ESG Policy

Listed Equities

At CenterSquare Investment Management LLC (”CenterSquare” or the “Firm”), we have been incorporating aspects of ESG considerations into our listed equities investment process for over two decades. As the focus on ESG has continued to evolve, CenterSquare continued to incorporate additional best practices to make our model more robust. We begin by generating a ranking framework to assess a company’s ESG score along ten categories that measure environmental stewardship, social responsibility, and corporate governance through a quantitative model using nearly 100 KPIs (varied by region) to provide an expanded analysis of material ESG factors.

CenterSquare’s active engagement with companies’ senior management teams in our investable universe is a key component of generating a comprehensive view of ESG practices. While we gather data from multiple sources (i.e. GRESB, Bloomberg, company disclosures) to inform our ESG scores, data providers generally assess ESG practices at a point in time or in the past. Our engagement with senior management enables productive conversation and accountability for continuous improvement of the company’s ESG efforts.

Environmental factors

Policy Analyze the robustness of the company’s environmental sustainability policies addressing energy efficiency, conservation, and carbon footprint reduction as well as their execution of those policies.

Action Real assets are a large consumer of energy and through the effective management of energy usage and development of energy-efficient assets, companies can reduce energy costs and minimize their impact on the planet. In this effort, CenterSquare analyzes the company’s real estate portfolio for heightened sustainability standards, such as attaining LEED, BREEAM, or Energy Star certification. As the company develops additional assets, we identify brown-field development and mass transit-oriented development as environmentally friendly. Additionally, as companies develop new assets, we assess their focus on the impact of development on the biodiversity and surrounding ecosystem.

Disclosure CenterSquare assesses the quality of disclosures regarding environmental sustainability efforts and the environmental impact of the portfolio.

Leadership & Advocacy Companies receive superior scores for being leaders and advocates within the environmental sustainability space.

UN Sustainable Development Goals CenterSquare assesses companies’ efforts toward achieving UN Sustainable Development Goals focused on environmental issues:

Social factors

Employee Engagement These factors capture the company’s quality of employee engagement such as policies regarding ethics, conduct, anti-corruption, and anti-bribery for employees and contractors. They also capture a company’s focus on employee development, diversity, equity & inclusion, and health & wellness.

Community Involvement These factors capture the company’s commitment to community involvement, civic service, and philanthropic efforts. These factors also measure the real estate portfolio’s impact on tenant health & wellbeing.

UN Sustainable Development Goals CenterSquare assesses companies’ efforts toward achieving UN Sustainable Development Goals focused on social issues:

Governance Factors 

Shareholder alignment These factors measure governance structures that promote proper alignment of interest between management and all stakeholders.

Board independence These factors measure the board’s ability to carry out its fiduciary responsibility as the stewards of shareholder capital.

Strategy These factors measure the extent to which strategic efforts have been clearly identified and implemented to enhance governance of shareholder capital.

Transparency These factors measure the quality of disclosures regarding governance policies.

UN Sustainable Development Goals CenterSquare assesses companies’ efforts toward achieving UN Sustainable Development Goals focused on governance issues:

Direct Property Investments

ESG Due Diligence
In connection with all new investment activities, CenterSquare conducts thorough ESG due diligence informed by green building standards for every acquisition. Material findings from ESG due diligence are included as part of the materials presented to each strategy’s investment committee for each proposed transaction.

Environmental Due Diligence
In connection with all new investment activities, CenterSquare independently or in conjunction with a co-lender, engages the services of a 3rd party professional to complete a Phase I Environmental Site  Assessment (“Phase I Assessment”) prior to making any new investment. The Phase I Assessment is conducted in accordance with ASTM E1527-13 Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, generally accepted industry standards, and is designed to meet United States Environmental Protection Agency (USEPA) Standards. In some cases, the Phase I Assessment will also address certain ASTM non-scope considerations. These non-scope considerations can include asbestos-containing materials (ACM), radon, lead-based paint (LBP), microbial growth, drinking water quality, flood zones, and wetlands. The purpose of the Phase I Assessment is to determine if a particular property contains any Recognized Environmental Conditions (“RECs”) and, if so, indicate what, if any, further investigation may be required to better understand and potentially mitigate those RECs. The Phase I Assessment includes an environmental records search, a search of the historical uses of the property, and on-site reconnaissance performed by a physically inspection by a trained professional. To the extent the Phase I Assessment identifies RECs, further investigation may be conducted through a Phase II which typically involves more invasive testing. Based on the results of the Phase II Assessment, CenterSquare may elect to forgo the investment or move forward with the investment but require environmental mitigations to address the REC.

Additional components of environmental due diligence include, but are not limited to, strategies for reducing water and energy consumption, recycling waste and minimizing greenhouse gas emissions associated with the transportation to and from the asset.

Assessing Climate-Related Physical Risks
In connection with all new investment activities, CenterSquare takes steps to determine if properties are currently located in existing flood zones and, to the extent such a condition is discovered, takes steps in conjunction with a professional 3rd party insurance consultant to ensure adequate insurance coverage is in place to address the risk. Additionally, CenterSquare assesses the coastal risk associated with rising sea levels through scenario analysis and incorporates such data into investment decisions.

Social Due Diligence
In connection with all new investment activities, CenterSquare takes steps to determine social impacts of properties on the surrounding communities. We assess aspects such as walkability, tenant health & wellness, and accessibility.

Responsible Contractors
CenterSquare employs a Responsible Contractor Policy designed to encourage, in a manner consistent with CenterSquare’s standards of fiduciary responsibility and prudence in managing its clients’ investments, compliance with the spirit and practice of social responsibility in the selection of independent contractors expected to provide high quality property management, leasing, and building construction services for real estate property investments being managed on behalf of clients.

The policy states that the selection of contractors should consider several factors including, but not limited to, record of compliance with applicable federal, state, and local laws, regulations and ordinances, insurance, withholding taxes, minimum wage, health and safety, and environmental matters. Where possible, the selection process should consider providing equal consideration to minority owned and controlled firms, firms owned and controlled by women, and ventures involving those same firms that otherwise would meet the selection criteria for contractors and service providers. CenterSquare Business Partners shall make reasonable efforts to ensure that contractors maintain safe and healthful working conditions and abide by all applicable wage and hour regulations and prohibitions against child labor.

Requirements of CenterSquare’s responsible contractor policy include competitive bidding, non- discrimination, neutrality, and adherence to all local, state, and national laws. For further details on our Responsible Contractor Policy, please contact us at [email protected].

Governance Due Diligence
In connection with all new investment activities, CenterSquare independently or in conjunction with a co-lender, either performs in-house or engages the services of a 3rd party professional to complete a background check on all individuals that control the borrower, partner, or sponsor as well as any individuals or entities that own a significant portion (>25%) of the financial interest of the borrower or General Partner. The scope of the search includes bankruptcy records, civil records and judgements, criminal records, UCC-1 filings, regulatory sanctions, tax liens, and OFAC. To the extent the search uncovers concerning results, the borrower, partner, or sponsor will be asked to provide further detail regarding the event which will be considered in determining if CenterSquare will move forward with the investment. A history of Class A or 1 felonies or crimes and civil judgements involving fraud will, in almost all cases, result in CenterSquare declining to make an investment.

Value-Added Fund Series
CenterSquare’s value-added investments’ business plans can include development and major renovations through which we can improve upon the asset’s environmental and social impact. CenterSquare’s Global ESG Lead is included in all due diligence kick-off meetings to discuss appropriate sustainability considerations as part of the business plan. To measure the impact of these decisions, CenterSquare partners with a third-party to create a triple-bottom-line net present value (“TBL NPV”) that measures the financial, environmental, and social impacts of the design decisions made and capital invested as part of our value-added business plans. The TBL NPV analysis alongside any other ESG due diligence and documentation is made available to buyers as we dispose assets.

Essential Service Retail
Assets held as part of CenterSquare’s Essential Service Retail (ESR) strategy can require major renovations. For these projects, minimum requirements as applicable can include, but are not restricted to, monitoring of the health and safety at the construction site, engagement with local communities and other stakeholders during the design and/or planning process, common health and well-being measures for occupancy, and management of waste.

CenterSquare ESG Governance
CenterSquare’s ESG Committee (“Committee”) is responsible for developing and maintaining the Firm’s ESG policies and practices, ensuring efficient integration across all investment and administrative functions. The Committee, which meets quarterly, consists of representatives across the public and private investment teams, capital markets, operations, and compliance and is led by the Firm’s Senior Investment Strategist & Global ESG Lead Uma Moriarity. In addition to steering the Firm’s overall ESG strategy, the Committee is tasked with annually reviewing the ESG Policy, understanding and adopting appropriate industry-wide best practices, setting and pursuing appropriate goals, conducting firm-wide ESG training, and communicating on all initiatives and progress. The Committee reports regularly to Firm leadership and the Board of Directors.