Season 3, Episode 5 – Game Changers: Inside Oxford Properties’ global decarbonisation strategy

Elena Lambros:

Hello and welcome to ESG Matters at Ashurst. I'm Elena Lambros, an Ashurst Risk Advisory partner specialising in sustainability and climate change. In today's episode, you'll hear our conversation with Pauline Martin, Associate Director at Oxford Properties, and Becky Clissmann, a sustainability counsel at Ashurst. Let's jump in and hear the discussion.

So, hi Becky. Hi, Pauline. Thanks for joining me on the podcast today. I thought we'd just start by doing an intro for both of you. So Becky, do you want to just give our listeners, a little bit about yourself and your role at Ashurst?

Becky Clissmann:

Thanks, Elena. So I'm Becky Clissmann. I'm a sustainability counsel here at Ashurst. I have a particular focus on sustainability reporting, but also in particular transition plans and what makes a good or credible transition plan.

Elena Lambros:

And Pauline, would you like to also just give the listeners a little bit about yourself and your role at Oxford Properties?

Pauline Martin:

Sure. So I'm Pauline Martin. I sit within the Sustainable Investing and Operations team at Oxford Properties and really we view our team as the facilitator of embedding ESG considerations within the business. So equipping our teams with the capabilities and knowledge to integrate sustainability within their day-to-day decision-making, which obviously incorporates decarbonisation.

Elena Lambros:

Great, thank you. Looking forward to the conversation.

So Becky, there's been quite a few regulatory developments recently around transition plans. Can you just give us a short overview of what's been happening and what you're expecting to happen?

Becky Clissmann:

Yes. So the UK government has recently published three consultations on sustainability reporting issues and one of those is a consultation on mandating transition plans, which is something the government committed to do at COP26. They talked about mandating transition plans for large companies or those in the financial services sector. We've been waiting this consultation for a wee while now, and what it's doing is looking at a high level on that commitment.

So what should the government be introducing?

And they've got a range of options, everything from comply or explain disclosures, which is very similar to what's required under the IFRS sustainability reporting standards. They're also considering whether or not they would require the development and publication of a transition plan and also even the implementation of transition plan. So they've got a full range of options.

Obviously it's quite a high level consultation at the moment and will probably result in a further consultation on a package of measures once they've looked at the consultation responses of this round. And we expect that that will probably happen sometime later this year or perhaps early next year. But we can see that requirements for some form of development of transition plans are certainly coming in the UK.

Elena Lambros:

Thanks, Becky. And always good to be across as we're probably going to talk about. It is quite some work to get one in place.

So Pauline, you spoke earlier a little bit about your role in ESG and the importance of that at Oxford Properties. Can you just tell me a bit more about Oxford Properties decarbonisation approach? Thinking through how have you developed that approach and what have been the timeframes and who are the key players at the part of the team that developed it?

Pauline Martin:

So for Oxford Properties, our approach is very much led by OMERS net-zero carbon target by 2050 with an ambition to reduce its emissions by 50% by 2030, which they set back in 2021. So OMERS is the Ontario Municipal Employees Retirement System and Oxford Properties as the real estate arm of OMERS. So we've been working on executing what that target means for Oxford Properties.

We have various types of investments. We sometimes own and asset manage the various assets. Sometimes we outsource the management of these assets and sometimes we even invest in some indirect investments. So we've really had to evolve our approach depending on the investment type, which is a first important point to make. But before digging into our decarbonisation approach, I really want to take a bit of a step back because we've put a lot of efforts into actually building a robust data foundation, which is obviously critical to understand and ensure that we're monitoring the data in a comprehensive manner.

So really the data foundation is a critical tool to enable decarbonisation and to make informed decisions on implementation. And to monitor our data in detail, we've invested in an environmental data management system, which enables us to consolidate all of the utilities data reporting in one single location, which is really important to have one single source of truth which has evidence to back our various statements, especially in light of various regulations that are coming up.

Elena Lambros:

Yeah, no, that's a great first start. I like it. It's really such a hard challenging place to be. The data and just understanding where that is and how you're going to monitor it and make sure that you are getting to where you need to be.

Pauline Martin:

Absolutely, absolutely. And to further emphasise and make our data more robust in a real estate context: Obviously you've got the land or related emissions and data which Oxford Properties is responsible for. But then obviously the reason why our buildings are successful is because we work with our tenants. And so embedding green lease clauses into our various lease agreements has been a fundamental way in which we've been able to increase our data foundation and really get a robust picture of how our assets are operating.

So acknowledging that point around the fact that data quality always is a focus for us, we started our decarbonisation journey by really trying to understand how our portfolio performs compared to the CREM trajectory. We've built an internal tool which enables us to understand how our various assets are performing against the CREM trajectory. And we've complemented this approach by creating a standard scope of works for our teams to complete a decarbonisation audit at the various assets.

And that really means that we have a standard request that goes out to the consultants with whom we work to conduct this analysis and they fill that out when they go on the various site audits. And having that standard approach means that we get a standard set of information back, which we can then input back into our centralised tool. And again, that enables us to make those decisions both at the asset level but always acknowledging the portfolio element to decarbonisation.

By undertaking these various steps, it means that we understand as a company what we need to do to actually decarbonise our portfolio. Obviously the implementation is the next stage, having the information as to how you're going to be implementing and what you need to implement is the first step. But then the implementation comes in and really that's the big undertaking here.

And so to do that, we're working really as a collaborative party between the asset managers on the Oxford Property end, the property managers who might sit on Oxford Property or third party, and obviously I just mentioned the tenants who occupy our spaces. And together we're ensuring that we have a consolidated consulted approach to decarbonising our portfolio in a smart manner.

Elena Lambros:

Yeah, that's really great. I like the fact that you have that standard approach. Everyone's expecting the information request and then you can feed it into a tool and you get to set that real baseline. I think that's really great.

And then just thinking through further is that once you've got the information you talked about, the implementation, is that how you're really embedding the decarbonisation into your corporate decision making? You're looking at the data and assessing what needs to happen next?

Pauline Martin:

Yeah, absolutely. There's only so much we can do at the building level. We can electrify it as much as we want, which is a key pillar of decarbonisation after you've reduced as much as you can the building energy use in the first instance. But really we know that there's elements outside of our control which we need to work with. So the speed at which national grids are decarbonising, for example, is a critical point which we have very little control over.

So we're always looking at the various factors which actually result in the decarbonisation of the asset, whether they be internal or external. And we also acknowledge the fact that we work on a very global scale. So the fact that the grid is much cleaner state in France than it is in some states in the US for example, means that in the way in which we make our decisions, it also needs to balance some of these wider macroeconomic elements.

So it's really a lens and various perspective which we need to bring to the table to inform our decision making. It can be regulatory led, it can be tenant led, it can be partner led. So there's a whole host of considerations we need to take into account.

Elena Lambros:

That complexity of being a global business and different assets operating in very different regulatory or climatic areas is quite difficult. And in terms of the main drivers for decarbonising, your business, you spoke earlier about OMERS and getting to net-zero.

Are there any other key drivers that you think about as you go through that decarbonising journey?

Pauline Martin:

Absolutely. So we know as ultimately the reason why we work is for our pension plan members. And so that is really something that is important for them and that is the main reason why we're doing this work. And OMERS ultimately believes that well-run assets, including those with a thoughtful and clear plan to address the impacts of climate change will perform better, particularly over the longer term. So it's really within our fiduciary duty to do so.

But in addition, we see it from the ground up, I will say, as well in the way in which we do business. So across our various stakeholder management, we see it come in two ways. The first one is within our development arm, and Becky mentioned it. A number of jurisdictions, particularly at the planning level, are requesting the new developments to be net-zero ready. So even if that's not immediately once they've completed, at least have a way to get there. And that's definitely something that we are seeing. Again, depending on where we are in the globe, that might take different forms. Some jurisdictions are very advanced and some are just starting the journey, but it is something that we're seeing more and more come up.

And then the other point is from an asset management perspective. Tenants also have their own emissions reductions targets and net-zero targets. And so they're demanding what the energy efficiency of our assets in the space that they will ultimately be occupying and how they can reduce that and work with us to reduce that. So there's definitely from the ground up, two clear ways that we're seeing that come up.

And increasingly as well from an investment perspective, when we're buying or we are selling our assets, this comes up more and more. So really across the board, various stakeholders are demanding this. So it's coming in from various different directions, but definitely coming through for sure.

Elena Lambros:

So definitely everyone's leading to the same place. So whether it's your role as a developer or an investor or as an asset manager, it's all leading towards that real drive for decarbonisation.

Pauline Martin:

Absolutely.

Elena Lambros:

Yeah. Interesting. And then in terms of thinking through how you would do this as a global business, a global real estate business, what documents have you used to develop your and guide your decarbonisation approach? How do they work and who are they for?

Pauline Martin:

So as mentioned, we've developed our decarbonisation toolkit mainly for asset managers. And that's really to make sure that we get exactly what we need. 

There's no room for error, and we get the data that we need for informed decisions. And it's really important for us because prior to this we didn't necessarily have a template. And so that meant that we would get an output that would be good, but it meant that we couldn't necessarily compare apples to apples between our different regions and our different assets. Which when you think about strategically decarbonising, your portfolio is really important to have a similar output.

So that's really been a really good progress from our perspective and really means that the asset managers, it makes it simpler for them. Obviously they need to own the process because ultimately it is their asset, it is their budgets, etc. But having this facilitates the whole decarbonisation approach for them.
And then the second tool that I think has been really good is that we've recently launched as our ESG development guidelines, and that's really speaking to our development arm and making sure that we have a standardised way in which we integrate ESG considerations across our development sites globally. Obviously there's many aspects to these guidelines, but one of which is having a decarbonisation trajectory for the development.

Again, in some jurisdictions it might be more asked than others, so we are pushing our teams to ensure that they have a trajectory that is set up for their asset. It doesn't mean that it will be net-zero necessarily once it's completed, but it needs to have a way to get there during its lifetime.

So I think these two are really fundamental to ensuring that we're asking the right questions to enable us to make the right decisions around decarbonising our portfolio.

Elena Lambros:

And again, that theme of standardisation and being able to compare and have that transparency is really clear in using both of those toolkits. So great to see that you've developed those.

Just briefly wanted to ask Becky, I know this is probably a challenge that a lot of our clients face. Are there are other frameworks that people should be thinking through if they're going on a similar journey?

Becky Clissmann:

Absolutely. So there are now an embarrassment of riches really in terms of the number of standards and frameworks that you can look at when you consider setting a transition plan. Probably some of the key ones, the GFANZ recommendations, but also the Transition Plan Task force's (TPT's) own disclosure framework, which was set up by... The TPT was set up by the UK government with a view to this consultation that I was mentioning. So it's a very thorough, and some people would say the gold standard of transition plan development.

There's a lot in there, but it's really good because what it does is it builds on the TCFD's framework and that is linked to the ISSB's own standards. So then you've got this theme of the TCFD recommendations running through all of those, so they have that common parentage, which means that people already reporting under one set of standards. If they adopt that, they will then they'll feel quite home because there will be things that will be very familiar to them, but obviously expressed, if you like, with relevance to transition plans.

So those would be the two that would spring to mind and that I would recommend people take a look at.

Elena Lambros:

Yeah, great. Thank you. It's actually nice to have some clear guidelines out there. And then Pauline, just thinking about all this work that you've been doing, what would you say has been one of the more challenging aspect of the decarbonisation work, and how have you managed to navigate this challenge?

Pauline Martin:

I think as I've alluded to before, the expectation of the various stakeholders with whom we work is very different, and it's also different based on the asset class. In an office class setting, it's very common practice to have a decarbonised asset or at least once that's working towards it. In an industrial shed, that might not be as shiny as a brand new office building that is less common.

So it is more or less standard practice to have this decarbonisation approach and the market needs are very different associated to it. So this is where, for us, having the market context, understanding who we're talking to in terms of stakeholders, and buy-in across the tenants and the people with whom we work has really made a big difference. But also leveraging the fact that we're a business that operates across multi-geography and multi-sectors with multiple different partners brings us a competitive advantage in the sense that we're able to spot the trends in one geography and know that ultimately it will reach the others at a different speed for sure. But we are able to prepare the business slowly, that this will become market expectation and work accordingly to extend that across the business.

And that means that we've had to have and adopt a different approach depending on the geography and the asset type that we're dealing with. So that's been a good learning and something that we also view as an opportunity as a global business.

Elena Lambros:

I love that focus on being a competitive advantage and actually an opportunity as well. That's really great to hear. My final question is just going to be, if you could provide our listeners with one key lesson learned so far, what would that be?

Pauline Martin:

I think when I was preparing for this, I was like, oh, there's lots. Because it is a complex field and you're working with a lot of different people. So I would say that you can't do everything. Your target is something that you want to be moving and demonstrating progress again, so it's really tempting to start everywhere. But really you need to prioritise and focus on where you will have the biggest impact and make sure that you really invest time in that stakeholder engagement.

You really need your stakeholders to own this topic because you're, as me as the part of the sustainability team, I'm facilitating decisions. I'm not making them for these decision makers. And really in order for it to be successful, the decisions and the ownership must come from them, not from the sustainability team. They own the budgets, they own the partnerships, they own the stakeholder management at the end of the day.

So really it's about making sure that you are empowering them with the knowledge and capabilities to have this top of mind when they're making the decisions and really owning the agenda. So I would say those are the top key learnings really.

Becky Clissmann:

That is something that really chimes with us because whenever we're talking to clients about it, we always say the magic of transition plans is not really the document that you get out of it, although that is an important document. It's the process. It's going through and having all those conversations and engaging all those stakeholders. And if you can get that bit right, then it's a really powerful process.

Pauline Martin:

In case anyone is interested, who has listened to the podcast today, to understand a little bit more about our decarbonisation approach, we have recently published our latest sustainability report. I encourage everyone to have a look at it. It is available on the Oxford Properties website.

Elena Lambros:

Thank you. And on that note, I just wanted to say thank you both for joining us. Thank you, Pauline. Thank you, Becky. Really appreciated your insights and for joining me today.

Pauline Martin:

Absolutely. It's our pleasure.

Becky Clissmann:

It's been great to be here. Thanks so much.

Elena Lambros:

Thank you for listening to this episode of ESG Matters at Ashurst. I hope you found this episode insightful. To find more about the UK government's three consultations into new sustainability reporting frameworks as it's mentioned by Becky in this episode, check out episode five of our governance and compliance miniseries over on the Legal Outlook channel.

To subscribe to future episodes of Game Changers and to hear previous episodes, click on the link in the show notes or search ESG Matters at Ashurst on Apple Podcasts, Spotify, or wherever you get your podcasts. And while you're there, please feel free to leave a rating or a review.

And finally, to learn more about all Ashurst podcasts, visit ashurst.com/podcasts. In the meantime, thanks again for listening and goodbye for now.