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Landsec

November 2022
By Vert Asset Management and
Elise Eva Otmani, Sustainable Finance Researcher

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VGSRX-company-profile-Landsec

“We design, develop and manage places that enhance the health of our environment and improve quality of life for our people, customers and communities, now and for future generations.”
— Landsec1

Ticker

LAND(LSE)2

Headquarters

London, UK

Market Cap

USD $4.1 billion

Company History

2007 founded as a REIT
when REITs were introduced to the UK

Properties

approx. 97 properties
24 million sq. ft.

Green Building Certifications

44% of the office buildings have Energy Performance Certificates (EPC) rating B

*Data as of September 30, 2022.

VGSRX-company-profile-Landsec
The Zig Zag Building, SW1, London, UK Source: Landsec, www.landsec.com

Recent Awards

gresb

GRESB 5 Star Rated Regional Listed Sector Leader for Europe within Diversified Office/Retail 2022

CDP (formerly the Carbon Disclosure Project)

CDP A List 2021

science based targets

Committed to Science-Based Targets Initiative

Who is Landsec?

Landsec Securities Group is a diversified REIT owning office and retail properties in the UK with a concentration of properties in London. The company’s areas of focus include unemployment, social inequality, and climate change.

Delivering Social Value

Over the last few years, the pandemic and civil unrest turned a spotlight on continued inequities in modern society. The state of buildings and the built environment – either in disrepair or fabulously refurbished – can directly affect the urban experience of nearby local inhabitants. Former UK Prime Minister Winston Churchill famously said, “We shape our buildings and afterwards our buildings shape us.”3 Architects agree that a building’s design and local context can change individual attitudes and behaviors.4 Building owner and developer such as Landsec, the company is using its platform in real estate to contribute positively to the communities where they own and redevelop properties in the UK urban landscapes predominantly in London and Manchester. Landsec is particularly committed to developing social value in four key areas: employment, volunteering, charity and education.

Landsec’s goal is to be a business “synonymous with enabling social mobility and creating opportunities for all people from all backgrounds.”5 The company uses national framework called National TOMs (Themes, Outcomes, Measures) to measure the impact of its social value program. Landsec delivered £5.1 million of social value between 2021 and 2022, with an ambition to reach £25 million by 2025.

In the most recent reported social contribution in 2022, the breakdown of their £5.1 million of created social value in 2021/2022 is as follows:6

  • £2.4m in employment: helping 173 people develop their skills and experiences to find work in real estate.
  • £195k in volunteering: for a total of 508 volunteer engagements supporting 836 people.
  • £2.5m dedicated to charity
  • Enrolling 762 youth students in Future Education School: the company’s education programme consists of workshops to prepare them for careers in property and sustainability.
VGSRX-company-profile-Landsec
Landsec’s Social Contribution: Future Education School for school-age students. Source: Landsec, https://landsec.com/insights/sustainable-business/our-social-contribution

Landsec’s Climate Action Plan

Buildings account for 40% of global energy demand and produce 30% of global greenhouse gas (GHG) emissions. Landsec developed a Climate Action Plan to assess how each property in its portfolio can lower its operational and embodied carbon.

In 2016 Landsec became the first commercial real estate business in the world to set a science-based carbon reduction target recognized by the Science Based Targets Initiative (SBTi). The company is working towards net-zero carbon business by 2030. Targets are “considered ‘science-based’ if they are in line with the level of decarbonization required to keep global temperature increase below 2 degrees Celsius compared to pre-industrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5).”7

Landsec is decarbonizing their portfolio by committing £135 million towards investment in their buildings. The company estimates a reduction of carbon emissions (both embodied and operational) of 24,000 tonnes from their initiative. The five pillars of their investment plan are:8

  1. Reduce operational energy use
  2. Invest in renewable energy
  3. Use an internal shadow price of carbon
  4. Reduce construction impact
  5. Offset remaining carbon


With this plan in place, they are aiming for Minimum Energy Efficiency Standards (MEES) of buildings with an EPC rating of B by 2030. Buildings now need to achieve a certain energy efficiency grade to be eligible for rent in London. Landsec’s plan includes:

Renewable Energy

Installing solar panels in their retail centers.

Energy Efficency

Using advanced AI technology to upgrade their lighting setups and optimize the energy consumption of their buildings

Heat Pumps

Installing heat pumps to reduce carbon from their buildings.

Interestingly, with the ongoing war in Ukraine, the price of gas has increased and energy-efficient alternatives are becoming more attractive and profitable.9 Efforts to move away from natural gas are all the more timely as the European Commission launched the REPowerEU plan to help European countries move away from Russian fossil fuels and accelerate companies’ reliance on sustainable energy.10 In 2021/2022 66% of Landsec’s total energy consumption (electricity, gas, heating and cooling) came from renewable sources. The company is targeting 85% by 2030.11

Landsec is also addressing embodied carbon associated with building construction. In the building lifecycle, embodied carbon is the bulk of GHG emissions. Embodied carbon comes from the emissions produced by the materials used and the emissions from transporting those materials to the construction site. Reducing a building’s GHG emissions thus includes reducing both its operational and embodied carbon.

Landsec’s Climate Action Plan and demonstrates that they are a “sustainability leader in real estate.”12 This action raises their profile among investors who believe that sustainability is a long-term investment. The company’s commitment to a science-based initiative highlights Landsec’s awareness of the possibility of stricter government regulations for the construction and operation of buildings in urban spaces.

Project Spotlight: Reinvigorating Southwark with Net Zero Buildings
– The Forge

The Forge is the UK’s first net zero carbon commercial development, expected to be completed by the end of 2022. The project is 139,000 square feet dedicated to office space in rehabilitating Southwark’s commercial desirability. The company is positioning itself as a partner to tenants who are interested in reducing their carbon footprint.

The project uses innovative sustainable construction techniques including modular design where elements are constructed and built off-site than transported on-site which reduces the construction embodied carbon by 25% and saves 178 tonnes of steel relative to a similar sized building. It is powered by 100% renewable electricity.13 Both operational and embodied carbon have been minimized.

VGSRX-company-profile-Landsec-the-forge
The Forge: Net Zero Carbon Development. Source: Landsec, www.theforgebankside.com

1 Landsec. (n.d.). “Build Well.” Landsec, https://landsec.com/sustainability/efficient-use-natural-resources/climate-change-carbon
2 Landsec is 0.59% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of September 30, 2022.
3 UK Parliament. (2022). “Churchill and the Commons Chamber.” UK Parliament. https://www.parliament.uk/about/living-heritage/building/palace/architecture/palacestructure/churchill/
4 Hart, Robert Lamb. (September 2021).  “How Buildings Shape Us.” Common Edge. https://commonedge.org/how-buildings-shape-us/.
5 Social Value Portal. (August 2022 ). “Landsec Social Sustainability Programmes.” Social Value Portal. https://socialvalueportal.com/case-study/landsec-social-sustainability-programmes/
6 Landsec. (2022). “Sustainability Performance and Data Report 2022.” Landsec. https://landsec.com/sites/default/files/2021-06/Landsec_Sustainability_PerformanceAndDataReport_2021_Final.pdf
7 Science Based Targets. (2021). “Landsec Case Study.” Science Based Targets. https://sciencebasedtargets.org/resources/media/LANDSECCASESTUDY.pdf.
8 Landsec. (n.d.) “Build Well.” Landsec. https://landsec.com/sustainability/efficient-use-natural-resources/climate-change-carbon
9 “Landsec Case Study.” Science Based Targets, https://sciencebasedtargets.org/resources/media/LANDSECCASESTUDY.pdf
10 “Repowereu: Affordable, Secure and Sustainable Energy for Europe.” European Commission – European Commission, 19 Oct. 2022, https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en.
11 Landsec AR2022 Sustainability Performance and Data Report. https://landsec.com/sites/default/files/2022-06/Landsec%20Sustainability%20Performance%20and%20Data%20Report%20FINAL%2007.06.22.pdf
12Landsec. (2022). “The Forge Bankside.” Theforgebankside.com. https://theforgebankside.com/
13 Birshan, Michael, and Anna Moore. (September 2022). “Four Front-Foot Strategies to Help Create Value in the Net-Zero Transition.” McKinsey & Company https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/four-front-foot-strategies-to-help-create-value-in-the-net-zero-transition

Please refer to the Prospectus for full risk disclosures. All data as of September 30, 2022 and subject to change daily.

The Vert Global Sustainable Real Estate Strategy operated as mutual fund from October 31, 2017 and prior to the fund reorganization on December 4, 2023. The investment objectives have not changed.

Investing involves risk. Principal loss is possible. Investors should be aware of the risks involved with investing in a fund concentrating in REITs and real estate securities, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. A REIT’s share price may decline because of adverse developments affecting the real estate industry. REITs may be subject to special tax rules and may not qualify for favorable federal tax treatment which could have adverse tax consequences. The Fund’s focus on sustainability may limit the number of investment opportunities available to the fund and at time the fund may under perform funds that are not subject to similar investment considerations. Diversification does not assure a profit or protect against loss in a declining market.

Please refer to the prospectus for important information about the investment company including investment objectives, risks, charges and expenses which must be considered carefully before investing. You may also obtain a hardcopy of the prospectus by calling 1-844-740-VERT. Read it carefully before investing.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance is annualized for periods greater than 1 year. For performance current to the most recent month end please call 1-844-740-VERT. Standardized performance of the Fund is viewable under the Information tab. Click here for standardized performance of the Fund.

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