ESG GUIDELINES

 

The ILG Group

 

ILG has been developing and managing real estate funds for private and institutional investors since 1980. As an asset, property and centre manager, it 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 is convinced that a sustainable approach to property management is a decisive factor for long-term property performance and this approach is therefore the objective of the ILG Group's business as an investment manager. Decisions are made accordingly with the following guiding principles in mind:

 

  • Environmental

    Only energy-efficient buildings realise sustainable tenant demand, maintain attractive rent levels and thus boost real estate values.

  • Social

    Only modern shopping worlds in retail properties that consider social conditions 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

 

ILG Group has developed high ESG (Environmental/Social/Governance) requirements. Properties should offer long-term adaptability to increasing regulatory requirements, efficient operating costs and should meet the requirements of retail customers, tenants and future buyers. Our ESG strategy is designed to promote tenant and customer loyalty and thus contribute to property returns.

 

Our strategy relates to investment processes, real estate portfolio management and the 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 flexibility of the building structure and building law are of particular importance. The consistently high occupancy rate of ILG's real estate portfolio provides exemplary proof that the selected properties are still attractive for retailers 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 resources. The ILG Group has established various measures to achieve and maintain a sustainable 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 international human rights.

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 strive for the elimination of all forms of forced labour.

5.      Businesses should strive for the abolition of child labour.

6.      Businesses should strive to eliminate discrimination in employment and occupation.

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

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

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

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

 

The ILG Group has a strong organisational and operational structure with clearly defined and demarcated tasks and responsibilities. It also has an internal risk management and control system. All employees of the ILG Group have 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 mission statement documents the ILG Group's self-image in the market relevant to it and the basis for its success there.

  • ILG Mission Statement for Employees and Managers

    The basis for the success of the ILG Group is its employees and managers. The realisation of their full potential requires the 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 employees 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.

  • Compliance Policy and Conflict of Interest Policy

    The ILG Group operates in a market regulated in particular by the KAGB [German Capital Investment Code]. The principles of compliance with the legal framework are set out in the Compliance Policy in section 5 and in the Conflict of Interest Policy in section 6. These regulations 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 the promotion and development discussions and thus indirectly influences the amount of their performance-related remuneration.

 

Violations of the general rules of conduct as well as the Compliance Policy or the Conflict of Interest Policy 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 the value of the investment)

    -   Water consumption and possibilities for the use of rainwater and greywater

    -   Waste generation and possibilities 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):

    -   Quality of stay

    -   Equipment suitable for the elderly and disabled - not only on the basis of legal requirements, but also best practice benchmarks in the market

    -   Conformity with sustainability requirements of anchor tenants

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

  •  Behavioural criteria (Governance):

    -   Security

    -   Cleanliness

    -   Building inspections, litigation review, tenancy management and relations with local opinion leaders

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

 

ESG in asset management

 

After the transition to the portfolio, a variety of measures are usually taken to ensure implementation of and compliance with ESG requirements at all levels. Examples include:

 

  • ESG in the supply chain

    Subcontracted service providers whose activities may have an impact on environmental and social goals are reviewed by the ILG Group or the Service KVG's outsourcing controlling department prior to the conclusion of the contract and during the term of the contract with regard to compliance with the agreed catalogue of services, which may also include ESG goals and measures. The ILG Group and ILG Assetmanagement GmbH also review other service partners regularly before and during their employment, including all relevant real estate service providers such as facility managers, energy suppliers and others.

  • Social aspects

    Within its own organisation, the ILG Group meets social objectives, for example by offering support and development programmes, sabbaticals and job rotations for its own employees, as well as donations and sponsorships. The monthly "First Friday" programme also provides information on news and developments within the company and industry, along with further training for employees by way of lectures led by the employees themselves or external speakers.

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

    In 2015, the ILG Group decided to supply all properties with 100% green electricity under a uniform framework agreement. The sustainability agency KlimaINVEST Green Concepts confirmed climate neutrality in the electricity consumption calculated for the ILG Group during this period. By using green electricity, CO2 consumption has been reduced by 938 tonnes to date. The framework agreement with a fixed term until 2019 is currently being extended. The ILG Group will continue to operate its properties with 100% green electricity in the future.

  •  Framework contract for sustainable site furnishing with seating

    Not only the technical systems of properties managed by the ILG Group are 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 to furnish the centres’ interior and exterior areas with seating. The furniture is made of natural raw materials that are replanted after production, and even the production and logistics are focused on sustainability.

  •  Framework contract for e-charging stations

    We also provide electric motor charging for vehicles at numerous locations. According to a study by the consulting firm Strategy Analytics, the electric car segment is growing rapidly. In 2025, according to the company's conservatively estimated forecast, a good 27 million electric vehicles are expected to roll off production lines, which comprises around a quarter of global new vehicle production. The ILG Group is following this trend and wants to offer customers at our locations an additional service. For this reason, we concluded a framework agreement with an e-charging station provider and will equip suitable ILG Group locations gradually with e-charging stations. The ILG Group already offers e-charging stations at numerous locations.

  • Photovoltaic systems

    We operate photovoltaic systems (PVA) at some of the ILG Group's properties to use part of the electricity required via renewable energies. For example, a PVA is operated in Straubing, whereby the electricity is also transferred to the power grid of the Straubing municipal utility company, among others. We check all ILG Group properties regularly for the possibility of retrofitting with PVA.

  • Waste separation

    In many properties, tenants separate waste at least into paper/cardboard and residual waste. Paper and cardboard are compacted by pressing. This reduces the volume of the "waste", which, in turn, reduces disposal intervals and thus transport journeys significantly, also reducing unnecessary pollution. In addition, the pressed paper/cardboard can be sold and reused for recycling products. If possible, 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 residential areas and are geared towards periodic shopping. For this reason, many customers travel by bicycle or e-bike. To offer these customers the best possible service and to strengthen the issue of sustainability and environmental awareness, we also offer charging stations for e-bikes in addition to the e-charging stations for cars.

  •  Parcel boxes

    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 service. Stress-free shopping combined with customer-oriented service is an increasingly important and rapidly developing trend. Our customers will be able to pick up their online orders at so-called “Packstationen” in the future, such as the parcel boxes offered by DHL, 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 network during the property selection process. If this is not available to a sufficient extent, the 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 directly in front of the centre. At other locations we have succeeded in increasing the frequency.

  • E3 Concept for social sustainability

    With regard to the social sustainability of bricks-and-mortar retail, the ILG Group has developed a concept that illuminates, evaluates and optimises the entire customer journey. We consider all points of contact between the customer and the property. The customer journey begins digitally with the preparation of the centre visit on the website and social media at home. A consistent information and signage concept welcomes the customer on access roads, welcomes them at the centre and leads them to parking spaces, entrances and shopping offers. Pictograms point out the various services offered such as family parking spaces, e-filling stations, lockers and free internet access. Designed entrances, a clear centre plan, comfortable seating areas with chargers, high-quality toilets and a friendly farewell complete the customer's accompanied journey through the centre and ensure optimal quality of stay.

    All these elements were developed with the aim of creating an intuitive and comfortable shopping experience. We paid special attention to ensuring that elements are functional in their interaction and focus the customer's attention on the goods on offer. 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 experience 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 being able to position themselves optimally in competition. The E3 concept is implemented in selected centres.

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

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, 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's operators.

2. CO2-neutral operation for all properties and business activities of the ILG Group by 2050

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 operations (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 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 foregoing air travel.


3. Conducting a tenant survey in selected properties until 2025

To better understand the needs and interests of our tenants in the buildings, we will conduct a tenant survey in selected properties. In it, we will ask about tenant satisfaction, but also what they wish to see from us in terms of ESG. Based on this, we will then develop a programme to increase tenant satisfaction on the asset level, including appropriate measures.

4. Conducting ESG training for all staff by 2024

To keep all colleagues up to date on what is happening in our industry, we hold training sessions on various topics regularly. Last year, we started training on ESG-relevant topics (e.g. legal basics, impacts of the climate and resource crisis). By 2024, all employees should have participated in at least one ESG-related training.