Climate Change Data

Supermarket Income REIT plc

Climate Impact & Sustainability Data (2021, 2022-07 to 2023-06, 2023-07 to 2024-06)

Reporting Period: 2021

Environmental Metrics

ESG Focus Areas

  • Mitigation of environmental impact
  • The highest standards of governance and reporting
  • Engagement with tenants and wider stakeholders
  • Responsible citizenship and support for communities

Environmental Achievements

  • Improved EPC ratings year-on-year; average EPC rating of stores acquired in 2021 was B, compared to D in the previous year. Two Tesco supermarkets improved from E to A rating.
  • Supporting Tesco with the rollout of solar panels in nine stores (around one-third of the portfolio).

Social Achievements

  • Supporting tenants’ community giving.
  • Investment Adviser supporting young people’s development through the IntoUniversity partnership.

Governance Achievements

  • Updated Terms of Reference of the Audit Committee to include ESG oversight.
  • Integrated sustainability criteria into the remit of the Audit Committee.
  • Formalized ESG commitments into policies and refined reporting framework.

Climate Goals & Targets

Environmental Challenges

  • Competition for investment properties in the supermarket sector.
  • Lower-than-expected portfolio performance could reduce property valuations and/or revenue.
  • Default of one or more lessees could reduce revenue.
  • Use of floating rate debt exposes the business to interest rate movements.
  • Lack of debt funding at appropriate rates may restrict growth.
  • Need to operate within banking covenants.
  • Reliance on the Investment Adviser.
  • Impact of Covid-19 (though mitigated).
Mitigation Strategies
  • Extensive contacts in the sector, off-market transactions, strong relationships with investors and agents.
  • Long lease terms with upward-only rent reviews (86% inflation-linked), active asset management.
  • Focus on assets let to tenants with strong financial covenants, thorough due diligence.
  • Interest rate derivative contracts to partially mitigate LIBOR exposure, exploring alternative financing arrangements.
  • Oversubscribed capital raises, broadened lender base, engaged external debt consultant.
  • Continual monitoring of banking covenant compliance.
  • New Investment Advisory Agreement with a two-year notice period, regular performance reviews, aligned interests.
  • Strong tenant base, robust grocery sector, enhanced controls, diversification of banking relationships, monitoring rent collection.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI, GRESB

UN Sustainable Development Goals

  • Goal 7 (Affordable and clean energy)
  • Goal 11 (Sustainable cities and communities)
  • Goal 13 (Climate action)

Initiatives such as solar panel installation, tenant engagement on sustainability, and improved EPC ratings contribute to these goals.

Reporting Period: 2022-07 to 2023-06

Environmental Metrics

Total Carbon Emissions:81,107 tCO2e
Scope 1 Emissions:10 tCO2e
Scope 2 Emissions:101 tCO2e
Scope 3 Emissions:80,906 tCO2e
Renewable Energy Share:1%
Total Energy Consumption:139,320 MWh
Water Consumption:639,277 m3
Waste Generated:168,169 tons

ESG Focus Areas

  • Environmental
  • Social
  • Governance

Environmental Achievements

  • Calculated and reported GHG emissions for the second year.
  • Committed to reach net-zero by 2050 and developed science-based emissions reduction targets (validated by SBTi).

Social Achievements

  • 100% of supermarket assets engaged in established formal community engagement programs through tenants (Tesco, Sainsbury’s, Asda, Morrisons, Waitrose, M&S and Aldi).
  • Health & Safety assessments conducted on 19% of the supermarket portfolio.

Governance Achievements

  • Board composed of six non-executive directors with equal gender diversity (three male and three female members).
  • Transparent and independent recruitment process for board appointments.

Climate Goals & Targets

Long-term Goals:
  • Reduce absolute Scope 1, 2 and 3 GHG emissions 90% by FY2050 from a FY2023 base year.
Medium-term Goals:
  • Have all owned properties at EPC C or above by 2028 and EPC B or above by 2030.
Short-term Goals:
  • Reduce absolute Scope 1 and 2 GHG emissions 42% by FY2030 from a FY2023 base year.

Environmental Challenges

  • Data gaps in electricity, fuels, and water consumption; reliance on estimations.
  • Limited data on waste and water consumption from tenants.
Mitigation Strategies
  • Improving data coverage and completeness over time through tenant engagement and improved data collection processes.
  • Using estimations based on BBP Benchmarks, GRESB 2020 Benchmarks, and Defra waste statistics to fill data gaps.

Supply Chain Management

Responsible Procurement
  • Engagement with SUPR’s suppliers to encourage suppliers to set SBTs and to measure and reduce their emissions.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: EPRA sBPR

Reporting Period: 2023-07 to 2024-06

Environmental Metrics

Total Carbon Emissions:84,281 tCO2e/year
Scope 1 Emissions:11 tCO2e/year
Scope 2 Emissions:92 tCO2e/year
Scope 3 Emissions:74,277 tCO2e/year
Renewable Energy Share:20% (UK sites only)
Total Energy Consumption:175,376,459 kWh/year

ESG Focus Areas

  • Climate and Environment
  • Tenant and Community Engagement
  • Responsible Business

Environmental Achievements

  • 87% of store EPC ratings at C or above
  • 30% of sites have EV charging
  • 20% of stores have solar installed (UK sites only)
  • Science Based Targets validated and approved by SBTi, including a commitment to reach net zero by 2050

Social Achievements

  • £120,000 donation to the Atrato Foundation
  • EPC improvements at Sainsbury’s, Cheltenham (D to B)

Governance Achievements

  • Prepared and submitted EPRA Sustainability Best Practices Recommendations disclosures for the first time
  • Undertook independent limited assurance over location-based Greenhouse Gas inventory figures for FY24

Climate Goals & Targets

Long-term Goals:
  • Net zero emissions by 2050
Medium-term Goals:
  • Reduce Scope 1, 2 and 3 emissions by 90% by 2050
  • All UK ancillary units EPC B or above by 2030
Short-term Goals:
  • Reduce Scope 1 and Scope 2 emissions by 42% by 2030
  • All UK supermarkets EPC B or above by 2030

Environmental Challenges

  • Higher financing costs due to higher interest rate environment
  • Valuation decline in 2023 due to higher interest rate expectations
  • Reduced addressable market in the UK due to operator buybacks and weakening covenants of some tenants
Mitigation Strategies
  • Interest rate hedging strategy
  • Debt reduction in 2023
  • Accretive acquisitions in UK and France
  • Strict cost control, achieving a low EPRA cost ratio
  • Expansion into the French market through Carrefour sale and leaseback

Supply Chain Management

Responsible Procurement
  • Spend-based approach for Scope 3 Purchased Goods and Services, prioritizing supplier engagement on decarbonization

Climate-Related Risks & Opportunities

Physical Risks
  • Flooding (acute & chronic)
  • Extreme heat (acute)
Transition Risks
  • Policy and legal risk (MEES regulation)
  • Market risk (energy costs)
  • Reputation risk (tenant preferences)
Opportunities
  • Market advantage through energy efficiency measures and SBT alignment

Reporting Standards

Frameworks Used: EPRA, TCFD, SBTi

Third-party Assurance: Grant Thornton UK LLP (limited assurance on location-based GHG emission data)

UN Sustainable Development Goals

  • Goal 8
  • Goal 11
  • Goal 12
  • Goal 13
  • Goal 17

The Sustainability Strategy supports multiple UN Sustainable Development Goals (SDGs) and particularly focuses on those goals which we consider most material to our business – namely, goals 8 – Decent work and economic growth, 11 – Sustainable Cities and Communities, 12 – Responsible Consumption and Production, and 13 – Climate Action, all of which are underpinned by goal 17 – Partnerships for the goals.