ESG
We want to make a positive contribution to the environment and society
while generating a financial return for shareholders
OUR APPROACH
UN Sustainable Development Goals
Our business is run in a manner that contributes to global sustainability efforts to achieve meaningful, lasting progress and mitigate climate change. We have chosen to adopt the UN Sustainable Development Goals (“SDGs”). The SDGs were first adopted by UN member states in 2015 as an urgent call to address 17 global environmental and socioeconomic issues with the ambition to meet 169 related targets by 2030. We believe that we can make the greatest contribution to the following three SDGs:
We are committed to supporting tenants in being a good neighbour, as well as being a cornerstone of vibrant communities. Our tenants employ thousands of people, providing a platform for local economies to continue to prosper and grow
We focus on ensuring lasting positive impacts wherever we operate. Thriving communities promote thriving tenants. We aim to ensure our buildings and their surroundings provide safe and comfortable environments for all users. We continue to support our tenants’ community giving.
We are committed to reducing the carbon footprint of our portfolio. We engage with tenants to enhance the buildings we own and have been successful in partnering on a number of initiatives, including the installation of solar panels in partnership with Tesco. We also continue to integrate environmental considerations into our acquisition and building evaluation process.
Identifying material issues
To better understand the sustainability issues, risks and opportunities that are most important to our business and stakeholders, we recently completed our first sustainability materiality assessment. Working with external consultants we embarked on a process of extensive internal and external engagement, further details of which can be found by clicking here.
Our materiality matrix presents an overview of the ESG issues that were discussed and a shortlist of those that were identified as priorities for Supermarket Income REIT and its stakeholders. We are using this shortlist to inform our strategy and continue enhancing our reporting and disclosures in these key areas.
OUR ASSETS AND THE ENVIRONMENT
Scoring our assets
Our Board has a longstanding approach to transactions and operational activities which seeks to minimise detrimental impacts to the environment and local communities. To reinforce this, our Investment Adviser has strengthened its responsible investment strategy by introducing an investment policy grounded on responsible investment principles and defining a scorecard focused on key ESG-related criteria.
This scorecard is an effective tool in ensuring that both existing and potential assets fit with our ambitions as a responsible business, by guiding both our investment decisions and asset management activities. It will enable us to align our future commitments with specific targets and goals and set meaningful KPIs.
The core aspects of the ESG scorecard are
Energy efficiency of buildings
Tenant commitments on the environment
Tenant approach to stakeholders and supply chain
Improving energy efficiency
Our assets are typically leased as full repairing and insuring (FRI), which gives the tenant substantive control rights over the property during the lease term along with responsibility for all external and internal maintenance and the procurement of energy.
That said, we are committed to improving the energy efficiency of our assets and either do so directly, where we have the opportunity, or by supporting our tenants to implement sustainability initiatives. To achieve this we engage regularly, both formally and informally, with our tenants to discuss their targets and goals.
Source: Atrato Capital Limited. As at 31st March 2022
Our overall portfolio EPC rating is C. There are nine properties with an EPC rating of D and only one property rated E. None of our assets have an EPC rating lower than E.
We have ongoing programmes underway to enhance energy efficiency across our portfolio. We only acquire assets with an EPC C rating or above, or where opportunities have been identified to improve the EPC rating through asset management initiatives.
The Government has recently set out plans to improve minimum energy efficiency standards (MEES) in tenanted non-domestic properties by requiring these assets to be EPC C by 2027, and EPC B by 2030.
We have carried out a detailed review with third party advisers to assess the cost of meeting these targets. The base case is that the costs to achieve an EPC B rating across our entire portfolio would be less than £10 million and may reduce further as a result of our tenants’ own initiatives. We are confident that we will meet, or exceed, the Government’s targets for energy efficiency ahead of the deadlines.
For example, Sainsbury’s has undertaken a programme of environmental measures across the stores in our portfolio. This includes improvements to heating and refrigeration, the installation of energy-efficiency LED lighting, and increasing water efficiency.
Solar energy
A key initiative is to improve energy efficiency is through the installation of solar photovoltaic panels across the portfolio.
Given the large footprint of our stores there is a significant opportunity for onsite renewable energy generation, primarily commercial rooftop solar. Solar contributes to the UK’s net zero carbon transition, enhances the environmental performance of the asset and also has the potential to reduce energy costs for the operator.
The Board of SUPR has entered into a memorandum of understanding to expedite the roll out of rooftop solar across the portfolio with Atrato Onsite Energy (LSE:ROOF). ROOF is the only listed entity dedicated to providing onsite renewable energy in the UK. Atrato Onsite Energy is a client of Atrato Partners Limited, the principal of our Investment Adviser, Atrato Capital Limited.
Biodiversity
Encouraging biodiversity, and protecting natural habitats and ecosystems is important to us and our tenants. For example, Sainsbury’s has highlighted the importance of ensuring that the impact of its operations is net positive for biodiversity, and it works closely with farmers, growers and suppliers to achieve this. More broadly, our tenants have made public commitments across their supply chains and in their management practices to support biodiversity.
Local communities
Our omnichannel stores are fundamental to the UK’s ‘feed the nation’ infrastructure. Beyond this, the sites often accommodate petrol stations and smaller ancillary units such as post offices, doctor surgeries, pharmacies, other retail and quick service restaurants; making them ‘go to’ destinations and providing valuable goods and services to the local community. Furthermore, within the stores some operators have created community rooms, learning centres and/or facilities for people seeking shelter from domestic abuse.
Our Investment Adviser donates to charities including with FareShare and The Trussell Trust, which aim to fight hunger and tackle food waste. The supermarket operators also have their own volunteering and fundraising programmes in place to support local communities.
Emissions and climate change
Working towards a net zero carbon economy and tackling climate change is a priority for the supermarket operators, and our tenants have set ambitious goals to this end.
As an externally managed fund Supermarket Income REIT does not have employees. Whilst our energy use and emissions are immaterial, we recognise the importance of having visibility across our value chain. Emissions from our downstream leased assets contribute to the majority of our Scope 3 carbon footprint, and we continue to work with our tenants to progress our ambitions to report actual data in the future.
Furthermore, we have sought to gain a clearer picture of the energy use and emissions produced by our Investment Adviser, whose primary environmental footprint is in relation to its London office. The Investment Adviser has committed to undertake its first Streamlined Energy and Carbon Reporting (SECR) in 2022.
We have declared our support for the Task Force on Climate-related Financial Disclosures (TCFD), joining more than 2,800 organisations in demonstrating a commitment to building a more resilient financial system and safeguarding against climate risk through better disclosures.
GOVERNANCE
Our Board
The Board of Supermarket Income REIT is dedicated to achieving the highest standards of corporate governance. It is fully independent and comprises of four non-executives with multi-decade experience across their respective fields of real estate, law, finance and grocery property. A quarter of Board members are female, and the promotion of diversity and inclusion remains a priority. The Board is responsible for the overall supervision of the Company, including sustainability and risk management.
Our Investment Adviser
Our Investment Adviser is responsible for shaping proposals in respect of the portfolio. The Board relies on the skills, experience and insights of the Investment Adviser to protect returns, promote the contribution of our tenants, and advocate improvements in real estate standards.
Supermarket Income REIT has no employees, and the Board therefore pays close attention to the culture of the Investment Adviser alongside other important ESG matters. The Investment Adviser has a talented and committed team who operate within a high-performance and dynamic culture. It has implemented a robust induction and training programme for its employees and has undertaken a range of measures to ensure their health, safety and wellbeing. Diversity and inclusion are promoted, and 40% of the leadership team are female.
The Investment Adviser has committed to donate a portion of cash profits (relating to the SUPR Investment advisory mandate with SUPR) from the previous financial year to charity annually. Its charitable partners for 2021 included:
For further information about the Investment Adviser’s ESG policies and practices, visit www.atratogroup.com.
Best practice and awards
Supermarket Income REIT Plc is a proud member of the Association of Investment Companies implementing the principles and recommendations of the AIC's Code of Corporate Governance.
Supermarket Income REIT Plc is delighted to have been awarded an EPRA Gold Best Practice Recommendations (BPR) award in 2019, 2020 and 2021.
