NAREIT VIDEO INTERVIEW ABOUT PARKWAY’S SUSTAINABILITY PROGRAMS
1. Can you talk about some of the key reporting and ESG initiatives underway at Parkway and how these initiatives are being perceived by your investors?
o REPORTING: At Parkway, we have implemented a holistic approach for our reporting initiatives. We continue to report to the Global Real Estate Sustainability Benchmark, Carbon Disclosure Project, participate on the Federal Better Buildings Challenge and continue to share our progress publicly on our annual GRI based reports.
o GRESB RANKING: We have reported to GRESB for 3 consecutive years, and we have consistently improved our ranking each year, an achievement that has been widely noticed by investors. Last year we ranked as the 5th highest environmental performer among our US Office Peer group and maintained our “Green Star” rating recognizing Parkway as a top quartile performer in all categories.
o DATA TRACKING/WASTE: We plan to maintain our leadership and stay ahead of upcoming regulations. In the past years, we have successfully benchmarked and automated our energy and water data, rolled out and implemented over 21 policies and procedures portfolio wide, and continued the completion of our LEED EBOM Volume program. We are now looking to deepen our efforts for waste tracking and recycling programs, an area that the industry as a whole has struggled with. We are excited that Energy Star will enable waste tracking on Energy Star Portfolio manager in 2016 which should help improve waste tracking for the industry as a whole.
o RESILIENCE: As climate change worsens, our risk management programs are becoming more important than ever. We have implemented Climate Change and Resiliency Policies that not only map out potential threats in our markets but also outline detailed plans and guidance for disaster prevention in case any buildings are affected by weather or other climate change related events.
o GOVERNANCE: Our executive team has taken a long-term strategic view of sustainability and invested heavily in our ESG programs with the belief it drives returns on capital, creates shareholder value, and mitigates risk while showing environmental stewardship. Investors and tenants are creating a greater push for more energy and water efficiency investments, climate change preparedness, and workplace health safety and productivity. It’s critical for any REITS that want to remain competitive, to stay ahead of these trends.
2. What are some of the highlights, challenges and success stories that you can share about the implementation of Parkway’s portfolio wide sustainability program?
o LEED VOLUME PROGRAM: Parkway’s greatest success story also serves as one of our greatest current challenges, completing Parkway’s LEED EBOM Volume Program. In 2014, we developed the program to take 25 buildings through LEED certification. Thus far, we have submitted 11 buildings and plan to submit many additional buildings in 2016. These are aggressive targets and there is an immense amount of work to be done in order to reach our goals. One of the challenges we are facing is the level of uniformity that is required to make a volume program efficient. Because every building is so different but we continue to push ahead and we are extremely proud of the progress we have made so far. Currently, 34% of our portfolio is LEED certified and 96.4% is benchmarked on Energy Star.
o CERTIFICATION TRENDS: Looking forward, we are exploring different avenues to streamline our certificationprocesses. We are currently investigating the LEED Dynamic Plaque as a more streamlined and cost effective, potential path to maintain our LEED Recertifications. We are also looking into a new certification program that was recently launched for buildings that don’t currently qualify for LEED Certification.
o EFFICIENCY INVESTENTS: In addition, Parkway is committed to continue making investments on energy efficiency projects. In 2014, Parkway invested almost $6.2 million in energy and water saving projects portfolio-wide. These projects resulted in more than $425,000 of annual operating expense savings. If these operating expense savings flow directly to NOI, savings will increase our buildings’ value by more than $6.5 million dollars using a 6.5% cap rate. In 2015, we completed several energy audits that enabled us to identify many additional efficiency investment opportunities. We plan to continue to investigate additional opportunities for efficiency investments and track the impact of these projects on our portfolio.
3. How has Parkway addressed stakeholder and tenant engagement with its sustainability initiatives?
o TENANT ENGAGEMENT: Parkway has taken extensive measures to remain engaged with our tenants and stakeholders and have had tremendous success. We host annual tenant engagement events such as Earth Hour, Earth Day, and an E-Waste Drive. In addition, we have implemented several programs to engage our stakeholders including tenant memos, signage programs, social media, annual reports, and sustainability newsletters.
o HEALTH & IAQ: As tenants become more sophisticated they are increasingly demanding sustainable buildings with a focus on indoor air quality, health, productivity, and lower operating expenses. In 2015, we developed a new Wealth and Well-being Policy that in addition to our Indoor Air Quality Policies, Green Cleaning Program, and IAQ Audits is making our Indoor Air Quality and health focused initiatives even stronger. As time goes on, tenants continue to see the value in having a healthier workplace, and Parkway plans on staying ahead of tenant demand in this and many fronts.
o PROPERTY TEAMS ENGAGEMENT/ANNUAL AWARDS: When it comes to engaging our Property Teams and building Engineers, we have incentivized and further engaged them to continue to focus on sustainability with several great initiatives including an annual awards program that recognizes our most energy and water efficient buildings as well as the most improved ones. Our program has been very successful and we are excited to have it featured on the Federal Better Buildings Challenge website later this year.
o INVESTORS/ACQUISITIONS: As more investors see the value of efficient buildings we feel it’s important to better understand existing building performance and opportunities for improvement before new acquisitions are finalized. For this reason, we are working toward enhancing our due diligence process for new Acquisitions and have developed a program to better understand building efficiency before acquisitions are final. This helps us identify opportunities for improvement that can be incorporated in our capital plans and underwriting models for new acquisitions.