPERTISE Using professional expertise to manage our assets sustainably A strong track record in resource efficiency is fast becoming a prerequisite for leading asset and property managers. It is clear that in the long term, buildings with low resource requirements and which are carefully managed are more likely to hold their value. For this reason investing in high quality assets and applying our professional expertise to improve the eco-efficiency of our portfolio is a strategic priority for Beni Stabili. OUR APPROACH We focus our efforts in four main areas: Measuring and tracking the environmental impacts of our assets Energy and water use is tracked via comprehensive and accurate reporting, which is now the cornerstone of our overall asset management strategy. Data is monitored for assets where we have management control. Where we see high levels of consumption, we engage with property managers to investigate the causes and investigate ways to reduce it. Management contracts include clauses and regular performance monitoring relating to sustainability impacts to ensure that buildings are operating as efficiently as possible. Enhancing the eco-efficiency of our assets On top of optimising assets and undertaking annual improvement works, we also invest in cost-effective measures that boost the eco-efficiency of our assets which includes anything from lighting upgrades to smart meters and energy audits. We are particularly interested in those that create value, reduce operating costs, enhance the customer experience, improve the appeal of the building or preserve its value over the long run. Engaging and helping our tenants to act sustainably Reducing resource use requires active engagement with key tenants. This is particularly important for 78% of our assets where we have no control over utility use, waste or the building management. In these instances we aim to share our expertise with our tenants, raise their awareness of ecoefficient practices and encourage them to enter into green lease agreements. Maintaining high health and safety standards We aim to conduct health and safety audits on all our development projects and managed assets, ensuring that minimum health and safety procedures continue to be effectively implemented PROGRESS Switched to certified green electricity: In 2015, the electricity supplied to 13 assets managed by Beni Stabili was switched to 100% certified green electricity. By December 2015, green electricity was supplied to 100% of the managed portfolio. In 2015 Beni Stabili also converted the thermal power plant at Amedei in Milan to gas the last property in the managed portfolio to have a diesel thermal plant. In 2016 the consumption of diesel will be zero. Improved waste data: In 2015 we worked with Revalo, our facilities managers to improve our waste data. Our maintenance staff now monitor and report to Revalo the day and time waste is collected and the number of bags or full bins collected per waste stream (recycled or non-recycled). The quantities are then converted to volume data (litres) to provide a more accurate estimation than we were able to calculate in previous years. Therefore, although the 2015 data is still estimated, overall it has significantly improved. Our goal is now to introduce the compilation of waste forms as part of all our maintenance contracts. Renewed Fire Prevention Certificates (CPI): A CPI certifies compliance with existing legal requirements and the presence of necessary fire safety requirements within the building that is certified. Although all our managed assets had a valid CPI, seven of these were nearing expiry and required 19

24 renewing. Throughout 2015 substantial changes were made at a number of our buildings to meet new, tougher safety requirements and renew the CPIs. This, in some buildings, has increased the occupancy capacity by optimizing the use of ladders as escape routes. Extended the electric vehicle fleet: Electric cars are exempt from the congestion charge in Milan, but there are still very few charging docks in the city centre. Since 2013 Beni Stabili has installed free electric car charging stations at eight buildings. In 2015 it purchased electric cars, car charging stations and bicycles for its main offices in Milan and Rome. It also installed a charging point at Montenero di Bisaccia mall and bought two electric cars, fifteen electric bikes and another charging dock to install in our refurbished assets and developments. These will be available for tenants to use in 2016 and will serve as a test-bed for innovative transport solutions. An electric car will always be available at Beni Stabili s headquarters for any travel to the Symbiosis construction site. Energy audits reveal 100,000 savings a year at five assets: In 2015 Beni Stabili needed to comply with a new Italian law transposing the European Energy Efficiency Directive (2012/27/ EU). In accordance with the regulations, audits were completed by qualified specialists at five assets, accounting for around 50% of our total energy use. The results were used to create a picture of our total energy use and to uncover key energy-saving opportunities. Overall the audits unlocked nine measures which have the potential to save over 100,000 in utility bills per annum. These will be incorporated into asset improvement plans, particularly where the cost-benefit profile is favourable. In 2015 we made a start by installing metering systems at eight properties. In 2016 the energy study will be enhanced through BREEAM In-Use analysis, and an action plan to implement the measures identified will be launched in 2017/2018. Set a reduction target for GHG emissions: Based on an analysis of our historical environmental performance data, improvements we have made to our assets and discussions with tenants, we aim to reduce our energy consumption and thereby reduce carbon emissions on a likefor-like basis by 5% (vs. our 2013 baseline) by end of Appointed a new Customer Satisfaction Manager: In 2014 we sent a customer satisfaction survey to 91 tenants, and achieved a response rate of 64%. Of those that responded, 86% expressed satisfaction with Beni Stabili s services and buildings. Some tenants also showed an interest in developing an energy reduction plan. In 2015 we appointed a Customer Satisfaction Manager to enhance the relationship with our tenants through continuous engagement, gathering feedback and responding to any concerns particularly about health, wellness, safety and security. The Customer Satisfaction Manager has been in contact and obtained feedback from 100% of our tenants in In 2016 we will develop a sustainability questionnaire for tenants with the goal of uncovering further opportunities to engage on sustainability issues. In my team I appointed a Customer Satisfaction Responsible to allow Beni Stabili to better understand our tenant needs and to develop good relationships with them. This will help us engage with them on sustainability issues through, for example, more tenant engagement programs and environmental working groups. Guido Giannetta Asset Management Offices Manager CUSTOMER SURVEY RESULTS Dissatisfied 9% Slightly satisfied 9% Satisfied Very satisfied 54% 28% 20

25 Via Dante Engaged with tenants to implement energy reduction initiatives: In 2015 we worked with six tenants in different buildings to support their efforts to reduce energy use. These efforts involved some of our largest tenants such as Intesa Sanpaolo which accounts for 9% of our annual rental income. but also smaller tenants. Examples include upgrades to heating and air conditioning systems, insulation and windows. The implementation costs were shared between Beni Stabili and the tenant. Beni Stabili also worked with its landlord Sator to make efficiency improvements to its headquarters in Rome. Set up environmental working groups at some of our largest assets: In 2015 we set up environment working groups in four of our largest sites with the aim of collaborating with tenants to embed eco-efficient behavior practices. At the Garibaldi Tower and at Symbiosis, we worked with our tenants to create more effective smart-working spaces. At our headquarters building in Milan, we worked with the other tenants to understand the need for more green forms of transport onsite and consequently increased the electric fleet and bicycles available for all the tenants. Finally, at Cadorna we worked with the tenant, Luxottica, to ensure the building was run at its optimal performance in terms of energy performance. OUTCOME OF ENERGY AUDITS Building Intervention Investment Return period (years) ROZZANO DANTE BENI STABILI EXTENDS PARTNERSHIP WITH TELECOM ITALIA Telecom Italia agreement In 2015 Beni Stabili signed a framework agreement with Telecom Italia which commits us to carry out renovation projects totalling 37.8 million over the next few years. These will improve energy efficiency and the layout of the buildings. Action plan for vacant assets In 2015 Beni Stabili announced plans to improve the occupancy rate of the non-telecom Italia portfolio from 80% to 91%. This will be achieved with an ambitious investment program of 60 million over two years. 90% of the investment program will target ten vacant buildings and is expected to create 14 million in new rental agreements and 16 million net recurring income. Annual cost savings 1 30, , , , , , ,000 Unreasonable Negligable 5 75, ,000 LUGARO 6 10, ,000 MONTENERO 7 200, , , ,000 CORNAGGIA 9 90, ,000 TOTALS 535, ,500 21