ESG GUIDELINES

The ILG Group

Since 1980 the ILG Group has been developing and managing real estate funds for private and institutional investors. As an asset, property and centre manager, the group manages its own fund properties and external real estate portfolios. The ILG Group invests primarily in retail properties and thus has an influence on the supply of periodic and aperiodic goods to the German population.

The ILG Group believes that a sustainable approach to property management is a key factor for long-term property performance, which is the objective of the ILG Group's business as an investment manager. Decisions are therefore made with the following guiding principles in mind:
 

  • Environmental

    Only efficient buildings (energy, emissions, use of resources) create sustainable tenant demand, attractive rent levels and thus real estate values. 

  • Social

    Only modern shopping worlds in retail properties that take social conditions into account generate customer frequency.

  • Governance

    Only ethical conduct will ensure long-term success in the market with customers and other partners of the company.

 

ESG at the ILG Group

 The ILG Group has developed high ESG (Environmental/Social/Governance) requirements. For example, properties should offer long-term adaptability to increasing regulatory require-ments, be operated at an efficient operating cost and with as little resource consumption and emissions as possible, and should meet the requirements of retail customers, tenants and future buyers. In doing so, our ESG strategy is designed to promote tenant and customer loyalty and thus contribute to property returns.

Our ESG strategy relates to investment processes, real estate portfolio management and management of the ILG Group itself.

From our point of view, one of the most important factors in terms of sustainability is that properties can be adapted to changing usage concepts as the requirements of retailers and customers change and do not have to be replaced by new properties. In this context, the flex-ibility of the building structure and building law are of particular importance. The consistently high occupancy rate of ILG's real estate portfolio is exemplary proof that the selected proper-ties are still attractive for retailers, in some cases decades after they were built.

 

Good Governance 

As an owner-managed company, the ILG Group places the highest value on integrity in its dealings with clients, employees and entrusted assets. Through its shareholding structure, it achieves the highest level of identification with the company and an efficient use of all re-sources. The ILG Group has established various measures to achieve and maintain a sus-tainable corporate culture.

This policy, as well as our ESG strategy, is guided by the 10 principles of the UN Global Compact:

 

1.      Businesses should support and respect the protection of internationally proclaimed hu-man right.

2.      Businesses should ensure that they are not complicit in human rights abuses.

3.      Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

4.      Businesses should work towards the elimination of all forms of forced labour.

5.      Businesses should work towards the effective abolition of child labour.

6.      Businesses should work to eliminate discrimination in respect of employment and occu-pation.

7.      Businesses should support a precautionary approach to environmental challenges.

8.      Businesses should undertake initiatives to promote greater environmental awareness.

9.      Businesses should encourage the development and diffusion of environmentally friendly technologies.

10.   Businesses should work against all forms of corruption, including extortion and bribery.

 

The ILG Group has a clear organisational and operational structure with well-defined and de-marcated tasks and responsibilities. It also has an internal risk management and control sys-tem. All employees of the ILG Group have also committed themselves in writing to comply with an employee code of conduct, which is subdivided into the following content sections:

 

  • ILG Corporate Mission

    The ILG corporate mission statement documents the ILG Group's self-image in the mar-ket relevant to it and the basis for its success.

  • ILG Mission Statement for Employees and Managers

    The basis for the success of the ILG Group is its employees and managers. The realisa-tion of their full potential requires internalisation of the principles of conduct set out in the ILG mission statement for employees and managers.

  • General rules of conduct

    In contrast to the "target" requirements set out in the ILG mission statement for employ-ees and managers, the general rules of conduct are binding for each individual employee. They contain regulations

    -    to comply with ethical standards;

    -    to protect company property and confidential information;

    -    to use information technology facilities responsibly;

    -    on secondary employment, employee transactions and the acceptance of benefits and gifts;

    -    to promote diversity, equity and inclusion.

  • Compliance Policy and Conflict of Interest Policy

    The ILG Group operates in a market regulated by the German Investment Code (KAGB). The principles of compliance with the legal framework are set out in the Compliance Guidelines in Section 5 and in the Conflict-of-Interest Guidelines in Section 6. These regu-lations are also binding for all employees.

 

The principles of conduct contained in the ILG Group's mission statement for employees and managers are part of the regular personnel evaluation. An employee's compliance with these principles is assessed as part of promotion and development meetings and thus indirectly influences the amount of their performance-related remuneration.

Violations of the general rules of conduct as well as the Compliance Guidelines or the Conflict-of-Interest Guidelines may result in consequences under labour law, up to and including termination of employment. The management decides on the sanctions depending on the nature and manner of the violation.

Accordingly, these factors are reviewed both at the time of acquisition and during ongoing management as part of asset, property and centre management.

 

ESG in purchase

In future, all dimensions of sustainability criteria - environmental, social and behavioural - are to be considered in the due diligence process where it makes sense to do so:

 

  • Environmental factors (Environmental):

    Resilience and adaptive capacity to climate change, including flood risk and protection;

    Risks from contaminated sites (soil and groundwater) and building pollutants;

    Technical building equipment, use of renewable energies;

    Energy and water supply;

    Energy performance certificates and other regulatory ESG risks;

    Energy consumption and associated greenhouse gas emissions as well as opportunities to improve energy efficiency (also to reduce operating costs and increase investment value) with the goal of climate-neutral operation (Net Zero);

    Decarbonisation path with the goal of climate-neutral operation (Net Zero);

    Water consumption and opportunities for the use of rainwater and greywater;

    Waste generation and opportunities for waste separation (waste management);

    Indoor quality (consideration of health, safety and welfare of building occupants);

    Transport links and proximity to facilities for daily needs;

    Green spaces and biodiversity;

    Sustainable purchasing and materials procurement

    Pollution prevention;

    Check for taxonomy conformity.

  • Social aspects (Social):

    -   Sojourn quality;

    -   Equipment suitable for people who are elderly or disabled - not only on the basis of legal requirements, but best practice benchmarks in the market;

    -   Conformity with sustainability requirements of anchor tenants;

    -   Neighbourhood development, customer satisfaction, health and safety, and employee and other stakeholder engagement, diversity, equity and inclusion.

  •  Behavioural criteria (Governance):

    -   Security;

    -   Cleanliness;

    -   Property compliance with all relevant regulatory requirements, building inspections, litigation review and management of tenancies and relationships with local opinion leaders;

    -  Prevention of bribery and corruption or fraud, compliance with fiduciary duties as well as data protection and privacy.
     

ESG in asset management

 After transition to the portfolio, we ensure compliance with and implementation of ESG re-quirements at all levels with the following measures:

 

  • ESG in the supply chain

    The ILG Group or the outsourcing controlling department of the Service IMC reviews out-sourcing to service providers that can influence environmental and social goals through their activities prior to concluding the contract and during the term of the contract, check-ing for compliance with the agreed catalogue of services, which may also include ESG goals and measures. The ILG Group also reviews other service partners regularly before and during their employment, as does ILG Assetmanagement GmbH in the case of all relevant real estate service providers such as facility managers, energy suppliers and others.

  • Compliance

    ILG attaches great importance to assuming responsibility as a company and complying with regulatory requirements at all times. To this end, we have appointed a Compliance Officer and derived a Compliance Action Plan with safeguards and controls for compli-ance risks. The Action Plan defines measures for the following topics:

    -    Bribery and corruption;

    -    Cybersecurity;

    -    Data protection and privacy;

    -    Fiduciary duties;

    -    Fraud;

    -    Political contributions.

    In addition, a risk management policy provides guidelines for the prevention of further risks.

    Furthermore, in the course of operational compliance work, the Compliance Officer car-ries out unplanned compliance measures as required (e.g. processing of findings from in-ternal reports, involvement by the management, money laundering officer and/or risk management, discussions, inspection of documents in coordination with the management (escalation to the supervisory board if necessary in the case of their involvement with re-gard to critical issues) and corresponds with relevant internal and external contacts. In addition, training for employees and answering questions are part of the job.

  • Social aspects

    Within its own organisation, the ILG Group meets social objectives (diversity, equity and inclusion), for example, by offering support and development programmes, sabbaticals and job rotations for its own employees or donations and sponsorships. The monthly "First Friday" programme provides information about company and industry news and developments, and is also a further training measure for employees, who hold lectures or listen to external speakers.

  • Framework contract for the supply of green electricity to the portfolio

    As early as 2015, the ILG Group decided to supply all properties with 100% green elec-tricity under a uniform framework agreement to come closer to the goal of climate-neutral operation (Net Zero). The sustainability agency KlimaINVEST Green Concepts confirmed climate neutrality in the calculated electricity consumption for the ILG Group during this period. According to KlimaINVEST, the use of green electricity has so far prevented around 938 tonnes of CO2 from having an impact on the climate. The ILG Group will con-tinue to operate its properties with 100% green electricity in the future.

  •   Framework contract for sustainable site furnishing with seating

    Not only technical systems in properties managed by the ILG Group must be used in a sustainable and energy-efficient manner. Sustainable products are also used to furnish centres. For example, ILG Group’s centre management decided to use products from the Swedish manufacturer Green Furniture Concept for the standard furnishing of the seating in and outside the centres. The furniture itself is made of natural raw materials that are replanted after production, and even the production and logistics are focused on sustain-ability.

  •   E-charging stations

    Furthermore, we offer electric vehicle charging at numerous locations. According to a study by the consulting firm Strategy Analytics, the electric car segment is growing rapid-ly. According to the company's forecast, a good 27 million electrified vehicles will roll off the production lines in 2025, which corresponds to around a quarter of global new vehicle production. The ILG Group is following this trend and wants to offer customers in our lo-cations an additional service. For this reason, suitable ILG Group locations are gradually being equipped with e-charging points. The ILG Group already offers e-charging stations at several locations.

  • Photovoltaic systems

    Photovoltaic systems (PVA) are also operated at some of the ILG Group's properties to use part of the electricity required via renewable energies. For example, a PVA is operat-ed in Straubing, whereby the electricity is also transferred to the power grid of the Straub-ing municipal utility company, among others. All ILG Group properties are checked regu-larly for the possibility of retrofitting with PVA.

  • Waste separation

    In many properties, waste is separated by the respective tenants into paper/cardboard waste and residual waste at the least. Paper and cardboard are compacted by pressing. This reduces the “waste" volume, which in turn reduces disposal intervals and thus transport journeys significantly, reducing unnecessary pollution in turn. Pressed pa-per/cardboard can be sold and reused for recycling products. If possible, the separation is further refined into glass and plastic.

  •   Charging points for e-bikes

    Most of the ILG Group's centres are located near or in the middle of residential areas and are geared towards periodic shopping. For this reason, many customers reach the loca-tions by bicycle or e-bike. To offer these customers the best possible service and to strengthen the issue of sustainability and environmental awareness, we offer charging stations for e-bikes in addition to e-charging stations for cars.

  •   Parcel stations (“Packstationen”)

    In the age of online trade, it is becoming increasingly important for stationary trade to score points with customers through perfect service and to combine off- and online. Stress-free shopping combined with customer-oriented service is thus an increasingly important trend that even the internet can hardly keep up with. For example, our custom-ers will be able to pick up their online orders at parcel stations in the future, such as DHL “Packstationen”, when they shop at selected locations.

  • Public transport

    Local public transport plays a central role for ILG's locations, as accessibility by car is no longer sufficient in today's world. We examine the connection to the public transport net-work during the property selection process. If this is not available to a sufficient extent, centre management endeavours to improve or establish the connection. In Dachau, for example, a bus stop was relocated after discussions with the city and is now located di-rectly in front of the centre. At other locations we have succeeded in increasing the fre-quency.

  • E3 Concept for social sustainabilityWith regard to the social sustainability of bricks-and-mortar retail, the ILG Group has de-veloped a concept that illuminates, evaluates and optimises the entire customer journey. All points of contact between the customer and the property are considered. The cus-tomer journey begins digitally with the preparation of the centre visit on the website and social media at home. A consistent information and signage concept already welcomes the customer on access roads and at the centre and leads them to parking spaces, en-trances and retail offers. Pictograms point out the various services offered, such as fami-ly parking spaces, e-charging stations, lockers or free internet access. Designed en-trances, a clear centre plan, comfortable seating areas with chargers, magnifying glasses on the shopping trolley, high-quality, barrier-free toilets and a farewell greeting complete the customer's accompanied journey through the centre and ensure optimum sojourn quality.

    All these elements were developed with the aim of creating an intuitive and comfortable shopping experience. We paid special attention to ensuring that the elements are func-tional in their interaction and focus the customer's attention on the range of goods on of-fer. The goal is more frequent visits, a longer length of stay and the sustainable success of the retail properties.

    These so-called E³ shopping experience elements optimise the customer's shopping ex-perience in bricks-and-mortar retail and are therefore, from the ILG Group's point of view, a sustainability element that contributes to the ILG centres positioning themselves opti-mally in competition. We have implemented the E3 concept in selected centres.
     

We review and renew these measures constantly as part of a continuous improvement pro-cess based on the PDCA cycle of the international standard for environmental management systems ISO 14001.

Below you will find further ESG goals that are lived within the ILG organisation.

ESG Goals of the ILG Group

1. Successive conversion to LED in the common areas of selected properties by 2030

When replacing lighting fixtures or systems, the ILG Group generally plans to use efficient LED lighting, which is more cost- and energy-efficient over its lifetime. This has a positive effect on operating costs and is also an argument when acquiring new tenants who are happy to link their own sustainability strategy with that of the location operators.

2. CO2-neutral operation for all properties and the ILG Group’s business activities by 2050 (Net Zero)

With the goal of climate neutrality (Net Zero), we are aligning ourselves with the European climate targets. We plan to reduce emissions resulting from property operation (heating, electricity) to a minimum by 2050 using technical optimisation measures. To this end, we use the CRREM tool to examine the stranding risk of the building at the time of purchase, and we draw up a climate protection roadmap for the buildings, based on the development paths of the Paris Climate Agreement and including concrete measures to reduce CO2 emissions and final energy demand. In addition, we also want to analyse the footprint of the ILG Group itself and reduce it as much as possible. To this end, we are implementing organisational measures, e.g. switching to green electricity in our offices or doing without air travel.


3. Conducting tenant surveys

To better understand the needs and interests of our tenants in the buildings, we conduct tenant surveys as part of annual tenant interviews. In these, we ask about tenant satis-faction, but also what they want from us in terms of ESG. Based on this, we then develop a programme to increase tenant satisfaction on the asset level, which includes corre-sponding measures. The aim is to document and evaluate these discussions and measures in a structured manner by 2025.

4. Conducting ESG trainings

To keep all colleagues up to date on what is happening in our industry, we hold training sessions regularly. Last year, we commenced training on ESG-relevant topics (e.g. legal basics, effects of the climate and resource crisis). By 2024, all employees should have participated in at least one more ESG-related training. We focus on the environmental (decarbonisation) and in the area of social and governance. In addition to these trainings, employees will be offered further training opportunities on these topics.