In a world first for the retail property sector, the QIC Shopping Centre Fund (QSCF) has issued an AUD300 million Climate Bond Initiative (CBI) certified green bond, enabled by QIC GRE’s commitment to enhancing environmental performance across its Australian retail portfolio.

The QSCF green bond was five times oversubscribed and attracted new investors with green and ESG investment mandates to the Fund from across Asia and Australia. Issuing a green bond is an important milestone for QSCF and the retail property sector globally and is an endorsement of QIC GRE’s progress and ongoing focus on sustainability.

This significant result has re-set green debt market expectations in Australia. The path to green bond issuance for QSCF began in 2016 and was not always straightforward. QIC GRE explored the standards used for incorporating commercial property into green bond issuance, under which CBI criteria stipulate an office building must be in the top 15% for carbon efficiency levels by capital city. However, most office buildings that meet criteria are new or recently built while equivalent criteria did not yet exist for shopping centres.

There were additional challenges with the scale of the fund’s portfolio of regional shopping centres and that its holdings are existing assets being redeveloped in stages over an extended period. However, most office buildings that meet the criteria are new or recently built, and equivalent criteria did not yet exist for shopping centres.

In the end, the portfolio has established a target of a minimum 30% reduction in emissions intensity in order to achieve CBI certification using the property-upgrade criteria. QIC GRE has also set an internal target for its shopping centre portfolio to have an average 4-star NABERS rating by 2021.

In 2018, QIC GRE entered into a partnership with the Clean Energy Finance Corporation (CEFC). The landmark agreement to invest $200 million into the QIC Shopping Centre Fund (QSCF), an Australian retail property first, will support improvements in energy performance across the portfolio.

In March 2019, a QIC Red Paper was released, co-authored with the CEFC – ‘Collaboration drives sustainability outcomes’. The paper, which showcases the power of a combined focus on driving improved energy efficiency and sustainability, illustrates tangible examples of the collaboration with CEFC in aligning investment strategies, enhancing sustainability performance, reducing greenhouse gas emissions, and driving genuine improvements to the bottom line.

Click here to download the QIC GRE Insights Paper.

We are implementing the environmental initiatives set-out below across our portfolio to deliver our commitments on energy, water and waste reduction targets.

Our short to medium-term (1-5 year) environmental objectives, are:

*Target to be superseded by move to a new commitment around a net zero emissions pathway.

Whilst significant progress has been made in reducing electricity intensity, achieving the 20% reduction target by June 2020 will be challenging. Planning is advanced on a range of energy reduction initiatives including rooftop solar at a number of QIC's shopping centres and we are aiming to commence our solar program in 2020. The current target and our performance in the chart below applies to QPF. It shows an 8% reduction in electricity intensity since in the baseline year, 2015.

QPF Retail Portfolio - Electricity¹

¹ Data as at 30 June 2019

Our long-term objectives are:

• To transform our business processes to achieve a step-change toward sustainable energy against our stated target

• To strive for innovation and social leadership projects to leverage across our portfolio, guided by our Corporate Social Investment (CSI) Framework

• To promote and educate all our stakeholders on the inherent values of our EMS Framework.

NABERS is a national ratings system that measures the environmental performance of Australian buildings. QIC GRE submits properties in QPF, QSCF and QGOF portfolios for NABERS energy and water assessment.

In the most recent NABERS assessment period, the average portfolio energy ratings achieved were:

• QIC Property Fund rating of 3.31 stars

• QIC Shopping Centre Fund rating of 3.16 stars

• QIC Government Office Fund rating of 4.62 stars.

The implementation of environmental initiatives is delivering ongoing annual improvements in these scores, with the goal of an average 4.0 star rating in future NABERS assessments a key target for QSCF assets in particular (a key target of QIC GRE’s partnership with the Clean Energy Finance Corporation).

Green Star is an internationally-recognised sustainability rating system for buildings, fitouts and communities. Well suited to assets <20,000m² GLA, the Green Star Performance Benchmark provides a holistic sustainability performance measure.

In 2018, QIC GRE commenced submission of retail assets in our QARP and QACPF portfolios for Green Star Performance Portfolio Ratings, with both receiving 1-star ratings.

The Global Real Estate Sustainability Benchmark (GRESB) is used by institutional investors to engage with their investments, with the aim of improving the sustainability performance of their investment portfolio, and the global property sector.

QICGRE has participated in GRESB reporting since 2012 for its QIC Shopping Centre Fund (QSCF) and QIC Property Fund (QPF) and started reporting for both the Queensland Government Office Fund (QGOF) and QIC Active Retail Property Fund (QARP) in 2016. Our results are detailed in the table below.

For 2019 we improved results for four out of our five real estate funds, with a small decrease in performance for the QIC Property Fund associated with certifications.

QIC GRE’s Environmental Reporting Standards define the scope and methodology for all environmental data reported through this ESG Report and other public interfaces.

Key observable trends in FY19 include:

• Ongoing reduction in overall consumption intensity for electricity, water, and greenhouse gas (GHG) scope 2

• Waste and recycling have been significant areas of focus and will continue to be so in the coming year. As well as a significant increase in recycling intensity achieved through individual centres implementing their own focused education and awareness programs, a comprehensive portfolio audit has been undertaken with learnings and improvements to be implemented in the coming year.

• Beyond electricity, there is also a strong focus on significantly reducing the amount of natural gas our assets are consuming. Natural gas consumption has increased this financial year largely due to the addition of two super regional assets, along with increases in consumption across a number of centres including Watergardens, Eastland and the Canberra Centre. To address this increased consumption, we are focussing on the large scale roll out of solar PV across our assets and finalising the business case to reset our energy generation to replace our base building heating and hot water end use from natural gas to renewable electrification. 

• We have now completed rollout of real-time monitoring software and sub-metering through our partnership with CIM, and this system is expected to provide ongoing opportunities to capture efficiencies in consumption in the coming years.

The following should be noted regarding the below data tables:

• Consumption has not been apportioned based on the % equity share or ownership agreements. We report on 100% of the consumption regardless of our ownership portion.

• The reporting boundary for water consumption relates only to data captured on ‘purchased’ water usage and excludes recycled or captured water sources.

• Scope 3 (indirect emissions from the supply/value chain) data is not currently captured or reported.

• There is currently no breakdown available for heating, cooling and steam.

• Scope 1 data relates only to CO², as this is all that is relevant for QIC GRE operations.

Please note: The information in the tables above represents the best available data at time of report publication.

Climate change and its impact on investments are an increasingly important focus of QIC’s Responsible Investment framework, with the potential to impact a wide range of asset classes and investments.

The QIC Board formally adopted climate action onto its agenda in 2016, and in 2018, QIC began disclosing under the Taskforce on Climate-related Financial Disclosure framework via the QIC Sustainability Report.

QIC’s Responsible Investment team leads QIC’s climate strategy and collaborates with QIC investment teams to develop our understanding of the risk and opportunities associated with our work at the organisational level. Projects to date include:

• whole-of-portfolio carbon foot printing

• identification of exposure to carbon intensive industries and engaging directly with companies to understand the strategies they have in place to manage the transition to a low carbon economy.

• the development of a process to assess physical climate risk in real assets

• climate scenario modelling.

For more on QIC’s approach to understanding the risks and opportunities posed by observed and projected changes in the climate, see the 2019 QIC Sustainability Report.

As holder of a large number of real assets on behalf of our investors, QIC GRE has been actively involved in work to better understand and manage climate risk, including the co-development of a ‘Climate Change Resilience Study’ with an academic partner to understand the potential physical impacts of climate change on our assets.

Phase 1 of this study, which included mapping climate projections over different periods for more than 40 retail and commercial assets in Australia, was completed in 2018. Work is now underway to combine the results of this project with QIC’s climate scenario modelling, with the aim of building a comprehensive view of portfolio-level climate risk exposure.

QICGRE has undertaken a major redesign of its property operations, using advanced automation technology to interrogate individual asset performance data on energy consumption and equipment maintenance, which is delivering real-time information that materially enhances operational efficiency and sets a new standard in best practice asset management.

QIC GRE recently partnered with leading Australian technology company CIM Enviro to optimise its energy efficiency across its major shopping centre portfolio, using a data-driven approach that collates and interrogates data from all the existing sensors across a building.

Failures and deteriorations in asset energy performance instantly generate an alert that details the location of each fault, the root cause, the cost impact and the solution. Each alert automatically becomes an assigned maintenance ticket for onsite teams to close out rapidly, ensuring energy wastage is addressed without delay.

This technology is already delivering significant savings and reducing energy consumption as the rollout continues. For more information, read our case study.