Investor Centre

Corporate responsibility and ESG

ESG policy

The Board acknowledges the importance of Environmental, Social and Governance (“ESG”) matters across our business.  We are committed to delivering transparent reporting to our stakeholders on our ESG strategy in line with international reporting and verification standards including Global Reporting Initiative (“GRI”) and AA1000 standards.  Our intention is for this to inform investment decision making, enable alignment with industry best practice and enhance our stakeholders’ understanding of the impact of ESG matters on our real estate.  We are committed to publishing an annual report on ESG which at this stage is included within the annual report and also posting the ESG report on our website.

Our ESG Policy focuses on four priority areas that incorporate environmental responsibility, social responsibility and corporate governance:

  • Governance and disclosure – embedding ESG principles in our decisions; Greenhouse Gas emissions reporting
  • Responsible investment – commitment to becoming a signatory of the United Nations Principles of Responsible Investment (“UNPRI”) in 2022
  • Working collaboratively – continuing and enhancing our dialogue with tenants to achieve mutual ESG goals
  • Meeting our legal obligations – Streamlined Energy & Carbon Reporting (“SECR”) and Taskforce for Climate Related Financial Disclosures (“TCFD”)

We comment on the link between our ESG Policies and our Investment Strategy within this report.

Governance of ESG matters

In 2021, we strengthened our existing governance of ESG matters by the creation of an ESG Committee.  The Committee is chaired by the Company’s Chairman, Martin Moore, reflecting the importance we attribute to ESG.  Other Committee members are Mike Brown and Ben Walford, both of whom are directors of and shareholders in the Investment Adviser.  The ESG Committee, appointed by the Board, has access to expert advice where relevant and its principal responsibilities are to develop and monitor the Company’s ESG Policy, and to report on it to the Board.

The ESG Committee’s duties include:

  • preparation for the Board’s approval at least annually of ESG policies to effectively manage the Group’s ESG risks and opportunities;
  • development of appropriate KPIs or other appropriate targets and external benchmarks for recommendation to the Board, and monitoring and reporting on progress against them to the Board at least quarterly; and
  • overseeing engagement with the Company’s key stakeholders on ESG matters.

The Committee chairman reports to the Board on Committee proceedings after each meeting.

The Committee annually reviews its report to shareholders on its activities, of which this is the inaugural report, for recommendation to the Board for inclusion in the annual report.  The Committee’s most recent meeting was held in February 2022 and, including that meeting, it has met twice since its inception in September 2021.

ESG risk management

ESG risks are integrated into the Group’s risk management process and the Group risk register includes climate risk and risks from the transition to decarbonisation within one of the overarching risks faced by the business. 

Material issues

With reference to the GRI principle of materiality, we consider that a meaningful ESG strategy is one that is evidence-based and created with an understanding of the most material issues to our business and our stakeholders.  We commissioned an independent specialist to carry out a materiality review in 2021.  This review included a review of our shareholders’ priorities, our tenants’ priorities, relevant legislation and an assessment of peer companies in the UK real estate sector.  The review was informed by best practice frameworks, including GRI, and conducted in conjunction with consideration of the United Nation’s Sustainable Development Goals (“UN SDGs”).  The review identified the following UN SDGs as the most material for the Group:

Sustainable Cities and Communities (Goal 11)

The Group’s investment properties provide social infrastructure for leisure, tourism and health care uses, generating employment and social value for communities.

Responsible Consumption & Production (Goal 12)

We work with our tenants to reduce the resources used in their operations, focused on energy, water and waste, and promote responsible fit out, refurbishment and development practices.

Climate Action (Goal 13)

We will be calculating, with actual data where possible, the Scope 1, 2 & 3 carbon emissions of the Group’s investment properties.  We are also encouraging and, where possible, working with our tenants to reduce these emissions in line with a net zero carbon future in the UK.

The material ESG issues are reviewed at least annually to ensure they remain relevant for the Group and are adjusted in response to any significant change to the Group’s portfolio or operating environment.

ESG strategy

The Group’s ESG strategy is summarised in the ESG policy that is considered by the Committee as part of the performance of their duties and presented to the Board for approval at least annually.

Strategy Operating Context Outputs Value Created
Climate Action We will be measuring our Scope 1, 2 & 3 carbon emissions in support of this goal and are working with our tenants to reduce these emissions in line with a net zero carbon future in the UK. Real estate is one of the biggest contributors to climate change worldwide and one of the largest consumers of scarce natural resources and land. · Memorandums of understanding to be put in place with tenants
· Measurement of Scope 1, 2 and 3 emissions to be undertaken
· Climate risk an overarching theme in risk management
· EPC assessment across portfolio to be obtained
· Commitment to report to TCFD
· Commitment to align with UNPRI
Increased financial value from the long term resilience of our assets
Sustainable Cities & Communities We contribute to Goal 11 through the provision of social infrastructure for leisure, tourism and healthcare uses, that generate employment and social value for communities. Capital is allocated after taking into account an analysis of ESG factors · Governance of diversity and inclusion
· Reporting on human rights & supply chain in the statement on modern slavery, data protection and health, safety and wellbeing
Stronger relationships with tenants, investors, the workforce and suppliers
Responsible Consumption & Production We contribute to Goal 12 by working with our tenants to reduce the resources used in their operations, focusing on energy, water and waste and promoting responsible fit out, refurbishment and development practices. There may be a premium in the market for buildings that meet ESG expectations of buyers and occupiers · Planned measurement of tenant energy, water and waste data
· “Green” lease clauses, principally formalising co-operation on ESG reporting
· Working with tenants to achieve alignment with future EPC regulations
Protection of the natural environment through improved environmental performance

The ESG strategy is integrated with the Group’s investment strategy to provide long term, secure, inflation protected income and capital returns from Key Operating Assets.  As a result, we focus on realising commercial benefits and protecting value in our investments over the long term.  For example, we are working to understand the energy efficiency of the Group’s investment properties, knowledge of which will help in the evaluation of both emerging regulatory implications for the Company as a landlord, as well as emerging regulatory obligations for our tenants.  These range from current and predicted Minimum Energy Efficiency Standards for buildings, through to the UK’s net zero carbon pathway, planned mandatory reporting of Taskforce for Climate-related Disclosures standards and the Streamlined Energy and Carbon Regulations.

We aim to achieve improvement in relation to ESG matters by working in collaboration with our stakeholders, primarily the Group’s tenants, to influence them as their support is important in achieving our ESG strategy.

Best practice and responsible investment

We continue to embed and strengthen our approach to ESG through commitment to best practice and providing an objective validation of our overall approach.  As well as reporting against the UN SDGs, we are in the process of further aligning with the UN PRI by the end of 2022, building on our existing compliance with its principles.  We currently include ESG considerations in our investment decision making and due diligence process, including the EPC rating of specific assets and the overall strength of a prospective tenants’ approach to ESG and the extent to which it aligns with our own (UN PRI Principle 1).  Similarly, we consider ourselves active owners of our investments and regularly engage and communicate with tenants and other stakeholders on ESG issues (UN PRI Principles 2 and 3).

With an understanding of the risks and opportunities that climate change presents to our business, we are committed to addressing the TCFD recommendations.  Following the Board’s commitment to aligning with the TCFD framework, as disclosed in the 2020 Annual Report, we have made progress in the last 12 months against some of these recommendations, including:

  • the continued inclusion of climate risk as one of two over-arching themes in the Group’s overall risk management assessment;
  • the Board having full oversight of climate related risk at the most senior level within the business, through the creation of the Company’s ESG Committee which is chaired by Martin Moore, Chairman of the Company; and
  • commencement of work to compile the measurement of the Scope 1, 2 and 3 greenhouse gas emissions from the Group’s investment properties.

We are committed to continuing to report further in line with the recommendations of TCFD and to conduct a deeper assessment of the impact of climate change on our business for our stakeholders, ahead of planned mandatory climate risk reporting to be introduced in the UK from April 2022.

Environmental and wider ESG impact

Operational control of the vast majority of the Group’s assets, and therefore the vast majority of the impacts of our real estate including energy use, water use, resource use and waste, rests with our tenants as the Group’s investment properties are let on Full Repairing and Insuring terms.  However, we are in many cases our tenants’ largest single landlord, or responsible for a significant proportion of their real estate portfolios, making us mutually significant stakeholders in each other’s businesses.  For example, we are landlord of one third of Ramsay Health Care’s UK estate and two of Merlin Entertainment’s top three UK resort theme parks.

The table below indicates the percentage of assets by Estimated Rental Value (“ERV”) where the tenants have full operational control:

 LeisureHospitalsBudget HotelsTotal
Number of assets2512123160
Lettable floor areaThe nature of the great majority of the Group’s assets is such that lettable area measured in square feet is not a relevant measure.  As the assets are operational assets, lettable floor area is not monitored by the Board and so is not provided.
Percentage by ERV of indirectly managed assets (where tenants have operational control)98.9%100%100%99.5%
Average occupancy rate by ERV99.9%100%100%100%

Co-operating with our tenants is inherent in the Group’s business model of providing secure, high quality, long term returns.  This approach is reciprocated by our tenants, who rely on us as owners of the real estate, which is essential for the delivery of their businesses, where barriers to entry are high and relocation is often unfeasible.

The deep rooted and enduring relationships we have with our tenants makes mutual co-operation and collaboration a necessity.  Due to our long lease terms, the financial incentive for our tenants to improve the environmental performance of our assets is greater than in traditional landlord and tenant relationships, as our tenants will benefit for a much longer period from any improvements they make.  This contrasts with the shorter leases and typically adversarial relationships which have historically been a barrier to progress in traditional landlord and tenant relationships in the UK real estate industry.  The Company seeks to understand the downstream impact of its investments on climate change (UN SDG 13) and resource use (UN SDG 12).

Our influence as a critical stakeholder of our tenants, working with them to collectively address ESG matters for mutual benefit, is demonstrated by the following case study.

Case Study – Working Collaboratively

The regear of Merlin’s theme park leases, extending the unexpired term from 20.5 years to 55.5 years announced in December 2021, included mutually agreed “green lease” clauses to improve the environmental performance of the assets, share data and co-operate on EPC ratings.  These clauses help to solidify the strong joint working relationship which already existed between us and our tenants and contribute to each party achieving their ESG objectives.

Similar to the enhanced and formalised collaboration with Merlin, we are working towards entering into memorandums of understanding with our other key tenants to formalise the sharing of utility data and to cement the regular channels of communication with our tenants that already exist.

Tenants having operational control of our assets places a significant emphasis on understanding how they fulfil their ESG responsibilities when considering the long-lasting value of our investments.  At least annually, we monitor all key tenants’ ESG activities and wework very closely with our tenants with a view to achieving the best outcomes for our respective businesses.  The information that we obtain in working with them allows us to understand our tenants’ cumulative ESG impact, including from our assets.  All of our major tenants have an ESG strategy or policy in place, which were used as an input in the materiality review that we conducted.  There is a high degree of synergy between our and our tenants’ ESG strategies, with widespread reporting of greenhouse gas emissions (Merlin, Ramsay and Travelodge); carbon reduction targets (Merlin and Ramsay); alignment with UN SDGs (Ramsay) and recognition of the risk of climate change (Merlin).  As it would not be right for the Company to disclose more about our tenants’ businesses than they themselves report publicly, we summarise below the key points from our major tenants’ publicly available statements.

Contractual rent per annum £m Summary Key commitments & achievements
Merlin Entertainments Limited 36.2 Merlin has a “Responsible Business” section on its website, www.MerlinEntertainments.Biz.  That includes a “Corporate Responsibility” section in its annual reports and accounts on a range of ESG issues which are material to its business including health, safety & security, people & communities, animal care & conservation, the environment and corporate governance. The company has an environmental policy. · Use of 100% renewable electricity
· A commitment to comply with and, where appropriate and practicable, to exceed all relevant environmental legislation
· A carbon reduction target
· A commitment to a circular economy and plastic use reduction
· Inclusion of climate change risk in risk management
Ramsay Health Care Limited 35.4 Ramsay has a specific “Sustainability” section on its website,  This covers in detail their various governance policies and includes their Global Sustainability Policy and Supplier Code of Conduct Policy. Ramsay also publishes a sustainability impact report, available on its website. · Completion of a materiality assessment
· Commitment to UN SDGs and UN Global Compact
· 10% reduction in energy and greenhouse gas emissions intensity by 2026
· Gender balance targets at Board and Senior Executive level
· Inclusion in the FTSE4Good Global Index
· MSCI* ESG rating of AA
Travelodge Hotels Limited 30.3 Travelodge’s annual report and accounts include a section on “Sustainability” and focuses on material issues for its business including safety, information security, greenhouse gas emissions and social impact. · Reporting on greenhouse gas emissions
· BREEAM rating for new hotels
ASM Global (parent entity of SMG) 4.1 ASM’s corporate responsibility statement is available on the “Our Story” section of its website,  This includes an overview of their environmental policy. Measurement of greenhouse gas emissions, water consumption and waste reduction.
The Brewery on Chiswell Street Limited 3.8 The Brewery’s corporate social responsibility statement is available within a dedicated section of its website Both the tenant and venue have achieved ISO20121 certification for sustainability in event management.
Major tenants 109.8 94% of Group contractual rent
*the reference to MSCI ESG Research LLC or its affiliates (“MSCI”), and the use of MSCI logos, trademarks, service marks or index names herein, does not constitute a sponsorship, endorsement, recommendation or promotion by MSCI.  MSCI services and data are the property of MSCI or its information providers, and provided “as is” and without warranty.  MSCI names and logos are trademarks or service marks of MSCI.

Social and governance

While we use our influence and positive relationships to deliver the most material environmental aspects of our ESG strategy with our tenants, the direct impacts of our business are focused on social and governance issues over which we have direct control and accountability.  We are also working during the next 12 months to understand the social impacts that we are able to enable with our tenants, to better understand how our social impacts extend beyond the boundaries of our own business.

Diversity and inclusion

The Company’s diversity and inclusion policy appears in the Corporate Governance Report in the Company’s annual report and the Nomination Committee reports on its approach to diversity and inclusion in the Company’s annual report.

Human rights and supply chain integrity

The Company posts a statement on its responsibilities under the Modern Slavery Act 2015 on its website annually.

Health, safety and wellbeing

The Board’s responsibility for the wellbeing of the workplace and the Remuneration Committee’s report on workplace engagement appear in the Company’s annual report.