Responsible Property Investment 2008 - Henderson Global Investors

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Responsible
Property
Investment
2008 Report

2008 report Responsible Property Investment
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Contents
Managing Director’s Statement 2
Responsible Property Investment at Henderson 3
Sustainability Portfolio Analysis 4
Responsible Property Management 6
Responsible Property Development 8
What’s Next? 9
2008 Target Update 10
2009 Targets 11
Advisor’s Statement 11
“Doing Well by Doing Good”
When asked to sum up why Responsible Property
Investment (RPI) is so important to Henderson’s property
business, I often refer to the maxim “doing well by doing
good”. This is because we have reached the inescapable
conclusion that by acting in a way that is beneficial to
the environment and community, we can better protect
or perhaps even enhance the returns to our investors
over the long term.
It therefore gives me great pleasure to introduce our first
annual RPI report and I trust the pages that follow will highlight the considerable progress we have made
over the last year. Indeed, Henderson’s property business now works towards a clearly defined RPI policy
and objectives, within a strategic operational and reporting framework. This will help us to manage and
develop our assets in a way that minimises their adverse social and environmental impacts.
At a detailed level, our approach has been to undertake a comprehensive sustainability audit of every
property in eight of our UK portfolios representing 161 properties with a combined value in excess of
£3.3 billion*. The results of this assessment underpin a sustainability risk management strategy for each
participating fund, which details the specific challenges and opportunities for that fund. Our RPI
philosophy is based on continuous improvement and we will use future editions of this report to inform
you of the progress we are making.
Finally, I would like to leave you with the reassurance that we are not about to rest on our laurels. Our
RPI team is currently looking to increase the number of UK assets participating in the framework. In
addition, we are about to embark on a trial assessment of a sample of our assets in France, extending
the reach of the initiative to our pan-European property portfolio.
In recognition of the importance of transparency and communication with all our stakeholders, I hope
that you find this first annual RPI report illuminating and would welcome any feedback you might have.
Best wishes
James Darkins, Managing Director, Global Property
*As at end December 2008
Cover photo: Belgrave House, Henderson Central London Office Fund

Responsible Property Investment at Henderson
ADDRESSING RISKS AND IDENTIFYING OPPORTUNITIES FOR LONG-TERM VALUE CREATION
We consider the good management of our
environmental and social impacts to be central to our
future success. Our holistic approach enables us to
assess key risks and opportunities in areas that may be
overlooked by short-term real estate investment
strategies and helps us to anticipate changes in
occupier demand, climate, energy supply, the
investment market, legislative and fiscal regimes.
We believe that the sustainability performance of our
property portfolio will impact on operational costs, asset
values, obsolescence and rental growth as well as occupier
wellbeing, community regeneration and climate change
adaptation and mitigation. RPI helps us to better address
these issues through strategic risk management and to
identify opportunities to create value for all our stakeholders.
The Head of Global Property Investment assumes specific
responsibility for RPI issues and is supported by the Head of
Responsible Property Investment, who co-ordinates and
promotes the implementation of our policy throughout
Henderson’s property division. The RPI Steering Committee
meets regularly to monitor progress, while the RPI initiative
is supported by our managing agents, joint venture partners
and sustainability advisors.
To ensure that RPI is integrated into all aspects of our property
investment, development and management activities, we
have established the following governance framework:
We have taken a significant step forward in 2008 and are determined to embed
sustainability into the heart of our property investment processes. We hope that in
implementing our RPI policy and strategy we will be better able to protect and
enhance the value of our assets, while responding positively as a business to the
challenges posed by climate change
Andy Schofield, Head of Responsible Property Investment
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Henderson’s Sustainability Portfolio Analysis
ASSESSING THE SUSTAINABILITY PERFORMANCE AND RISK EXPOSURE OF OUR PORTFOLIO
Our major endeavour in 2008 was to undertake a
detailed survey of all the environmental and socioeconomic
features of the properties in eight of our
funds and assess their exposure to sustainabilityrelated
risks.
We developed and carried out an extensive Sustainability
Portfolio Analysis (SPA), enabling us to identify areas of risk
and opportunity at both a property and fund level. We now
have risk profiles for each fund and detailed property
improvement plans, which will inform our fund strategies
for 2009.
• 161 properties took part, each answering 78
questions contained in the Henderson SPA audit
• 97% of the properties (156 sites) were visited
and assessed during the process
Risk Mapping and Benchmarking
Alongside the SPA process, Henderson took part in Upstream
Sustainability Services’ The Third Dimension for the third
consecutive year. As well as contributing to industry research
into the link between sustainability and investment
performance, this enabled us to compare the sustainability
risk exposure of our funds to that of the 2008 syndicate of
12 major property investors comprising 1500 properties. 45
funds took part in the benchmarking, whereby five out of
eight Henderson funds demonstrated above-average
sustainability performance:
Total Weighted Sustainability Score
80%
70%
60%
50%
40%
30%
20%
10%
0%
Henderson Funds
The Third Dimension Syndicate Funds
SPA - Environment
We believe that it is our responsibility to reduce our carbon
footprint and manage those impacts which contribute to
climate change, as well as ensuring that our property
portfolio is capable of adapting to predicted changes in
weather patterns such as heavier rain, increased flooding,
hotter summers and drought. Financial considerations such
as rising energy costs and landfill tax have also encouraged
us to address utilities consumption and waste management.
Other key climate change and environmental issues
examined through SPA included pollution, biodiversity,
weathering, transport, hazardous waste, passive design,
water use and renewables.
Environmental topics comprised a significant proportion of
our questionnaire and we now have a comprehensive
picture of the activities and features already in place across
our portfolio. SPA has also identified those properties at
highest risk and with greatest potential for improvement, so
we can work together with our property managers to
concentrate our efforts on those key areas.
• 21% of our multi-let properties provide recycling
facilities for the tenants
• 69% of our multi-let properties are undertaking
energy reduction measures
• 45% of the properties analysed encourage cycling
Risk can arise from three broad sources:
• Legislative – risks that arise from liabilities under
current and forthcoming legislation such as the
UK Climate Change Act, Carbon Reduction
Commitment and European Performance of
Buildings Directive, which could lead to increased
obsolescence and greater financial burden.
• Operational – risks that can potentially affect a
building’s ability to operate effectively in the
changing market and climate, using resources
efficiently whilst attracting, retaining and
providing comfort for occupiers.
• Reputational – risks encompassing the
reputational consequences for a landlord or
particular property of a well-publicised
environmental or social incident, which could
affect Henderson’s aim to be a landlord of choice
for occupiers and investors.
SPA has helped us to establish which of our assets need our special attention so that,
with the help of our property managers, our funds can work towards generating
optimal performance combined with a strong sustainability profile
Ainslie McLennan, Director of Property and Fund Manager

SPA - Society
We want to be more conscious of our role in the
communities surrounding our assets and for our occupiers
and visitors to enjoy a safe and productive environment. To
ensure that we fulfil these objectives in the future, the SPA
assessed the position of each asset with regards to a number
of social issues such as accessibility, crime and security,
community engagement, health & safety, public transport
provision, procurement and occupier interaction.
• 70% of our multi-let properties have had a DDA
Audit or Update in the last 5 years
• 91% of our multi-let properties are taking
measures to promote crime reduction on site
• 56% of our multi-let properties request contract
tenders and procure services from local firms
SPA - Economy
Our broad view of sustainability seeks to encompass the
inter-relationship with economies that are local to our assets,
in addition to the indirect impacts through our supply chains.
As a business, we are accountable to our investors and
therefore need to ensure that our properties have a robust
environmental and social performance coupled with a stable
income stream. The SPA examined occupier lease terms,
interaction with the local economy, rent and service charges
in order to assess where we need to reinforce this triple
relationship.
Implementing SPA
The SPA provided us with a unique opportunity to engage on
a large scale with our property managers on RPI matters. We
recognise that working together with our partners is the
most effective way to fully address our impacts and achieve
our targets. Expanding this engagement process will be a key
focus for us in 2009.
Taken together, The Third Dimension and the SPA have
furnished Henderson with a sophisticated and granular
understanding of the sustainability profile of our portfolios,
from fund to property level. We intend to use this
information to inform our risk and asset management, to
ensure that our portfolio is future-proofed as far as possible.
The results of the SPA process provide a framework for fund and asset level strategies.
In addition to achieving our sustainability objectives, we expect this to provide
opportunities for active asset management
Clive Castle, Director of Property and Fund Manager
Following its recent refurbishment, 133 Houndsditch in the Henderson Central London Office Fund received one of the
highest sustainability scores in the SPA
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Responsible Property Management
DELIVERING RPI ON THE GROUND WITH OUR PROPERTY MANAGEMENT TEAMS
Engaging our property managers is central to the
success of our RPI programme, particularly around the
three key areas of energy, water and waste
management.
In 2008, we initiated data collection across our property
portfolios. Measurement of sustainability performance
represents one of the key challenges to the property sector,
as evidenced by the growing number of industry-wide
initiatives on sustainability performance measurement and
reporting. We want to ensure that next year we are able to
report to our stakeholders on our performance regarding key
indicators such as carbon emissions and recycling rates. Our
properties now regularly submit their energy and waste data,
enabling us to establish the 2008 baseline against which we
will be reporting annually.
Our vision of a sustainably managed building is not limited to
addressing its environmental impacts; we also have a
number of successful community initiatives in place and we
are looking to assist our funds in sharing this good practice
to increase the number of properties taking part in these
activities.
Energy efficient lighting at the Bullring
The Bullring, an iconic building in the centre of Birmingham,
installed an energy efficient lighting system in summer 2008.
In partnership with Philips Solid State Lighting Solutions, the
Bullring, Weblight and Mitie have undertaken the
replacement of the original cold cathode decorative lighting
scheme with a state-of-the-art LED solution. This approach is
expected to save:
• 85% of the energy needed to illuminate the
centre
• £34,000 in annual running costs
• Some 250 tonnes of CO2 emissions annually
In addition to the impressive energy savings, the new LED
system brings a whole host of creative lighting displays
which shoppers and visitors to the centre can enjoy.
Selecting LEDs has enabled us to enhance the
Bullring’s aesthetics and visual impact as well as
reducing our environmental impact
Tim Walley, General Manager, Bullring
We know it will be a long journey to embed sustainability at the heart of our
property management and to be able to robustly measure the impact of our
initiatives in these areas. However, we are optimistic that our property management
teams and occupiers will help us to implement our strategy over the next year
Jason Boyce, Portfolio Manager
Whitefriars Shopping Centre, a centre of excellence in environmental performance and community work

Waste management at The Brewery
The Brewery’s waste management changed dramatically in
2008. The retail park’s centre management now views waste
as a potential resource and salvages cardboard, plastics, paper,
cans, glass and bottles. Every measure is taken to reduce the
amount of waste going to landfill and the Centre is exploring
‘waste to energy’ options for residual waste. A clothes and
shoe bank has also been introduced in the car park area.
Portfolio Manager, Adam Stone, and the property
management team accept the ‘Green Apple’ award at the
House of Commons
At monthly tenants’ meetings The Brewery management
team works closely with staff and tenants on implementing
the retail park’s Green Business Plan. The response to this
initiative has been overwhelming.
The property management team’s achievements at The
Brewery gained recognition through the International Green
Apple Awards, presented in the House of Commons by The
Green Organisation.
The Brewery are helping to preserve and protect
the environment and all our new recycling on site
has made a positive contribution
Ian Forster, General Manager, Esporta
Providing local employment opportunities
The Academy @ St James Shopping Centre in Edinburgh was
officially opened in March 2008. It is working to train young
people and provide retailers within St James Shopping,
Multrees Walk and throughout the city centre with fully
prepared, high calibre candidates for job vacancies. One of
the units in St James was offered rent free as the ‘hub’ of the
Academy and Henderson contributed a further £5,000
towards the fit-out of the unit.
• In the first 12 months, 1,182 young people
enrolled to the Academy @ St James
The Retail Academy at Buchanan Galleries, another initiative
within the Henderson Shopping Centre Fund, is operated by
Glasgow North Regeneration Company and delivers six week
retail skills programmes. These offer intensive training and
work experience to participants, providing a pool of
customer focused, commercially aware staff to employers. In
addition, the Academy has delivered six two-day customer
service programmes for Buchanan Galleries with over 60
employees participating.
• Six full programmes have been delivered at
Buchanan Galleries, with 85% of participants
achieving employment or qualifications as a result
The Academy is an exciting partnership approach to
improving access to employment and training,
increasing the pool of potential recruits with the
skills, experience and abilities to meet specific
recruitment needs
Councillor Tom Buchanan, the City of Edinburgh Council's
economic development leader
Occupier engagement was key to The Brewery's success in introducing extensive recycling and water-saving features across
the retail park
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Responsible Property Development
INTEGRATING SUSTAINABILITY INTO THE HEART OF OUR DEVELOPMENT PROCESS
Henderson’s RPI policy relates to all facets of the
investment process including transactions, management
and development. However, we believe the complexities
and potential impacts of our development and
refurbishment activities warrant a dedicated Responsible
Property Development (RPD) strategy.
Following consultation with our project teams and partners, we
published an RPD Policy enshrining our approach to reducing
environmental impacts and maximising the socio-economic
contributions of our development projects. We have set a
number of stretching targets with regards to energy, flooding,
water, ecology, waste, community, procurement and transport,
which will be applied to all development projects from 2009 to
2011.
We believe that this three-year target period will give us
sufficient time to practically consider and implement the
necessary changes at both strategic and project level. Key
Performance Indicators have been set, several of which have
been translated into contractual requirements to ensure that all
parties in the development project teams collaborate and assist
with achieving our objectives.
RPD Checklist
An important step towards delivering our RPD commitments
was the development of an RPD checklist and guidance note.
The checklist is designed for use both on new developments
and major refurbishments, and incorporates all project phases
from land acquisition through design and planning to fit-out
and post practical completion. The checklist will encourage
the project team to undertake all the necessary steps to fulfil
each RPD target, monitoring progress and highlighting key
areas to be addressed. A guidance note accompanies the
checklist giving recommendations of good practice and linking
to relevant documentation and sources of further information.
RPD in practice
Our major city centre redevelopment of the St James Quarter
in Edinburgh will be carried out in accordance with our RPD
Policy. We have recently completed a two year consultation
process with the City of Edinburgh Council, the community
and local business leaders to receive outline planning consent
for our mixed-use design featuring retail, hotel, restaurants,
leisure facilities and housing. The project offers us a fantastic
opportunity to put our checklist to the test and to translate
our RPD objectives into practice.
This year we have put a lot of thought into our responsible property development
approach, exploring what it really means on the ground and how we can work
together with our partners to overcome the practical challenges of constructing
more sustainable properties and places
We are very pleased to have developed a user-friendly interactive checklist to ensure
that we do this in a consistent and robust way
Colin Palmer, Director of Property, Development Management (Europe)
Sustainability is a priority in the design and construction of the St James Quarter, Edinburgh

What’s Next?
REPORTING OUR ACHIEVEMENTS AND EXPANDING OUR RPI PROGRAMME
Following the 2008 Sustainability Portfolio Analysis, we
now have a comprehensive picture of the key areas for
improvement across our funds. SPA has identified
inherent risks that we will address by integrating
sustainability assessment into our asset allocation and
investment decision-making procedures. The SPA fundlevel
and property-specific recommendations will enable
us to direct our efforts towards the necessary initiatives
that we will put in place through engagement with our
managing agents and occupiers in 2009.
Occupier engagement
A key focus for 2009 will be an extensive programme of
occupier engagement. An important finding of the SPA was
that, in order to maximise opportunities for improving
sustainability performance at our properties, it is imperative
that we work together with our managing agents and
occupiers. This will help us to ensure all parties are working
towards the same goals and sharing good practice.
Widening the SPA net
We are expanding the SPA to our non-UK assets with a trial
assessment of a sample of our French properties. We are also
planning to undertake a detailed sustainability analysis of our
newly acquired fund New Star UK Property Unit Trust, to
ensure it is fully incorporated into our RPI programme.
Data gathering and reporting
In 2009 we plan to make our energy, water and waste data
gathering processes more accurate and easier for our
managing agents to undertake. The regular collection of
performance data allows us to identify problems and
anomalies as quickly as possible. It will also enable us to
accurately monitor our performance in comparison to our
2008 baseline and against our 2009 targets. We look
forward to reporting more quantitative measurement data
in next year’s annual report.
Benchmarking
To enable us to track and rank progress against our peers,
we will enter 20 of our properties into Upstream
Sustainability Services’ Operational Performance
Benchmarking. This will help us to make better informed
management choices by identifying areas of over and underperformance
and comparing these against established
benchmarks and sustainability indicators.
I look forward to overseeing the expansion of our programme over the coming year.
Our targeted approach is particularly important given the current economic
circumstances, where it would not be justifiable for us to dedicate time and
resources to an RPI programme that was not explicitly focused on protecting and
enhancing value
Mike Sales, Head of Global Property Investment
Henderson's assets in the Paris region are next in line to take part in the SPA
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2008 Target Update
REPORTING OUR PROGRESS AGAINST HEADLINE OBJECTIVES
We set ourselves a large number of challenging management targets in 2008 and worked together with our
property management teams and sustainability advisors throughout the year towards achieving them. Due to
the extensive scope of the targets, the completion of many of them is still in progress and this has informed our
more streamlined target-setting process for 2009.
Governance and Strategy
Establish an internal governance process to ensure that our strategy is effectively implemented
Set specific objectives, targets and key performance indicators with defined responsibilities, and review our progress
towards these on a regular basis
Develop employee RPI training programmes and incorporate RPI responsibilities into job descriptions
Property Transactions
Integrate sustainability issues into standard risk assessment and due diligence procedures
Integrate RPI considerations into transaction decisions
Portfolio Management
Complete a detailed analysis of the specific sustainability risks associated with the property types and individual
properties that we invest in
Engage with all property managers in order that they can successfully deliver our RPI strategy
Measure the performance of all property managers against our RPI strategy
Engage with all of our tenants regarding the objectives of our RPI strategy
Ensure that tenants have due regard to our RPI strategy when granting approval for proposed improvements
and/or refurbishments
Conduct research into occupier demand preferences for facilities and services
Engage with our investment partners to encourage the implementation of our RPI strategy for those properties where
we do not have direct management control
Measure and reduce energy consumption within landlord controlled areas at our properties
Commence the assessment of the energy performance of our directly managed properties in advance of the
introduction of EPCs
Measure and reduce water consumption within landlord controlled areas at our properties
Measure and reduce landlord controlled waste production at our properties
Measure and increase waste recycling at our properties
Implement a 'green travel plan' at selected properties
Ensure that all our properties are DDA compliant
Develop employment opportunities within the local community
Take measurable steps to provide safe and secure local environments around our properties
Completed
In progress
Not completed

2009 Targets
ALL TARGETS ARE ANNUAL FOR 2009, EXCEPT WHERE OTHERWISE STATED
Energy: Reduce landlord-controlled CO2 emissions by 5%
against the 2008 baseline, by the end of 2010
Water: Reduce water consumption within landlordcontrolled
areas by 5% against the 2008 baseline, by the
end of 2010
Waste: Reduce the amount of landlord-controlled waste
sent directly to landfill by 15% from the 2008 baseline, by
the end of 2010
Benchmarking our performance: Take part in an industry
recognised benchmark to measure the sustainability
performance of our properties
Implementing SPA: Address the risks and opportunities
identified by our 2008 Sustainability Portfolio Analysis by
implementing the fund-level recommendations and setting
fund-specific targets
Advisor’s statement
Upstream Sustainability Services has been supporting
Henderson Property with its Responsible Property
Investment approach since July 2007.
Our close engagement with the Head of RPI and regular
attendance at meetings with Henderson’s RPI Committee,
fund managers and managing agents has enabled us to
provide a well-informed external view of the progress
Henderson has made to date in achieving their targets and
embedding sustainability into their operations. However, due
to the nature of our involvement in delivering part of the RPI
commitments, including the 2008 SPA process, this
statement should not be read as fully independent assurance
of the information in this report.
Due to the large number of RPI targets that Henderson set
themselves for the first time in 2008, 66% of them have
been assessed as ‘in progress’ at the end of the year, and
work towards two targets has not yet started. However, four
of the five targets that have been fully achieved represent
key milestones in ensuring that Henderson’s RPI aspirations
are realised, both within Henderson and by the external
parties involved in the management of their portfolios.
Communicating with our investors: Communicate our RPI
risk management and performance improvement initiatives
to our investors
Engaging with our occupiers: Carry out an engagement
programme with our key occupiers
Investment: Develop a method to assess the sustainability
features and risks of potential acquisitions
Carbon Reduction Commitment: Establish our liabilities in
respect of the Carbon Reduction Commitment, confirming
metering arrangements, ownership structures and energy
procurement contracts across our portfolio
Our property funds can only represent a more sustainable investment option for clients
if we set clear and quantifiable goals and objectives. The introduction of RPI targets
keeps us focused and ensures we make tangible improvements to our properties
Adam Stone, Portfolio Manager
Systematic data collection should represent a key focus in 2009.
This is instrumental in optimising performance improvements
and monitoring possible liabilities under such legislative
initiatives as the Carbon Reduction Commitment. It will also
enable Henderson to move towards more robust reporting of
performance next year. We would recommend that in the
medium term Henderson considers aligning its reporting
approach with one of the emerging sustainability reporting
frameworks, such as the Connected Reporting Framework.
In conclusion, we believe that Henderson should be praised
for making a considerable step forward in 2008, but there is
still much to be done. During the year ahead the organisation
faces the challenge of undertaking projects that are farreaching
in scope and require a high level of dedication from
both the Henderson property team and their managing
agents. We look forward to observing progress towards the
more focused targets for 2009 and the establishment of a
quantitative reporting framework next year.
Jenny Pidgeon, Senior Consultant
Upstream Sustainability Services, Jones Lang LaSalle
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