second in a series of toolkits on responsible …unep finance initiative metrics for performance...

Responsible Property Investing:Metrics for Performance Measurement

Second in a Series of Toolkits on Responsible Property Investing

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RESPONSIBLEP R O P E R T YI N V E S T I N G C E N T E R

RPIC

A Toolkit on Responsible Property Investing

Responsible Property Investing Center

Metrics for Performance Measurement

UNEPFI disclaimerUnited Nations Environment Programme (UNEP) and Partners: This report is the outcome of work

sponsored by UNEP and Partners. The findings, interpretations, opinions and proposals expressed in the

report do not necessarily represent the views of every member of every organization who commissioned

the report, nor do they represent the decision or the stated policy of UNEP. The designations employed

and the presentation of the material in this publication do not imply the expression of any opinion

whatsoever on the part of UNEP concerning the legal status of any country, territory, city or area or of its

authorities, or concerning delimitations of its frontiers or boundaries. Although the information provided

in this report is the best available to the authors at the time of preparation, UNEP and Partners cannot

be held liable for its accuracy and correctness. This report is not intended to provide investment advice.

Citing of trade names or commercial processes does not constitute endorsement by UNEP nor by any of

the Partner organizations who commissioned this report.

Copyright noticeThe report and the contents of the report remain the sole property of the UNEP Finance Initiative. None

of the information contained and provided in the report may be modified, reproduced, distributed,

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copyright, trademark and other laws.

UNEP Finance Initiative

IIIMetrics for Performance Measurement A Toolkit on Responsible Property Investing

Contentsp.3�� I�Introduction

p.4�� II�IdentifyingtheroleRPImetricscanplayinyourorganization

p.7�� III�Designingasystemofperformancemetrics

p.13�� IV�Buildinganinformationmanagementsystem

p.17��V�Puttingmetricstowork

p.19��VI�Thirdpartystandards

p.21��VII�CollaboratingwithstakeholdersonstandardizingRPImetrics

AcknowledgmentsMarch 2010

This toolkit was written by David Wood, Director of the Initiative for Responsible Investment (IRI) at

Harvard University, with extensive support from Professor Gary Pivo of the University of Arizona,

Synnove Sandberg of the UNEP FI Property Working Group, Andy Szyman of F&C REIT Asset

Management, and Valerie Berezin of the IRI. Many thanks for valuable advice and comments came

from Gilles Bouteloup of Axa Real Estate Investment Managers, Keith Bugden of Hermes Real Estate,

Cate Collins of Lend Lease Real Estate Investment Limited, Lisa Galley of Galley Eco Capital, Rowan

Griffin of Colonial First State Global Asset Management, Christian Gunter of Kennedy Associates Real

Estate Counsel, Masato Ito of the Sumitomo Trust and Banking Company, Limited, Paul McNamara of

PRUPIM, Jean Rogers of Arup, Lynn Thurber of Lasalle Investment Management, and Hong Woon Wey

of Aviva Investors.



IV Metrics for Performance Measurement


3Metrics for Performance Measurement A Toolkit on Responsible Property Investing

I. Introduction

ResponsiblePropertyInvestingcoversawiderangeofinvestmentpracticesandstyles

thatintegrateenvironmental,social,andgovernanceinformationintoinvestmentdecision-

making�Keytomanagingandmonitoringprogressontheseissuesaresystemsfor

measuringandbenchmarkingbuildingandportfolioperformance�

Thepurposeofthistoolkitistoprovideinterestedinvestorsandpropertyfundandasset

managersguidanceonhow:

• SystemsofmetricsmeanttomeasureRPIperformancecanbedeveloped�

• Informationonthosemetricsacrosspropertyportfolioscanbecollected�

• Theinformationcollectedcanbeintegratedintoportfoliomanagement

Thisisthesecondinaseriesoftoolkitsto

bepublishedbythePropertyWorkingGroup

(PWG)coordinatedbytheUnitedNations

EnvironmentProgrammeFinanceInitiative�

TheToolkitseriesisbeingproducedin

conjunctionwiththeResponsibleProperty

InvestingCenter,tosupportandencourage

thedevelopmentofRPI�

Wehopetocatalyzethedevelopmentof

industry-wideconsensusoncommonRPI

metricsthatfacilitatestheircollectionand

usebyinvestors,evenaswerecognize

eachindividualcompanywillneedtotailora

commonsystemtosuititsownneeds�

Developing Metrics

Step1:Identify the role RPI metrics can play

in your organization

Step2:

Design a system of performance metrics

Step3:

Choose which third-party standards to collect

Step4:

Build an information management system

Step5:

Put RPI metrics to work

Step6:

Collaborate with stakeholders on standardizing RPI metrics

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4 Metrics for Performance Measurement

II. Identifying the role RPI metrics can play in your organization TheUNEPFIPropertyWorkingGroup’sfirstToolkit,“EngagingandCommitting”,laidoutaprocessforidentifyingorganizationalstrategiesandgoalsinRPI�Itfocusedongovernance:howorganizationsmightcommittoanRPIstrategy,andputintoplaceinstitutionalstructurestointegrateRPIpracticesintocorporateculture�Italsoarguedthatthosestrategieswillnecessarilybeorganization-specific,influencedbyamixofcorporateculture,geographicallocation,regulatoryregime,investorinterest,andportfoliomakeup�

Asystemofmetricshelpstranslatethosestrategiesandgoalsintoactionandtangibledeliverables�Metricsarethetoolswhichallowinvestorstomeasureprogressagainstbenchmarksforperformance,andtheysignaltointernalandexternalstakeholdersalikewhichcategoriesofanalysisaninvestorfinditimportanttomeasureandmanage�

ThefirststepincreatingasystemofmetricsistodevelopstrategicclarityonwhyRPImetricswillenhancecorporateperformance�

PractitionerspointtoavarietyofreasonsforcreatingRPImetrics,including:

Enhanced Building Performance: EstablishingRPImetricscanhelpseta

baselineforbuildingperformance,andidentifyopportunitiesformoreefficientoperationsinbothexistingbuildingsandinnewconstruction�

Buildingperformancemetricsaremostfrequentlyassociatedwiththekeyimpactareasofenergyandwateruse,andwastemanagement�Thesemetricsmaybeusedtodesignsystemstomonitorandreduceoperatingcosts,andtomitigateagainstpoliticalandregulatoryriskassociatedwith,forinstance,potentialclimatechangeregulationsaffectingbuildings�Similarly,healthandsafetymetricscanhelpimproveworkforceperformanceandminimizeharmtoemployeesandothers�

Forenergyperformance,HermesRealEstate,aUnitedKingdombasedfundmanager,tracksabsoluteenergyuseandcarbonemissionsacrossitsportfolioandreportsonthemannually�Theseabsolutenumbersarethenfurtheranalyzedonalike-for-likeportfoliobasis,allowingthecompanytobettertrackperformanceimprovementsinbuildings,inadditiontochangesinportfoliocomposition�http://www.hermes.co.uk/rpi_report_09/performance.htm



Metrics for Performance Measurement 5

Distinguishing RPI Portfolios: Ametricssystemcanproviderigorand

coherenceforthedevelopmentofRPIspecificportfolios�Themetricscanbeusedtoidentifytargetsforacquisition,disposition,anddevelopment;theycanalsobeusedasportfolio-widemeasures�Forinstance:

• Greenfundsneedtomeasuretheimprovedresourceefficiencyorreducedgreenhousegasemissionsincomparisontotheirpeergroup�

• Urbanregenerationfundsneedtodemonstratethattheyhavetargetedtheirinvestmentstounderservedareas,andcreatedeconomicdevelopmentandgoodjobopportunitiesinthoseareas�

• Landconservation,ecosystemsupportservices,orbrownfieldremediationfundsmustdemonstratethenumberofacresoflandtheyhavepreservedorrehabilitated,orthecarbonemissionoffsetsorwetlandsrestorationtheyhaveachieved�

Forworkforcehealthandsafety,LendLease,anAustralianbasedinternationalpropertycompany,tracksbothquantitativedataonissuessuchaslosttimetoinjuriesperhoursworked,reportedincidents,andmajorincidentsbycircumstance(e�g�fallofmaterials,propertydamage,orelectricalshock)andfatalities�Thesedatacanbeanalyzedtoidentifyareasofperformanceimprovementbyregion,typeofincident,typeofbuildingorjob,andsoon�http://www.lendlease.com.au/sustainability/ourPeopleDetail.html?search=metrics#/health-and-safety-detail

TheIglooRegenerationFund,aprivateequityfundfromAvivaInvestorsintheUnitedKingdom,definesitscommitmenttosustainableinvestmentbyidentifyingkeyareasofperformanceacrossissuesofHealth,HappinessandWell-Being,Regeneration,EnvironmentalSustainability,andUrbanDesign�Theperformancemeasurementsassociatedwiththesethemesincludegatheringdataasvariedasthesafetyofstreetdesign,publicspaceprovision,formaldesignationasregenerationdistrict,energyconsumption,anddensityandmixofuses�http://www.igloo.uk.net/media/dContent/mediaCentre/footprint-secure-080926.pdf Similarly,theRoseSmartGrowthFund,aUnitedStates-basedprivateequityfund,identifiesacquisitiontargetsbygatheringdataonproximitytotransit,energyuse,andtheallocationofmixed-incomeunitsandaffordablehousinginagivenbuilding�ThesecriteriaformthebasisfordifferentiatingtheFund’sportfolio�http://rosecompanies.com/what-we-do/investment




Engagement with Stakeholders: ThevaluepropositionforRPIincludestheadvantagesitbringstobuildingrelationshipswithinvestors,publicofficials,localcommunities,andnon-profitorganizations,amongotherstakeholders�Aclearandrelevantsetofperformancemeasurementsallowsformoretransparentstakeholderengagement�

Forinstance,assetmanagerswhoworkwithassetownersthatfavorfairlaborpracticesneedtodemonstratehowtheymanagetheirhiringprocesses�Affordableandworkforcehousingrelatedinvestorsneedclearandcomparabledataonwhowillrentorbuytheirproducts�Companiesthatpromotetheircommunityrelationsworkwillwanttomeasuretheoutputs,andimpacts,ofcommunityengagement�

Thesearenotmutuallyexclusive:thestrategicreasonsforRPImetricsoftenoverlap�

ThestrategicjustificationforRPImetricsshouldfocusonidentifyingtherelativeexposuretomaterialrisks–regulatory,physical,reputational–andopportunities,fromimprovedenvironmentalandsocialperformancetoenhancedinvestorrelationships�

FewinvestorswillwanttomeasureandmanageperformanceacrosseverypotentialRPImetric�Creating,andinstitutionalizing,newstandardsofperformancerequiresacommitmentofresources,andthegoalsbehindsuchacommitmentshouldbeclearfromtheoutset�

Itisworthreiteratingthefundamentalfunctionthatmetricsserve�Metricsallowinvestorsandfundmanagerstomeasureandbenchmarkperformance,providingsupporttotheirRPIcredentialsthatcanstandscrutinyfromtheirpartnersandstakeholders�Withoutsomesortofevaluationandmeasurement,RPIpotentiallyremainsrhetoricratherthanpractice�



III. Designing a system of performance metrics

Corporatestrategywilldictatekeyissuesforwhichmetricsarenecessary,andinturndeterminethestrategiesforcollectinggiveninformation�Thenextstepistoconvertthesestrategiesintoaclearmeasurementframework�

Ameaningfulsetofmetricswillexhibitfourkeycharacteristics�Itwillbe:

• Clear–allstakeholdersshouldreadilyunderstandtheinformationtheyrepresent�

• Comparable–thedatacollectedshouldallowformeasuringrelativeperformanceacrossinvestmentsandovertime�

• Usable–asystemofmetricsmustnotputunduestrainonthoseprovidingtheinformationorthoseanalyzingit�

• Accurate–thesystemformeasuringperformanceshouldincludestepstoensurereliabilityandintegrity�

Balancingtheseattributesrequirescarefulattentiontolevelsofdetail,quantification,andtheidiosyncrasiesofspecificbuildings,geographies,andculturalcontexts�

Practitionersconvergeonacommonpieceofadvice:Keepthesystemofmetricsassimpleaspossible�Datacollectionandanalysiswillbecomplicatedenoughevenwithabasic,easilyunderstandablesetofmetrics�

Tobreakdownthesystemintocomponentparts,organizationsmaywishtobreaktheirmetricsoutbyspecificissueareas�

Here,fordemonstrationpurposes,wehavedividedRPImetricsintothreecategories:

• Environmental–energyandresourceefficiency,pollutionmitigation,preservation

• Social–targetedimpactoninternalandexternalstakeholders

• CommunityImpact--contributionstolocalandregionaleconomicdevelopment

Note:whatfollowsisnotacomprehensivereviewofpotentialmetrics,butasetofexamplesthatrepresentarangeofconsiderationsavailabletoinvestorsandfundmanagers�




Commonresourceusemetricsinclude:

Greenhouse gas emissions:metrictonsofcarbonequivalentspersquaremeter

Energy use:kilowatts/hrconsumedpersquaremeteroffloorspace

Water use:cubicmeterspersquaremeteroffloorspace

Water recycling:cubicmeterspersquaremeterofrecoveredwater

Waste management:tonsofwasteperunitoftime

Recycled Waste:tonsofwastedivertedfromlandfill

Recycled Construction Material:%involumeorweightofRecyclablesusedinConstruction

Environmental MetricsThemostcommonlyusedenvironmentalmetricstodayarethoseforresourceuse:energy,water,andwastemanagementinparticular�Propertymanagerscanusethisinformationtoidentifyareasforimprovementinindividualbuildings�Developerscanusethesemetricstointegratedesignstrategiestoreduceconsumption�Attheportfoliolevel,investorsandfundmanagerscantrackyearoveryearperformanceimprovements,identifybuildingsmostsuitableforretrofitting,andmayaidanalysisofacquisitionordispositionopportunities�

Itisimportanttonotethevariousissuesthataffectthecollectionandinterpretationofdata�Tomeasurecarbonemissions,anincreasinglyimportantgoalformanyinvestors,practitionersmustcollectinformationabouttherelativecompositionoftheenergysourcesusedbyabuilding–whetheralternativeenergysourcessuchaswindorsolarpowerareused,andwhetherenergyissourcedfromcoal,naturalgas,nuclearpower,etc�Theymayalsocollectadditionalinformationaboutthecarbonemissionsassociatedwithoccupanttraveltoandfromaparticularbuilding�

Standardizationofreportingisafundamentalissueforenablinginvestorstomakeapplestoapplescomparisonsofinvestmentrisksandopportunities�Tothatend,theUNEPSustainableBuildingsandClimateInitiative(SBCI)hasdevelopedaCommonCarbonMetric,atoolforthatallowsforcommon,comparablemeasurementsofusetoallstakeholderswhenanalyzingbuildingperformance�Themetricchosenforenergy:kWh/m2/year(kiloWatthourspersquaremeterperyear)and,tomeasureintensityperoccupant:kWh/o/year(KiloWatthoursperoccupantperyear)Themetricchosenforgreenhousegasemissionis:kgCO2e/m2/yearorkgCO2e/o/year(kilogramsofcarbondioxideequivalentpersquaremeterorperoccupantperyear)



Someinvestorsandfundmanagersexpandtheirenvironmentalmetricstoidentifytheenvironmentalperformanceissuesassociatedwithabuilding’slocationinaneighborhoodcontext,oritsimpactonsurroundingland�Manyofthesemetricsareassociatedwith“smartgrowth”goalsofcompact,mixed-use,lessauto-dependentcommunities�Othersareassociatedwithlandandecosystemconservation�

Similarly,keyinformationaboutpropertytype,numberandactivityofoccupants,geographicalregion,andsoon,arefundamentaltounderstandingthemetricsastheyrelatetoabuilding’srelativeperformance�Clearly,anofficebuildinginSydneywillperformdifferentlythanoneinCopenhagen�Buildingswithmoreoccupantspersquaremetermayusemoreenergythantheircounterparts;differenttypesofbusinessactivitiescarrydifferentenergyintensities;andsoon��Thedesignandageofabuildingwillhelpdeterminewhetheritissuitableforaretrofit�

ThehopeoftheUNEPSBCIisthatthisemergesasaglobalstandardthatenablesmoreefficientregulatoryandinvestmentdecision-making�ThepurposeoftheproposalforaCommonCarbonMetricistosupportgreenhousegas(GHG)emissionsreductionsthroughaccuratemeasurementofenergyefficiencyimprovementsinbuildingoperations�UNEPSBCIalsooffersguidanceoncollectinginformationfromprivateandpublicsourcesforaccuratemeasurement�

http://www.unepsbci.org/newSite/COP15/Common%20Carbon%20Metric%202009(1).pdf

Aspartofitssustainabilitypractice,InvestaPropertyGroup,basedinAustralia,measuresenvironmentalindicatorsincludingcarbondioxideemissionintensity,electricityuseintensity,wateruseintensity,wastegenerated,andwastediverted�Themeasurementsallowthecompanytomeasureperformanceagainsttargets�Thealsoformthebasisofanalysistodetermineenvironmentalperformancebybuildingtype,andtheportfolio-widemeasurementareanalyzedtodeterminetrendsthatresultfromsustainabilitypracticesoracquisitionandsalesactivity�

http://www.investa.com.au/Reports/2008/sustainability/Environment/




Location-specificmetricsmayinclude:

Transit-orientation:distancetosubway,bus,ortrainstop�

Urban infill:densityasexpressedbyfloor-arearatio

Walkability:proximitytoanarrayofgoodsandservices;infrastructureandneighborhooddesignthatsupportspedestriantraffic

Land conservation:acrespreservedthroughminimalordensedevelopment

Thesecanbeusedtodescribewholeportfoliosorindividualbuildingsandprojects�Yearoveryeardatacandeterminetherateandscaleofconservationgoalsachieved;itcanalsoofferdirectionalinformationonthenatureofaportfolioinrelationtosmartgrowthcharacteristics�

Social MetricsSocialmetricsrefertotargetedsocialissuesorbenefitslinkedtospecificgroupsofstakeholdersassociatedwiththeoperationanddevelopmentofbuildings�Otherthanowners,keystakeholdersincludeemployees,tenantsandcustomers,andcommunitieswhohaveanimmediaterelationshiptoabuildinganditsoperations�

EmployeesFundandpropertymanagerscanuseinformationabouttheiremployeestoimproveoperationalefficiencyandemployeerecruitmentandretention�Investorsmayuseinformationaboutemployeestoidentifywell-managed

companieswithdiverse,well-trainedandcommittedemployees�Publicagenciesmayreviewworkforceinformationforcommitmenttopublicgoalssuchashealthanddiversity�

MetricsforRPIissuesrelatedtoemployeesrangefromhealthandsafetyinformation,tolongevityandqualityofemployment,toemployeeproductivity�

Thesemetricsmayinclude:

Accident rate:numberofaccidentsperemployeeperyear

Health and safety costs:medicalexpensesorworker’scompensationperemployeeperyear

Employee turnover:percentageofemployeeworkforceturnedoverperyear

Job quality:percentageofworkforcewithfull-timejobswithbenefits

Labor standards:percentageofworkforcerepresentedbycollectivebargainingagreements�

Workforce diversity:percentageofemployeeswhoarewomenorminorities

Management diversity:numberofuppermanagement(andboardmembers)whoarewomenorminorities

Tenants, Consumers and CommunitiesTenantandcustomersatisfactionisalong-standingwaytomeasurethebenefitsofmanagementanddevelopmentchoices�InthecontextofRPI,investorshavepointed



toincreasedtenantsatisfaction,andworkerproductivity,associatedwithincreaseddaylighting,morecomfortableheatingandcoolingsystems,thesignalingeffectofenvironmentallyefficientbuildings,thereputationalbenefitsofcommunityoutreachprograms,andsoon�

Investorsandpublicofficialsmayalsowishtoknowtowhatextentresidentialinvestmentscreateaffordableoptions,orhowinvestmentsserveunderservedcommunities,orcreateopportunitiesfororganizationsthatcreatepublicbenefits�InmanycasesthisinformationisusedtodefinetailoredRPIinvestmentfundsfocusedonissuessuchasurbanregenerationoraffordableandworkforcehousing�

Examplesofsuchmetricsmightinclude:

Tenantsatisfaction:Surveysoftenantsatisfaction,includingtheirsatisfactionwithRPIdimensionsoftheirbuilding�

Affordablehousing:Percentageofunitsforrentorpurchaseaffordabletopeoplewith30-80%ofAreaMedianIncome�

Workforcehousing:Percentageofunitsforrentorpurchaseaffordabletopeoplewith80-120%ofareamediaincome�

Urbanregeneration:PercentageofpropertieslocatedinneighborhoodswithAreaMedianIncomesat80%ofregionalaverage�

Supportfornon-profits:Numberorpercentageofnon-profitorpublicpurposetenants�

Community Impact MetricsCommunityimpactmetricsmeasuregeneralcontributionstoeconomicstabilityandgrowthinagivenarea�Thesemayincludedirectcontributionsthroughtaxesandfees,indirectcreationofemploymentopportunities,orphilanthropicactivitiesundertakenbyacompanyanditsemployeesand/ortenants�

TheMulti-EmployerPropertyTrust(MEPT),aUS-basedrealestateequityfund,tracksjobcreationaspartofitseffortmeasurethesocialandeconomicimpactsofitsinvestmentactivity�Metricsusedincludedjobhourscreated,jobscreated,andlocalandstatetaxrevenuesgenerated�Aspartofthefund’sgreeninvestingstrategy,theMEPThasbeguntracking“greenjobs”createdacrossemploymentsectorsthroughitsadoptionofgreenbuildingconstructionandmanagementpractices�www.mept.com/news

Forsomeofthesemetrics,industrystandardcalculationsprovideacceptedestimatesofeconomicdevelopmentimpactsthatarenoteasilymeasuredwithprecision�




CommunityImpactmetricsmightinclude:

Taxesandfeespaid:totalamountofannualpayments

Jobscreated(direct):numberofemployeesusedfordevelopment,orongoingopportunitiescreatedbybuildingoperationsandmaintenance

Jobscreated(indirect):numberofjobscreatedinagivenareaassociatedwithinvestmentinpropertydevelopmentormanagement

EmployeeandTenantvolunteering:numberofhoursperyearinphilanthropicactivityencouragedandcoordinatedbyagivencompanyanditspartners�

Foreachsetofmetrics:environmental,social,andeconomic–therewillbetimeswhennarrativeaccountsofactivitymaybepreferabletoquantifiablemetrics�Butthegoalsofusabilityandcomparabilitypointtowardssimple,quantifiablemetricswheneverpossible�



IV. Building an Information Management System

Thestrategicworkofdefiningprioritiesandestablishingkeymetricscanbedifficult,butpractitionersoftenpointtotheprocessofcollectionofdataasthemostcomplicatedaspectoftheprocess�HereweidentifykeystepsthatpractitionerslinktosuccessfulintegrationofRPImetricsintotheirday-to-daypractice�

Identify who “owns” the process Thisiscrucialtoproperdatacollection�Gatheringdataisacomplexandoftenlongprocess,asearlyeffortsrunintoproblemsofstandardizationandreliability�Aninternalmanagerorchampion,whohasthisworkattachedtotheirmandate,isimportanttoensuringthatausefulsystemisputintoplace�Akeyinitialtaskwillbeoutreachtoconvincecolleagues,partners,andclientsoftheimportanceofcollectingandreportingdata�

The“owner”oftheprocessmaybuildaninternalRPIteam,ormayworkwithexperiencedexternalconsultants,tohelpcreaterelevantinformationmanagementsystems�Akeyelementforsuccesswillinanycaselikelybeastrongcentralmanagerfortheprocess�

Create a Sustainability Scorecard A“sustainabilityscorecard”isasimpleformatthatstandardizestheinformationcollectionprocess,andcanbeeasilyusedbyinternalstakeholderstocommunicatebuildinglevelinformation�Theissuesthescorecardcoverswillofcoursedifferfromorganizationtoorganization,butkeytoitssuccesswillbeasetofcomparabledatathatcanbeaggregatedandanalyzedbytheowneroftheprocess�Thescorecarditselfcanserveasanoutreachtoolthatmakesclearexactlywhatisexpectedfromeachpartyintermsofinformationtheyarerequiredtoprovide�

Engage property managers, developersand other external stakeholdersInternalstakeholdersmayseeRPImetricsasanadditionalburdenontimeandresources,somethingnotpartoftheirdailyroutine�Practitionerspointtotheneedformanager,agent,andtenanteducation,andclearstandardsetting,inordertointegratethecollectionofRPImetricsintotheordinarycourseofbusiness�

Amongthetoolscompanieshavechosentoadoptarewrittenguidesexplainingtheapplicationofmetricssystems,seminars(onlineandinperson),andcasestudiesofmetricsinaction�




Asset Characteristics: AssetType(commercial,

residential, industrial, etc.) Size Floor-AreaRatio Age OccupancyRate TotalOccupants PropertyManager Ownershipstructure

Energy and Resource Use: EnergyConsumption CarbonEmissions WaterUse WasteGeneration DiversionRate Third-PartyRating

Asset Location Characteristics: ClimateZone(specify) RegenerationZone

(public designation) ProximitytoTransit

(specify transit type) Brownfieldsite UrbanInfillSite Walkscorerating

Sustainability Scorecard Thegoalofa“sustainabilityscorecard”istointegrateRPImetricsintostandardizedbuildingrecordkeeping�Thescorecardhasseveralvirtues,prominentamongthem:clarityintherelationshipsbetweeninvestors,fundmanagers,andpropertymanagersoverthemetricsunderconsideration;andasystematicmethodtoallowforbuildingtobuildingcomparison,controllingforvitalbuildingcharacteristics�

HerewedrawfromaarticlewrittenfortheULIResponsiblePropertyInvestingCouncilofFall2009toofferalimitedsamplescorecardbasedonseveralenvironmentalandurbanregenerationRPImetricsfordemonstrationpurposes�

Asalways,itisworthnotingthatinvestorswillneedtochooseforthemselvesthosemetricsrelevanttotheirlong-terminvestmentperformancebasedontheparticularcharacteristicsoftheirportfoliosandstakeholderrelationships�

LinktoULIFallCouncilArticle:http://www.galleyecocapital.com/wp-content/uploads/2009/11/uli_fallcouncil2009_draft.pdf

Ifeachbuildinginaportfolioweremeasuredaccordingtothesecategories,investorscouldbetterdescribetheirwholeportfolio,targetopportunitiesforefficiencyimprovements,andweighacquisitionandsaledecisionsinlightoftheportfolio-widemeasurements�



Thedevelopmentoftheworkingrelationshipsnecessaryforreliableandtimelyinformationisacomplicated,ongoingprocess�Practitionersfrequentlyrelatehowsystemsmustdevelopovertime,withhonestfeedbackbothfrommanagers,developersandtenantsonthedifficultiesofgatheringinformation,andfromfundmanagersandassetownersontheirspecificneedsandexpectations�Thequalityofinformationshouldimproveasstakeholdersgainexperiencecollectingandtransmittingdata�

Automate data collectionTechnologicalupgradescanfacilitateinformationgathering�Sub-meteringforenergyandwaterusage,forinstance,canofferarichsourceofinformationonresourceconsumptionthatallowsforsignificantoperationalimprovements�Byinstallingsub-meters,managerscanbypasstheneedtoengagedirectlywithtenantstogatherinformation�

Forsomepractitioners,thegoalforcollectingmetricsisanautomatedsystemthatallowsthemtogatherinformationfrommeteringdirectlyintoaninformationmanagementsystem,enhancingboththetimelinessandreliabilityofdata�Moregenerally,automateddataaggregationacrossthespectrumofRPIissues–forinstance,throughanonlinedataentrysystem--canmakemetricsmoreusefultobusinessdecision-making�

Determine Publicly Available SourcesManyRPImetricscanbegatheredthroughpubliclyavailablesources,whetherthroughgovernmentsponsoreddatacollectionorprivateresearchfirmswhogathersuchdata�

Dataoneconomicdevelopment,forinstance,oftenrelatestounderservedgeographicareas�Publiclyavailableinformationonareaincomesorothereconomicindicatorscanbeusedtomeasuretherelationshipofaspecificbuildingtoissuessuchasurbanregenerationorbrownfieldredevelopment�Forinstance,insomejurisdictions,publicagencieslabelneighborhoodsasregenerationzones�

ForacomprehensivelookatonepotentialsetofinformationsourcestomeasureRPIperformanceintheUnitedStatescontext,seeGaryPivo’sarticle“SocialandEnvironmentalMetricsforUSRealEstatePortfolios:SourcesofDataandAggregationMethods,”foundatwww�u�arizona�edu/~gpivo/MetricsPaper_Pivo_June08_v1�0�pdf

Similarly,questionsofsmartgrowth–relativedensityofneighborhoods,proximitytotransit,orwalkability–canoccasionallybegatheredthroughpubliclyavailabledatasources�Forinstance,WalkScore,aUS-basedservicethatranksneigborhoodsontheirwalkability,(www�walkscore�com)offersapubliclyavailableinternet-basedtoolwhichmeasuresproximitytoservicesandpublictransitbybuildingaddressintheUnitedStates,Canada,theUnitedKingdom,Australia,andNewZealand�




Evaluate Research FirmsAnumberofresponsibleinvestmentresearchfirmsandconsultantsexist�Whiletheirfocushasnotprimarilybeenonpropertyinvestment,theymayofferresourcesbothfordesigninginformationcollection,verifyingtheinformationthathasbeengathered,orevenconductingtheprocessthemselves�Thesefirmsmightcoverresponsibleinvestmentissuesbroadly,orfocusonkeyenvironmentalorsocialissues–suchasmeasuringportfolio-widecarbonemissions,ofparticularinteresttoinvestorsandfundmanagers�

Practitionerswillwanttoweighthemosteffectivemeansforassuringdataquality�Internalreview,externalaudits,thirdpartyevaluation–eachoffersaparticularsetofcostsandbenefitsandmeritscarefulconsideration�Morethananyparticularmethod,practitionersshouldbesuretoincludeconsiderationofdataqualityasafundamentalpartoftheirinformationmanagementsystem�



V. Putting Metrics to Work

Oncegathered,metricscanbeputtoworkinawidevarietyofways,bothforindividualbuildingsandforwholeportfolios�Akeyissueforpractitionersistodetermineatwhatscalemetricsaremostusefulfortheirstrategicneeds�

TheusesforRPImetricsincludebutarenotlimitedto:

Benchmarking performanceAttheindividualbuildinglevel,practitionerscanusemetricstobenchmarkissuessuchasresourceuse,tenantsatisfaction,oremployeehealthandsafety�Attheportfoliolevel,practitionerscanaggregatedataonissuessuchastotalgreenhousegasemissions,affordablehousingcreatedormaintained,acresofgreenfieldpreserved,orjobscreatedandmaintained�

Setting performance targetsAttheportfoliolevel,investorsmaywishtosetcomprehensivetargetsforimprovement,andusetheirbenchmarkstomeasureprogress�Inrecentyears,forinstance,anumberofinvestorshavesetportfolio-widegreenhousegasemissionreductiontargetsof,forexample,10-30%overanumberofyears�Metricscanalsobeusedtosetminimumstandards–forthepercentageofunionizedlabor,orthediversityoftheworkforce,ortheenergyefficiencyofabuilding,forinclusioninportfolios�

Prupim,aUK-basedglobalrealestateinvestmentmanager,usesmetricsforenergyperformancetosetclearcorporategoalsonperformance�Theorganizationisworkingondevelopingarelatedsetofindicatorsforadditionalcategoriessuchashealthandwell-being,jobsandskills,community,andbiodiversity�http://www.prupim.com/site/media/documents/3414_Our_Future_Targets.pdf Similarly,Hammerson,aEuropeanrealestatefundmanager,setsperformancetargetswithmetricsforclimatechange,energy,andresourceuse,includingannualandrollingtargets�http://media.corporate-ir.net/media_files/irol/13/133289/crreport/Full_report.pdf




Acquisition, disposition, and improvement guidanceRPImetricscanhelppractitionersdeterminewhetherabuildingissuitableforaportfolio,orwhetheritofferstheopportunityforoperationalefficiencygainsormarketrepositioning�Forinstance,RPImetricsmighthelpidentifyenergyinefficientbuildingsthatcanberetrofittedorbroughtuptothirdpartystandards�Similarly,metricsontransit-orientationcaninformarepositioningofportfoliosawayfromurbansprawl�Tenantdissatisfactionmayurgedispositionofbuildingsthatcannotberepositioned�

Disclosure and transparencyMetricsofferthebaselinedatawhichorganizationcanusetoreporttheirRPIperformancetoemployees,contractors,investors,regulators,communities,andNGOs�Metricsthemselvesdonotalwaysfittheneedsofsuchdisclosure�Rather,theymustbeplacedinbroaderorganizationalandsocialcontextstobemeaningfultoabroadgroupofstakeholders�DisclosurewillbethesubjectofToolkit3inthisseries�



VI. Third Party Standards

Investorsshouldidentifythosethirdpartystandardsrelevanttotheiractivities,anddecidewhetherthosestandardshelpthemachievetheirinvestmentgoals�

RecentyearshaveseenthedevelopmentofanumberofrobustthirdpartystandardsforratingbuildingsonRPIissues,particularlyonenvironmentalissues,acrosstheglobe�Theseratingssystemsanalyzebuildingsacrossaspecificsetofperformanceissuessuchasenergy,climateemissions,water,waste,indoorairquality,andsustainablelocation�Theyincludethe:

• UnitedStatesGreenBuildingCouncil’sLEEDstandards,whichcoverenvironmentalperformanceofnewandexistingbuildingsofmultiplepropertytypes,withnewerratingsforneighborhoodimpactandenvironmentalperformanceacrosswholeportfolios�www.usgbc.org

• UnitedKingdom’sBREEAMstandards,whichofferenvironmentalperformancemeasurementformultiplepropertytypes,includingresidential,commercial,industrial,andmorespecifictypesincludingecohomes,healthcare,educational,prisons,andalsocanbeusedforwholecommunityenvironmentalratings�www.breeam.org

• CASBEEsysteminJapanincludesenvironmentalassessmentsofmultiplepropertytypesandacrossfourbuildinglifecyclestages–pre-design,newconstruction,

existingbuilding,andrenovation�CASBEEisalsodesignedtotakeintoaccountissuesparticulartoJapanandAsia�http://www.ibec.or.jp/CASBEE/english/overviewE.htm

• GreenBuildingCouncilofAustralia’sGreenStarsystem,whichcurrentlyhastoolstoratemulti-unitresidential,healthcare,retail,office,andeducationalbuildings,withpilotprojectsforotherpropertytypessuchasmixed-use�GreenStarincludesspecificconsiderationofthevariedgeographicinfluencesonbuildingperformanceinAustralia’sdiversecontexts�http://www.gbca.org.au/green-star

Theseareamongthemostprominentexamples,andtheyworkwithsimilarissuestocreatewide-rangingevaluationsofenvironmentalperformance�Thereareother,similarratingssytemsunderdesign,fromthepublic,private,andnon-profitsectors,aswellasregulatoryeffortstoconcretelymeasureenergyuse�Theproliferationofmultipleratingssystemshasledtocallsforamoreuniversalstandard�

Ingeneral,ratingssystemshavefoundmoreuptakefrominvestors,fundmanagers,andotherstakeholdersonnewconstructionthanonexistingbuildings,andportfolioanalysisthroughthirdpartyratingsremainsverydifficult�




Foracomparisonofanumberoftheworld’sthirdpartybuildingstandards,seetheUNEPFI/SBCI’s(SustainableBuildingandClimateInitiative)FinancialandSustainabilityMetricsReport:aninternationalreviewofsustainablebuildingperformanceindicatorsandmeasurements,foundathttp://www.unepfi.org/fileadmin/documents/metrics_report_01.pdf

Intheory,thesestandardsoffertheadvantageofclarityandcomparability,thoughinpracticethornyissuesofsub-assetclass,geography,buildingpurpose,occupancyrate,etc�remain�

KennedyAssociatesRealEstateCounsel,aUS-basedinvestmentadvisor,reportsonthebuildingsinitsportfoliothathavebeencertified,pre-certified,andarependingcertification(andthelevelofcertificationforeach)fromtheUSGreenBuildingCouncil’sLEEDsystem�ThecompanyalsousestheEnergyStarbenchmarkingsystemonitsexistingbuildingportfoliotobenchmarkenergyperformance�Finally,KennedyisengagedwiththeUSGBC’spilotprogramforLEED-EBOM(ExistingBuildingOfficeandMaintenance),whichseekstosetstandardsforexistingbuildingenvironmentalperformance,andofferportfoliomanagerstheabilitytostreamlinecertificationacrosslargeportfolios,acommondifficultywiththirdpartystandardsforexistingbuildings�http://kennedyusa.com/PDFs/RPI%20Report%202009.pdf

Thirdpartystandardscanserveasrulesofthumb,andsavetimeandresources�Thisisespeciallytrueattheportfoliolevel:Practitionerscaneasilyidentifyhowmanybuildingswithinaportfoliohaveachievedacertainrating�Thestandardsmayalsoserveasusefultemplatesforthosepractitionerswhoaredevelopingtheirownsystemofmetrics�Formanystakeholders,thirdpartystandardshavebecomedefactometametrics,andtheyareincreasinglyrecognizedintherealestatemarketplace�Investorsmaywishtoadapttheirownmetricssystemstofacilitateevaluationbythirdpartystandards�

Practitionersmustcarefullyconsidertwoissueswhenevaluatingthirdpartystandards:• Arethestandardsrecognized andconsideredrelevantby importantstakeholders?• Doesthecostofachievingacertain ratingoutweighitsbenefitsasa signaltostakeholders?Theanswerstothesequestionsarelikelytochangeovertime,asmarketdynamics,consumerpreferences,andpublicpolicyconsiderationschange�TheemergenceofindustrystandardRPImetrics,andratings,isanimportanttopicforinvestorsbothtostudy,andonwhichtocollaborate�



Metrics for Performance Measurement 21

VII. Collaborating with stakeholders on standardizing RPI metricsResponsiblePropertyInvestingisanemergingdiscipline,andthefieldistakingshapethroughcollaborativeactionamongindustrypeersandrelatedstakeholders�Collaborativeactiontodefineindustrystandardsformetrics,andtosharebestpracticesontheircollectionanduse,havethepotentialtoplayavitalroleindefininganddisseminatingRPIinpractice�

Theissueofmetricsinparticularisonewherecollaborativeaction,intheformofcreatingindustrynormsformetricsandtheirreporting,couldhavewidelybeneficialconsequencesforintegratingRPIintoinvestmentpractice�

Anumberofforumsexistforsuchcollaboration�The UNEP FI Property Working GroupandtheResponsible Property Investing Center,thesponsorsofthistoolkit,offerinvestorsandstakeholderstheopportunitytoshareexperiencesandsetnormsforthefield�TheUrban Land InstitutehascreatedaResponsiblePropertyInvestingCouncilfordevelopersandinvestors�Moreandmore,industrytradeorganizations,responsibleinvestmentnetworks,andotheradvocacyorganizations,aremakingRPIapartoftheirwork,andcanprovideforumsfortheexchangeofinformationandbestpractices�OnRPImetrics,theGlobal Reporting InitiativehasestablishedaWorkingGrouponsector-specificreportingguidelinesfortheconstructionandpropertysector�

Third-partstandardsettingbodiesalsoorganizestakeholderstocontributetothegenerationandmodificationofstandards,andthepresenceofinvestorscanplayavaluableroleinreviewingstandardsforusefulnessandpracticability�

United Nations Environment Programme Finance Initiative (UNEP FI)TheUnitedNationsEnvironmentProgrammeFinanceInitiative(UNEPFI)isaglobalpartnershipbetweentheUnitedNationsEnvironmentProgrammeandtheprivatefinancialsector�UNEPFIworkscloselywiththemorethan180financialinstitutionsthataresignatoriestotheUNEPFIStatements,andarangeofpartnerorganizations,todevelopandpromotelinksbetweentheenvironment,sustainabilityandfinancialperformance�Throughregionalactivities,acomprehensiveworkprogramme,trainingactivitiesandresearch,UNEPFIcarriesoutitsmissiontoidentify,promote,andrealizetheadoptionofbestenvironmentalandsustainabilitypracticeatalllevelsoffinancialinstitutionoperations�

RPICTheResponsiblePropertyInvestingCenter,ajointprojectoftheUniversityofArizonaandtheInitiativeforResponsibleInvestmentatHarvardUniversity,fillsavoidintherealestatelandscapebybringingtogetherleadingrealestatepractitioners,fromdevelopersandlenderstofundmanagers,assetownersandinstitutionalinvestors,inordertocoordinateanddisseminatetheirbestpractices,conductcrucialresearch,andtocreatenetworksofinvestmentopportunitiesthattakeadvantageofthechanginglandscapeofpropertyinvestment�Formoreinformationseewww�responsibleproperty�net�

www.unep.org

United Nations Environment ProgrammmeP.O. Box 30552 Nairobi, Kenya

Tel: ++254-(0)20-62 1234Fax: ++254-(0)20-62 3927

Email: [email protected]

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RPIC

InternationalEnvironmentHouse

15ChemindesAnémones

1219Chatelaine,Geneva,Switzerland

Tel:(41)229178178

Fax:(41)227969240

fi@unep�ch

www�unepfi�org

For more information, contact:

UNEP FI Property Working Group:property@unepfi�org

David Wood:david_wood@hks�harvard�edu

second in a series of toolkits on responsible …unep finance initiative metrics for performance...

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