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Pension investing is more a process of matching assets to liabilities, with the ultimate objective being to pay retirement income. Usually a young plan can afford greater risk because of longer time horizons. The solvency of pensions and insurers suffered as yields fell because it increased the present value of their liabilities, which were difficult… Read More Read More

Pension investing is more a process of matching assets to liabilities, with the ultimate objective being to pay retirement income. Usually a young plan can afford greater risk because of longer time horizons. The solvency of pensions and insurers suffered as yields fell because it increased the present value of their liabilities, which were difficult… Read More Read More

Leader in the Light Working Forum 2017 Video Interview

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Daniele Horton, Head of Sustainability, Parkway, Inc.

Founder & President, Verdani Partners

Tuesday, Jan. 16

Last year, Parkway merged with Cousins Properties and spun off the assets into two different organizations. What are the challenges or issues that must be addressed when companies merge or acquisitions are made from a sustainability perspective?

One of our biggest challenges was the large amount of building-specific data that had to be shared between the two companies following the merger and the spin-off. Many of those buildings had been pursuing ongoing sustainability initiatives like LEED and ENERGY STAR, which hinge on maintaining a seamless record of energy, water, and waste data from one month to the next. We had a challenging task to ensure a smooth transition after the change in ownership for each asset. It required strong cooperation and coordination between both entities. In order to facilitate a smooth post-closing transition, we convened an in-person meeting after the transactions closed to get all the property teams on board with Parkway’s corporate sustainability initiatives. Parkway’s sustainability team spent two full days reviewing sustainability policies and programs with the senior management team and asset managers in Houston. Their entire team is now strongly committed to the pursuit of our shared sustainability goals. Parkway’s Director of Sustainability, Jeff Dunbar, our Regional Chief Engineer, Mike Shreve and our VP Director of Operations, Jack Gregoire and all the property managers and engineers were instrumental in making this effort a success.

Parkway has a goal to achieve a 20% energy reduction across its portfolio. What key steps you plan to take to make that happen?

To achieve that goal, we plan to continue implementing a comprehensive program including several portfolio and building-level initiatives. I will try to cover key aspects of it since a lot of these strategies are becoming best practices and can be easily replicated:

Portfolio-level strategies

Developed performance targets

Implemented an energy efficiency policy

Benchmarked and track data progress

Automated our utility data tracking

Implemented building-level energy management software

Implemented a sustainability due diligence process for new acquisitions

Included efficiency projects on annual budgets

Implemented high ROI efficiency programs

Implemented a robust tenant engagement program

Incorporated green lease language

Created internal & external recognition programs

Implemented a portfolio-level data management software

Publicly report our annual progress

Building-level strategies

Monitoring, metering and commissioning main building systems

Maximizing operational programs including heating and cooling efficiencies & Installing variable frequency drives on equipment

Implementing Lighting upgrades and controls

Installing building automation systems and investing in DDC, wireless controls, energy optimization software & demand response infrastructure

Retrofitting main building systems as feasible: chillers, cooling towers, boilers, and fan motors

Tuning up our Building Envelop including sealing windows as feasible

The planed and completed energy upgrades at our lower-performing buildings will be key areas to focus to achieve our portfolio-wide energy savings. In several cases, we got great savings and short payback times by focusing on key aspects of the energy efficiency picture, such as lighting retrofits. We have implemented and will continue to focus on major garage lighting retrofits at several properties. Switching thousands of fluorescent bulbs with ultra-low-wattage LED lamps have been a great area to focus on for energy savings.

We have talked in the past about Parkway’s participation in the LEED volume program. Can you update us on how that process is going?

Following the merger and spinoff, Parkway’s portfolio breakdown is as follows:

100% of our portfolio is benchmarked in ENERGY STAR

89% of our portfolio earned ENERGY STAR labels in 2016

100% of buildings have utility automation

95% of portfolio is LEED Certified (by both building count and square footage)

The new, more efficient portfolio was better suited to the USGBC’s new alternative LEED Performance Score Pathway with the new arc platform. Some of the benefits of this new certification path include:

Streamlined annual recertifications (much like ENERGY STAR) instead of a major LEED recertification effort once every 5 years

Far less paperwork and staff time required to prepare for recertification each year with far fewer requirements for ongoing data tracking, which enable us to refocus our efforts on actual improvements.

Focus on five key performance indicators: energy, water, waste, transportation, and indoor air quality.

A simple platform that automates data flow with key data sources like Energy Star Portfolio Manager that simplify the ongoing data tracking needs for energy, water, and waste on a monthly basis.

Can you talk about some of the goals Parkway has regarding advanced energy, water and carbon reduction strategies going forward?

Parkway plans to work toward achieving our long-term reduction targets of 20% in energy and carbon emissions and 30% in water use across the portfolio. Parkway has also set a long-term goal to reduce waste and increase waste diversion rates to 75%. With the recent implementation of waste tracking features in ENERGY STAR Portfolio Manager, Parkway can better track waste generation and identify high waste-producing properties. Because the company’s entire portfolio is located in Houston, Parkway expects to be able to optimize its recycling programs, meaning far fewer waste haulers and recycling vendors to manage. We also plan to implement a comprehensive tenant engagement and signage programs. Almost 70% of the energy use in buildings is the responsibility of building occupants, so it is essential to educate and engage our tenants on sustainable behaviors.

In addition to energy, water, waste, and carbon goals, Parkway also values the health and well-being of employees and tenants. For employers, this equates to increased productivity, lower absentee rates, and reduced healthcare expenses. For employees and tenants, a health and well-being program increases happiness and lowers illnesses.  We introduced a comprehensive health and well-being program that we will continue to enhance. We have also implemented a Health and Well-being Guide and are focusing on initiatives that improve indoor air quality, improve access to physical activity and healthier food choices at our properties.

Resilience is also an important aspect of our program. We have implemented a Climate Change and Resilience policy and are working with our properties to make sure they are ready so sustain the impacts of stronger weather events and making them safer for our occupants.

Our achievements demonstrate Parkway’s commitment to enhancing the long-term value and sustainability of our portfolio. There is a greater push for sustainable, efficient, healthy, and resilient buildings from both tenants and investors. We believe that our stakeholders benefit from ESG initiatives. [While tenants benefit from lower operating costs, building owners/managers enjoy increases in rent, building values, occupancy, and retention. Meanwhile, lenders lessen their risk with reduced default rates and investors improve their ROI.

As the industry evolves, the demand for efficient buildings is steadily growing. We expect that the Parkway Green Sustainability Program will lessen our environmental footprint, increase the value of our portfolio, reduce operating costs and improve the quality of our buildings for our tenants.

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.

2016 LEADER IN THE LIGHT WORKING FORUM GETTING STARTED

Highlights from 2016 NAREIT Leader in the Light Working Forum

1. REIT Investor Perspective:

Hans Op’t Veld and John Robertson from PGGM and Deutsche Asset Management provided valuable insight on the role ESG plays in their investment processes, data collection, and engagement processes with firms. They discussed the relationship between ESG efforts and good management and described how essential ESG programs are becoming in order to stay competitive.

2. GRESB Overview and GRESB Update:

Chris Pyke and Dan Winters from GRESB reviewed 2015 as a banner year and announced changes to expect in 2016. In 2015, GRESB had more participants than ever before and expects even more in 2016. The green building industry continues to grow, breaking boundaries in every category. Looking forward, GRESB and investors alike seek higher data quality.

3. US Building Energy Policy Update:

Cliff Majestic from IMT reviewed new benchmarking legislation and policies that have been enacted across the United States. He discussed the importance of green leases and recommended ways to overcome the strenuous relationship between owners and tenants when it comes to costs and benefits associated with sustainability initiatives. Finally, he discussed steps going forwards on streamlining the barriers to benchmarking buildings.

4. Real Estate and Sustainability Reporting:

  Sustainability Disclosure in Real Estate:

Lenora Suki and Morgan Tarrant from Bloomberg reported on the progression of sustainability data and disclosure in 2015. Sustainable investment, green bonds, and disclosure is on the rise while the standardization of reporting is still evolving.

 Sustainability Accounting Standards Board:

SASB is an independent 501(c)3 non-profit whose mission is to develop and disseminate sustainability accounting standards that help public corporations disclose material, decision-useful information to investors. SASB is working to standardize sustainability disclosure topics and requirements for publicly traded companies. With an overwhelming dissatisfaction from investors on current sustainability reporting and a quickly growing desire to see sustainability data, SASB is working tirelessly to fill current gaps.

 ESG Perspective on the Real Estate Industry:

INTERVIEW with DANIELE HORTON, FOUNDER & PRINCIPAL of VERDANI PARTNERS and HEAD of SUSTAINABILITY at PARKWAY PROPERTIES

Watch the interview here.

Verdani's Daniele Horton sits down with NAREIT's Matt Buchard to discuss how Parkway Properties is achieving sustainability across its portfolio and is reporting its progress through programs like GRESB. Tenant education programs and realistic sustainability policies have produced positive results. 

This interview took place during this year's Leader in the Light Working Forum  in January of 2015.

See the full interview Q & A below:

1. Parkway saw dramatic improvement inits sustainability performance according to the GRESB results. What drove sucha strong improvement?

Parkway Propertiesranked as a "Green Star" in the "Top Quartile" in allcategories and took the 8th place in the US Office Peer group. This was a big improvement from last year and is a great testament to the strength and success of Parkway’s sustainability programs.

As an advisor, Verdani put together a dedicated team supporting Parkway’s sustainability programs. We worked hand-in-hand with Parkway leadership to benchmark the portfolio, set aggressive sustainability goals and targets and track and measure our progress toward achieving them. We have also centralized Parkway’s programs, developed a strong educational outreach program, a resources site and rolled out over 20 corporate sustainability policies. These targets include among others a decrease in carbon emissions by 20% across the portfolio over the next 10 years and having most eligible facilities score 90 or higher on ENERGY STAR.

At the same time, Parkway enrolled 25 buildings in the US Green Building Council’s LEED Volume Program. Currently, 40% of our portfolio is already LEED certified and 96% of our buildings are ENERGY STAR labeled. The volume prototype was approved last year and we plan to submit most buildings in 2015. This streamlined approach to LEED certification is a cost-effective way to implement Parkway’s sustainability programs on a large scale

To reach our energy targets, Parkway is implementing several strategies like operational improvements and tackling load reduction projects first, some deep retrofit projects and implementing a Green Tenant Improvement Guide and a green office guide to address tenant behavior. Our robust corporate sustainability program combined with a strong commitment from Parkway’s leadership team were critical to our success and improved GRESB ranking.

2. Parkway recently released its first sustainability report and is very proactive in stakeholder engagement programs. Can you talk about these efforts and what the company hopes to gain from these efforts

Parkway takes a practical approach to stakeholder engagement as a way of building effective relationships both internally and externally. Listening and talking to employees, vendors, tenants, investors, and other community groups is a key strength of Parkway’s sustainability programs. The sustainability team hosts company webinars, developed a sustainability website and resource site, company newsletters, LEED and sustainability training, a Twitter account and tenant engagement programs. We also implemented an annual sustainability awards program, giving recognition to our top performing and most improved properties.

We have also rolled out a robust Tenant engagement program. They can be challenging but working with our tenants on energy saving programs is critical and cannot be ignored as they are responsible for 50-60% of a building’s energy consumption. We encourage tenant participation in Earth Day activities, recycling and e-waste drives, and participation on our Green Office Guide to stimulate green occupant behavior. Sophisticated tenants are demanding more sustainable, efficient and healthy spaces as they are making a stronger connection with productivity benefits of green buildings so we are being proactive with these drivers. 

We also developed strong partnerships with industry partners and organizations like the USGBC, NAREIT, ULI Greenprint Foundation and recently joined the DOE Federal Better Buildings challenge, making a commitment to reduce our overall energy consumption by 20% in the next 10 years.  By implementing these programs we hope to make our buildings more efficient, healthy and sustainable, lower our operating expenses, make our tenants happier and increase our bottom line. 

3. As you look at the broader sustainability landscape, what do you think is the next frontier REITs will begin to address

DRIVERS: The driving force behind greening existing building stock has shifted from being “the right thing to do” to being vital for business as REITS with larger penetration of LEED and Energy Star buildings are outperforming their peers.  Therefore, more and more investors are starting to connect their capital with companies that are running their portfolios more efficiently and sustainable. Sustainability leadership is becoming a proxy for good management.

REGULATIONS/ TRANSPARENCY REQUIREMENTS: Regulations are continuing to raise the floor and becoming more stringent. California's governor just announced very aggressive sustainability goals including doubling the energy efficiency of existing buildings and I think that more states will follow suit. A greater push for transparency as benchmarking requirements grow is influencing more owners to disclose their efficiency data. There are now over 10 states with benchmarking requirements in the US and more are expected to follow suit. This is making more real estate firms look for creative ways to meet market demands, lower operating costs, stay competitive, and increase their bottom line.

UTILITY DATA ACCESS: As the market makes a stronger push to get data, measure and report it, we expect to see a lot of movement in the industry. In terms of utility data access, I think that we need to move toward having more tenant submeters so they can pay for the energy they consume and smart meters so the end user can get data access directly from the utility providers and save money and all the extra steps we currently have to take with manual data inputs or 3rd party automation partners.

TECHNOLOGY: Smarter technology is providing building owners and managers insights into how buildings perform in real time, throughout the lifecycle of the building. Cloud-based software applications tied to building automation systems are helping owners operate their buildings more efficiently.

ORGANIZATIONS: The landscape of sustainability providers and organizations is changing to adapt to a market that is rapidly evolving. As they discover more synergies with their work we are seeing more opportunities for partnerships, collaboration and new mergers. The Rocky Mountain Institute and the Carbon War Room joined forcesand the recent merger between the GBCI and GRESB is an example of that. I think that the new GRESB alignment with the GBCI will make portfolio level reporting on sustainability metrics more consistent with established programs on the asset level which is positive. I was also excited to hear that GRESB is improving the data collection process for reporting and broadening their Automated Data Feed options which will streamline the GRESB data gathering and reporting process.