Natural capital

Highlights

	4,9 million kWh of energy saved over 22 months to end-June 2014, generating cost savings of R5,9 million
	7% increase in total waste recycled
	External appraisal of environment, social and governance strategy (page 45)
	First submission to Carbon Disclosure Project
	Participated in Global Real Estate Sustainability Benchmark

Environmental strategy   A comprehensive external analysis of our environmental, social and governance strategy during the year confirmed the value of initiatives already under way and highlighted areas for improvement. We summarise our three-year environmental strategy in this report to provide a fuller understanding of how Hyprop is mitigating environmental impacts wherever possible and proactively managing environmental resources. In our next reports, we will measure our performance against the targets disclosed below which were approved post-year-end. Primary objective Minimise energy consumption and carbon emissions Monitor water consumption Increase percentage of waste recycled Primary targets (baseline June 2013) Energy (electrical) consumption – 3% reduction on average per annum across the portfolio over three years Water consumption – improve measuring and monitoring Recycling – 5% improvement across the portfolio over three years (baseline: 67%) Carbon emissions – in line with energy (electrical) consumption reductions Secondary objective Standardise management of energy, water, waste, carbon and biodiversity across the group Secondary targets Consider best practice in energy, water reduction, waste management and carbon emissions Consider green building principles Manage biodiversity impacts through responsible management by considering best practice and new developments Enhance stakeholder engagement by engaging large users and exploring collaborative opportunities Ensure compliance with environmental legislation Embed culture of environmental responsibility across the group Undertake annual environment-specific risk assessments Explore how innovation and technology can support competitiveness

Approach

Given the nature of its business, Hyprop is classified as having a low environmental impact in terms of the JSE’s Socially Responsible Investment Index. Integral to our commitment to continuously improving our operations, however, is reducing this environmental impact. After identifying the most relevant environmental impacts of our business as relating to water, energy and waste, we introduced our green design and environmental strategy two years ago with progress to date shown below.

Our approach is informed by best practice, proven methods, the practical ease of implementation, as well as the benefit and cost of retrofitting green design to existing buildings. Identified opportunities include lower operating costs, improved leasing terms, reduced liability and risk of higher utility costs, stringent legislation in terms of, for example, carbon taxes.

Given the absence of standards on the environmental sustainability of existing buildings, and no simple solution to environmental challenges, this strategy is dynamic and continually reviewed against best practice and new developments. We focus on practical implementation within the parameters of a cost/benefit analysis and the feasibility of retrofitting green design.

In addition, Hyprop is a member of the Green Building Council of South Africa (GBCSA), and has committed to actively support and adhere to the council’s vision and mission. A green building incorporates design, construction and operational practices that significantly reduce or eliminate the negative impact of development on the environment and occupants.

Key environmental projects completed in financial year 2014

Projects during the year totalling R6,5 million focused on installing energy-efficient lighting to reduce both electricity consumption and maintenance costs.

Property	Description	Capital expenditure	Annual CO2 reduction (tonnes)	Payback	Estimated lifetime of initiative
CapeGate	Replace dichroic downlighters with LED, metal halides with LED and T8 parking with T5	R1 218 953	1 818	10,3 months	3 years
Cradock Heights	Replace dichroic downlighters with LED and T8 parking with T5	R49 967	63	8,8 months	3 years
The Glen	Replace T8 cove lighting with LED and replace downlighters	R2 155 384	687	23 months	5 years
Clearwater Mall	Replace T8 cove lighting with LED	R838 794	118	8,5 months	5 years
Willowbridge South	Replace dichroic downlighters with LED and T8 parking with T5	R134 689	340	4,4 months	3 years
Stoneridge	Replace 2 x 58W T8 tubes in parking with 1 x 35W reflector T5 fitting	R201 230	282	8 months	3 years
Hyde Park	Replace 2 x 58W T8 tubes in parking with 2 x 35W reflector T5 fitting	R396 964	499	9 months	3 years
Canal Walk	Install LED downlighters and cove LED	R1 460 493	1 669	6,7 months	3 years

Energy-efficiency initiatives

Given that around 30% of Hyprop’s total operational spend in any reporting year is on electricity (mostly consumed by tenants), energy efficiency has become a financial imperative. We are initiating a range of energy-efficient solutions to better manage costs for the group and its tenants.

Determining Hyprop’s carbon footprint

To establish an accurate baseline, we are determining the group’s scope 1 and 2 carbon footprint using Defra (UK Department for Environment, Food and Rural Affairs) voluntary reporting guidelines and the revised corporate accounting and reporting standard of the Greenhouse Gas Protocol, the most widely used international accounting tool for government and business leaders to understand, quantify and manage greenhouse gas (GHG) emissions.

Numerous initiatives are under way across the group to improve our environmental performance and reach set targets.

Initiative		Objective		Progress
Proactive and responsive facility management team		Timely intervention to mitigate risk and loss Remain abreast of developments and trends		This function is overseen by the national facilities manager and national technical manager. Each asset has a dedicated operations manager. There is a monthly focus on relevant aspects of facilities management (referred to as monthly themes) to ensure adherence to plans, improve efficiencies and ensure quality control.
Set and monitor consumption targets (energy, water and waste)		Able to reduce current consumption and measure progress Able to monitor and flag setbacks		All bulk electricity and water meters are being converted to smart remotely-read meters. All waste areas were upgraded to optimise sorting process.
Implement a building-user training programme for operational staff		Raises awareness on technology, legislation, best practice and benefits		Discussions are under way with the Green Building Council South Africa to facilitate this.
Supply chain management		Select vendors based on environmental performance		Database of vendor environmental performance being developed.
Review tariff structure options		Adopt a tariff structure that is financially optimal to a building’s peak use		All buildings where it was financially viable have been placed on a time-of-use tariff with the relevant supply authority.
Control tenants in terms of tenant installations		Reduce risk of legislative non-compliance		All tenant installations completed during the year are compliance.

Fines

Hyprop incurred no fines for non-compliance with environmental laws and regulations during the year.

International benchmarking

During the year, and in line with its strategic pillars of quality and innovation, Hyprop voluntarily participated in two global benchmark programmes. These comprehensive exercises underscore our commitment to ensuring best practices are embedded throughout our group for the benefit of all stakeholders.

We completed our first submission to the Carbon Disclosure Project, now rebranded as CDP, the acknowledged international benchmark for environmental reporting.

CDP is an international non-profit organisation providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information in building sustainable economies.

The Global Real Estate Sustainability Benchmark is an industrydriven organisation that assesses the sustainability performance of real estate portfolios (public, private and direct) around the globe. It is used by institutional investors to improve the sustainability performance of their investment portfolio, and the global property sector.

The survey includes performance data, such as energy, GHG emissions, water and waste. It also covers broader issues, such as sustainability risk assessments, performance improvement programmes, and engagement with employees, tenants, suppliers and the community.

Conserving resources

Energy

Resource scarcity, particularly energy and water, is a risk to the sustainability of both our buildings and business model as a lack or inadequate supply of water or electricity will affect current operations and future projects.

Hyprop’s long-term resources strategy is continuously reviewed and improved. We are establishing a credible track record and a base to accelerate momentum.

The table below highlights ongoing opportunities to manage energy more efficiently.

Initiative		Objective		Progress
Capital replacement programme		Ensures capital equipment that has reached the end of its lifecycle is replaced with energy-efficient equipment and accessed against the following criteria: non-ozone depleting refrigerant gas; reverse-cycle heating instead of electrical element heating; performance coefficient of 3 or better.		All capital replacements are approved by the national technical manager.
Sub-metering electricity consumption		Detect faulty installations. Ensure accurate monitoring and enable efficient consumption control so that we can recover related costs in a multi-tenant environment with varying consumption trends.		External specialists have been appointed and are conducting building audits as part of the take-on process.
Modify thermostat set-points and supply temperature for chiller water		Lower energy costs in winter and summer.		Set-points adjusted at Canal Walk and CapeGate — the only two sites with chillers.
Variable speed drives for heating, ventilation and air-conditioning systems		Match speed to required output to reduce consumption.		Speed drives installed at CapeGate.
LED lighting and occupancy sensors		Improve lamp life and reduce required power factor correction.		During the year, LED projects were implemented at all shopping centres. Somerset Mall project was approved for implementation in FY15.
Implement preventative maintenance programmes		Ensure optimal operation of equipment.		All equipment is serviced monthly in line with service level agreement.
Peak energy demand reduction		Reduce power consumption in peak periods (premium tariff) and avoid expensive peaks, reducing the cost of consumption.		LED projects have reduced kVA. Staggered starting of air-handling units to reduce peak start-up current.
Power factor correction		Reduced consumption (in kVA), which accounts for current and pressure.		Power factor correction technology installed at all buildings where appropriate.
Light-coloured surfaces		Buildings absorb less radiant energy, reducing solar heat gain and reliance on artificial light.		Hyde Park has been repainted with light-coloured paint while Rosebank Mall has reflective roof sheeting.
Insulation of duct and pipework for heating, ventilation and air— conditioning		Reduce loss of cold air from air— conditioning systems into building environment.		Ongoing and monitored monthly through service level agreements.
Architectural shading and external planting		Reduce solar gain and energy use		The results of a project at Canal Walk are being reviewed.

Water

Hyprop is exploring opportunities to reduce water consumption while improving measurement and monitoring standards. This includes installing water-efficient equipment, optimising operating practices, and ensuring leaks are detected and repaired rapidly.

At existing assets, we rely on close cooperation with tenants and customers to reduce water consumption. At new developments and during renovations and upgrades, efficiency is a determining factor in choosing technical equipment (toilets, urinals, taps, sprinkler systems and cooling systems).

Water-saving initiatives implemented in the prior period included installing waterless urinals at two facilities at Cradock Heights, and using drought-resistant landscaping at Lakefield, Glenfield and Glenwood to reduce water consumption.

Bulk water consumption is monitored daily at centres to identify unusual consumption patterns that might indicate leaks.

Hyprop will implement smart metering across the portfolio to improve measuring and monitoring of general water consumption and identify leaks from unusual flow patterns.

Smart metering Hyprop is introducing smart metering across the portfolio. This will be phased in over three years, starting with installing bulk meters, then sub-meters for major users and finally submeters for remaining tenants. The benefits of smart metering include: History of consumption per 30-minute interval can be downloaded for speedy resolution of tenant queries Alarm raised when meters are tampered with Anomalies immediately flagged which limits risk and consequential loss High-risk tenants can be converted to prepaid consumption which can be switched off remotely, translating to zero risk to landlord Accurately tracking consumption patterns optimises financial benefits of time-of-use tariff Balancing sub-meters back to bulk meter at all times to flag any bypassing

The table below highlights ongoing opportunities to manage water more efficiently.

Initiative		Objective		Progress
Fire system water consumption		Identify leaks and illegal use of water.		All buildings measured.
Waterless urinals and dual-flush toilets		Reduce use of potable water. No mechanical parts.		All cisterns are dual-flush systems.

Waste

Hyprop’s waste management approach is designed to maximise recycling, minimise disposal to landfill and ensure compliance with legislation.

Tenants are regularly informed about on-site waste management systems, and Canal Walk and Clearwater Mall have public recycling stations. Suitable waste segregation facilities are in place at all centres.

For development projects, we consider best practice for optimising the environmental quality of our construction sites. Waste generated through construction is disposed of in line with responsible waste management plans. Hyprop adheres to all applicable regulations.

In 2014, Hyprop recycled 67% of total waste, up from 60% in 2013. While higher in percentage terms, lower group volumes in the table below reflect greater individual recycling efforts from our tenants.

Recycling 2013 versus 2014 %

Environmental sensitivity

Canal Walk and Willowbridge are in biodiversity-rich areas

Canal Walk is part of the greater Century City precinct, which is in a national wetland conservation area – Intaka Island. Intaka is an award-winning 16-hectare conservation area, rich in birdlife and indigenous plants. The precinct has an environmental management plan to which Canal Walk adheres. In terms of the plan, no sewerage, fertilisers, herbicides or chemicals are discharged into canals that run through the precinct. Only biodegradable cleaning products are used for parking decks, walkways and walls to minimise water pollution. In addition, Hyprop contributes financially to the environmental management plan.

Willowbridge is next to the Elsiekraal River and adheres to the environmental management plan set by the council to guard against water pollution.