Cromwell Property Group

A Message from Lord Pickles and Lord Blunkett, followed by Cromwell Property Group's best practice article

The ability to listen and learn from one another has always been vital in parliament, in business and in most aspects of daily life. But at this particular moment in time, as national and global events continue to reiterate, it is uncommonly crucial that we forge new channels of communication and reinforce existing ones. The following article from Cromwell Property Group is an attempt to do just that. We would welcome your thoughts on this or any other Parliamentary Review article.

Blunkett signature Rt Hon The Lord David Blunkett
Pickles signature Rt Hon The Lord Eric Pickles

www.cromwellpropertygroup.com

BEST PRACTICE SPONSOR 2020
13CROMWELL PROPERTY GROUP |
HOUSING
Mark McLaughlin, Managing
Director, Europe at Cromwell
Property Group
Den Bosch office property
exterior, The Netherlands
Cromwell Property Group is a real estate investor and
manager operating on three continents with a global
investor base. The firm’s total assets under management
are worth €7.5 billion across Australia, New Zealand and Europe.
It manages €3.8 billion of assets in Europe across a variety of
funds and mandates, encompassing approximately 205 assets
and 3,000 tenants. Mark McLaughlin, Managing Director,
Europe at Cromwell Property Group, explains how they and the
rest of the industry are looking to reduce carbon emissions.
The property sector is responsible for approximately 30 per cent of the UK’s total
carbon emissions, a fact that is unlikely to escape the full attention of policymakers
for much longer.
Spurred on by movements like Extinction Rebellion, the fear that our planet is fast
approaching a tipping point beyond which there could be little chance of recovery
or rebalance is creating the conditions for urgent and co-ordinated action.
While public awareness is an important catalyst for change, it is not the only one.
We all know that achieving sustained change will require a delicate balance of
global and local leadership and collaboration across the public and private sectors,
a combination that historically has been difficult to achieve.
The Paris Climate Agreement, which the UK signed up to in 2015 along with more
than 196 other nations, is a serious global initiative which aims to limit the threat of
climate change by keeping global temperature rises to less than two degrees above
pre-industrial levels by the end of this century.
FACTS ABOUT
CROMWELL PROPERTY GROUP
»Managing Director, Europe:
Mark McLaughlin
»Established in 1998
»Headquartered inBrisbane,
Australia
»Services:Capital partnership
and fund management for
a range of global and local
investors, capital providers and
banking partners
»No. of employees:More than
420 across 30 offices in 15
countries across Australia,
New Zealand and Europe
»Cromwell has a strong track
record of creating value
and delivering superior risk-
weighted returns throughout
the real estate investment cycle
»www.cromwellpropertygroup.
com
Cromwell Property
Group
THE PARLIAMENTARY REVIEW
Highlighting best practice
THE PARLIAMENTARY REVIEW
Highlighting best practice
14 | CROMWELL PROPERTY GROUP
Another is the Task Force on Climate-
Related Financial Disclosures, a private
sector led task force chaired by
Michael Bloomberg, aims to increase
reportingtransparency.
Preparing for a low-emission
future now
With each nation responsible for
setting their own deadlines, the
UK and other developed nations,
such as France, have enthusiastically
committed to achieving the Paris
Climate Agreement target by 2050.
Although this may seem like a long
time away, decisions made today in
the property world could easily still be
impacting us 30 years from now.
Compounding the time pressure is
a lack of co-ordinated policy and
regulation to ensure we hit our carbon
emissions targets on time. This means
property investment businesses like
ours, which typically operate on long-
term horizons, are creating their own
internal frameworks to ensure decisions
made now will be compliant when those
regulations eventually come into force.
This is particularly relevant for large
capital expenditure items. A new gas
boiler, for example, could have an
operational life of 20 to 25 years, so if
we don’t install the right system now,
we could be facing huge replacement
costs further down the line that
will impact investment returns, the
lifeblood of our industry.
The same applies to energy contracts.
Energy and power are responsible for
the majority of a building’s carbon
emissions, but so-called green energy,
sourced from renewable or low carbon
sources, is a relatively scarce resource
in many countries. What’s more, as
demand for green energy increases,
the cost will inevitably increase
further too. Mitigating this requires
implementing measures to improve
energy efficiency now.
Property valuations will, at some
point, also be affected. Much as retail
property valuations are being affected
by the structural change taking place
in the sector as the continued march
of ecommerce responds to changing
consumer behaviours, a building’s
perceived sustainability will eventually
have a direct impact on its value.
Currently, the valuation process
doesn’t take sustainability into
account, but this will inevitably change.
In the meantime, new developments
will increasingly be built in more
sustainable ways. Some properties
will be worth retrofitting with the
remainder becoming obsolete.
Obsolescence and the impact on
valuations could come faster than most
Koningskade, ABN
AMRO headquarters,
The Netherlands
Den Bosch office
property interior, The
Netherlands
Public
awareness is
an important
catalyst for
change
“
“
15CROMWELL PROPERTY GROUP |
HOUSING
anticipate. This is similar to the scenario
we have seen in the past with asbestos.
Once regulation was in place, valuations
changed almost overnight as a brown
tax was applied to buildings which
required significant remediationwork.
Add to this the pressure from tenants
looking for sustainable buildings to
ensure they meet their own targets,
and we could see some valuations fall
sooner rather than later, widening the
pricing gap between sustainable and
non-sustainable buildings further.
We’ve already experienced this
sort of demand at Cromwell in the
Netherlands. For example, ABN AMRO,
the leading Dutch bank, worked with
Cromwell to find a highly sustainable
HQ building, having set themselves
stretch targets to reduce their own
property-related carbon emissions.
Our approach towards
sustainability
At Cromwell Property Group, we’ve
already created an internal framework
to align our global business across the
30 offices in 15 countries, and €7.5
billion of property that we manage.
Our solution was to create a
sustainability framework consisting
of five pillars: economic, governance,
community, people and environment.
Each year, we conduct a materiality
review to identify the key
environmental, social and governance
issues and risks that matter to our
stakeholders and identify ways to
address the risks and mitigate their
impact on the business. By doing so,
we have laid solid foundations from
which we can work towards meeting
the Paris Climate Agreement targets,
as well as a much broader range of
environmental, social and governance
– or ESG – criteria.
To ensure this model works, we have
also incorporated benchmarking
tools in each region that we operate
in. One of the most important is
the Global Real Estate Sustainability
Benchmark, or GRESB, used to assess
and benchmark the ESG performance
of our real estate assets. Importantly,
GRESB is aligned with international
reporting frameworks such as Global
Reporting Initiative, the leading global
sustainability reporting framework, and
Principles for Responsible Investment,
the world’s leading proponent of
responsibleinvestment.
Our current target is to increase the
number of Cromwell funds participating
in the GRESB reporting framework as
well as to increase our actual scores per
fund by five per cent annually.
By comparing our performance
to our peers in the industry, using
globally recognised benchmarks like
GRESB, we are seeing not only huge
improvements in our own performance
but also a bifurcation among our
competitors. A very clear delineation
is emerging between those who are
aware of what’s coming down the line
and proactively making fundamental
changes to the way they operate and
the long tail of other operators who,
we believe, will experience some
substantial issues very soon.
We are seeing
not only huge
improvements
in our own
performance
but also a
bifurcation
among our
competitors
“
“
Riverside Park, Warsaw
BEST PRACTICE SPONSOR 2020
THE PARLIAMENTARY REVIEW
Highlighting best practice
14 | CROMWELL PROPERTY GROUP
Another is the Task Force on Climate-
Related Financial Disclosures, a private
sector led task force chaired by
Michael Bloomberg, aims to increase
reportingtransparency.
Preparing for a low-emission
future now
With each nation responsible for
setting their own deadlines, the
UK and other developed nations,
such as France, have enthusiastically
committed to achieving the Paris
Climate Agreement target by 2050.
Although this may seem like a long
time away, decisions made today in
the property world could easily still be
impacting us 30 years from now.
Compounding the time pressure is
a lack of co-ordinated policy and
regulation to ensure we hit our carbon
emissions targets on time. This means
property investment businesses like
ours, which typically operate on long-
term horizons, are creating their own
internal frameworks to ensure decisions
made now will be compliant when those
regulations eventually come into force.
This is particularly relevant for large
capital expenditure items. A new gas
boiler, for example, could have an
operational life of 20 to 25 years, so if
we don’t install the right system now,
we could be facing huge replacement
costs further down the line that
will impact investment returns, the
lifeblood of our industry.
The same applies to energy contracts.
Energy and power are responsible for
the majority of a building’s carbon
emissions, but so-called green energy,
sourced from renewable or low carbon
sources, is a relatively scarce resource
in many countries. What’s more, as
demand for green energy increases,
the cost will inevitably increase
further too. Mitigating this requires
implementing measures to improve
energy efficiency now.
Property valuations will, at some
point, also be affected. Much as retail
property valuations are being affected
by the structural change taking place
in the sector as the continued march
of ecommerce responds to changing
consumer behaviours, a building’s
perceived sustainability will eventually
have a direct impact on its value.
Currently, the valuation process
doesn’t take sustainability into
account, but this will inevitably change.
In the meantime, new developments
will increasingly be built in more
sustainable ways. Some properties
will be worth retrofitting with the
remainder becoming obsolete.
Obsolescence and the impact on
valuations could come faster than most
Koningskade, ABN
AMRO headquarters,
The Netherlands
Den Bosch office
property interior, The
Netherlands
Public
awareness is
an important
catalyst for
change
“
“
15CROMWELL PROPERTY GROUP |
HOUSING
anticipate. This is similar to the scenario
we have seen in the past with asbestos.
Once regulation was in place, valuations
changed almost overnight as a brown
tax was applied to buildings which
required significant remediationwork.
Add to this the pressure from tenants
looking for sustainable buildings to
ensure they meet their own targets,
and we could see some valuations fall
sooner rather than later, widening the
pricing gap between sustainable and
non-sustainable buildings further.
We’ve already experienced this
sort of demand at Cromwell in the
Netherlands. For example, ABN AMRO,
the leading Dutch bank, worked with
Cromwell to find a highly sustainable
HQ building, having set themselves
stretch targets to reduce their own
property-related carbon emissions.
Our approach towards
sustainability
At Cromwell Property Group, we’ve
already created an internal framework
to align our global business across the
30 offices in 15 countries, and €7.5
billion of property that we manage.
Our solution was to create a
sustainability framework consisting
of five pillars: economic, governance,
community, people and environment.
Each year, we conduct a materiality
review to identify the key
environmental, social and governance
issues and risks that matter to our
stakeholders and identify ways to
address the risks and mitigate their
impact on the business. By doing so,
we have laid solid foundations from
which we can work towards meeting
the Paris Climate Agreement targets,
as well as a much broader range of
environmental, social and governance
– or ESG – criteria.
To ensure this model works, we have
also incorporated benchmarking
tools in each region that we operate
in. One of the most important is
the Global Real Estate Sustainability
Benchmark, or GRESB, used to assess
and benchmark the ESG performance
of our real estate assets. Importantly,
GRESB is aligned with international
reporting frameworks such as Global
Reporting Initiative, the leading global
sustainability reporting framework, and
Principles for Responsible Investment,
the world’s leading proponent of
responsibleinvestment.
Our current target is to increase the
number of Cromwell funds participating
in the GRESB reporting framework as
well as to increase our actual scores per
fund by five per cent annually.
By comparing our performance
to our peers in the industry, using
globally recognised benchmarks like
GRESB, we are seeing not only huge
improvements in our own performance
but also a bifurcation among our
competitors. A very clear delineation
is emerging between those who are
aware of what’s coming down the line
and proactively making fundamental
changes to the way they operate and
the long tail of other operators who,
we believe, will experience some
substantial issues very soon.
We are seeing
not only huge
improvements
in our own
performance
but also a
bifurcation
among our
competitors
“
“
Riverside Park, Warsaw

www.cromwellpropertygroup.com

This article was sponsored by Cromwell Property Group. The Parliamentary Review is wholly funded by the representatives who write for it. The publication in which this article originally appeared contained the following foreword from Rt Hon Elizabeth Truss.

Rt Hon Elizabeth Truss's Foreword For The Parliamentary Review

By Rt Hon Elizabeth Truss

Even by the standards of the day –this has been one of the most exciting and unpredictable years in British politics.

The leadership election we’ve just seen marks a huge moment in our country’s history. This government is taking a decisive new direction, embracing the opportunities of Brexit and preparing our country to flourish outside the EU.

As international trade secretary, I’ll be driving forward work on the free trade agreements that are going to be a priority for the government. Free trade isn’t just an abstract concept bandied around by technocrats. It is crucial for a strong economy and for the ability of families to make ends meet. Free trade benefits people in every part of our country, as British firms export to new markets and people doing the weekly shop have access to a wider choice of goods at lower prices.

The essence of free trade is in the title: freedom. It’s about giving people the power to exchange their goods without heavy government taxation or interference. Commerce and free exchange are the engine room of prosperity and social mobility. I’m determined to tackle the forces who want to hold that back.

One of my priorities is agreeing an exciting new free trade deal with the US, building on the great relationship between our two countries and the Prime Minister and US President. But I’ll also be talking to other partners including New Zealand, Australia and fast-growing Asian markets.

And with the EU too, we want a friendly and constructive relationship, as constitutional equals, and as friends and partners in facing the challenges that lie ahead – a relationship based on a deep free trade agreement. Our country produces some of the world’s most successful exports, and the opportunity to bring these to the rest of the world should make us all excited about the future. It is this excitement, optimism and ambition which I believe will come to define this government.

For too long now, we have been told Britain isn’t big or important enough to survive outside the EU – that we have to accept a deal that reflects our reduced circumstances. I say that’s rubbish. With the right policies in place, we can be the most competitive, free-thinking, prosperous nation on Earth exporting to the world and leading in new developments like AI. To do that, we’ll give the brilliant next generation of entrepreneurs the tools they need to succeed. Since 2015, there has been a staggering 85 per cent rise in the number of businesses set up by 18 to 24 year olds – twice the level set up by the same age group in France and Germany. We’ll help them flourish by championing enterprise, cutting taxes and making regulation flexible and responsive to their needs.

As we do that, we’ll level up and unite all parts of the UK with great transport links, fibre broadband in every home and proper school funding, so everyone shares in our country’s success.

2019 has been the year of brewing economic and political revolution. 2020 will be the year when a revitalised Conservative government turbo charges the economy, boosts prospects for people across the country, and catapults Britain back to the forefront of the world stage.



Rt Hon Elizabeth Truss
Secretary of State for International Development