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2018

Debt

Assessment

Contents

About GRESB

GRESB is an industry-driven organization transforming the way capital markets assess the environmental, social and governance (ESG) performance of real asset investments.

GRESB data and analytical tools are used by over 70 institutional and retail investors, including pension funds and insurance companies, collectively representing over USD 17 trillion in institutional capital, to engage with investment managers to enhance and protect shareholder value.

For more information,visit gresb.com. Follow @GRESB on Twitter.

About the 2018 GRESB Debt Assessment

The GRESB Debt Assessment is an ESG engagement and benchmarking tool for primary lenders including regional and national banks; insurance companies; private equity debt funds; and mortgage REITs. The benchmark is tailored to real estate lenders with specific focus on sustainability actions related to:

The Assessment is structured into three sections with 26 Core indicators along with five sector-specific indicators applicable to the lending units of banks and insurance companies, and a different set of five indicators applicable to private equity funds.

Participants answer 31 indicators that assess performance against 6 Sustainability Aspects:

The Assessment results provide opportunities to identify strengths and areas for improvement, both in absolute terms and relative to peers. Participants use their results to inform business planning and deepen stakeholder communication on sustainability issues.

For mortgage REITs and private equity real estate funds, the GRESB Debt Assessment serves as an outward facing communication tool to GRESB’s institutional investor members, and to the capital markets more broadly. Annual participation communicates commitment to ESG management practices and the incorporation of sustainability techniques into commercial real estate lending.

Participation and Membership

Participation in the Debt Assessment is free of charge. All participants receive a Scorecard with a summary of ESG performance. Participants do not need to be GRESB Members.

GRESB Members receive a bundle of benefits including a detailed Benchmark Report detailing current strengths and opportunities for improvement, business intelligence from peer-to-peer comparisons, and a thematic analysis of aspect scores. Members also receive a high-level pre-submission response check, and increased engagement opportunities including the opportunity to participate on the GRESB Debt Advisory Board.

Who can see my data?

GRESB Debt Assessment results and underlying information are private and not disclosed to any third parties. Data is submitted to GRESB through a secure online platform and can only be seen by current GRESB staff, or authorized personnel from GRESB’s parent company (GBCI, Inc). as necessary for the data validation process.

Timeline and Process

The GRESB Debt Assessment opens on April 1, 2018 via the assessment portal available at GRESB.com. The submission deadline is July 1, 2018 which provides participants a three-month window to complete the Assessment. This is a fixed deadline, and GRESB will not accept submissions received after this date.

The GRESB validation process starts on June 15 and continues until July 31, 2018. We may need to contact you during this time to clarify any issues with your response.

Results are published in September and are distributed as follows:

Response Check

A Response Check is a high-level check of a participant's Assessment response prior to final submission. It helps to reduce errors that may adversely impact the Assessment results and ensures the submission is as complete as possible.

The Response Check is available for request from April 1 to June 8, 2018 subject to available resources. We strongly encourage participants to place their request as early as possible.

Members are able to request a complimentary Response Check for one entity as a membership benefits.

Guidance & Support

The Assessment Portal is accompanied by indicator-specific guidance, available under the “Guidance” tab that describes:

In addition to the guidance found in the Portal, the GRESB Debt Assessment is accompanied by a Reference Guide. The Reference Guide provides general introductory information and provides indicator-by-indicator guidance that is also available under the Guidance tab in the Portal. The GRESB Debt Reference Guide will be available on March 1, 2018.

The GRESB Assessment Portal has the following tools and functionality to help ensure an efficient and accurate submission:

2018 Debt Assessment changes

GRESB works closely with its Members and broader industry stakeholders to ensure the Debt Assessment addresses sustainability issues specific to real estate lenders. Following extensive industry engagement and consultation with the GRESB Debt Advisory Board and 2017 Participants, the 2018 Debt Assessment introduces structural updates, new indicators and refinements to existing indicators.

The table below contains information on the most substantial of these improvements.

Entity & Reporting Characteristics

EC3

Improvements to entity type definition

Rationale for change: Refines the entity definition to focus on lender type rather than legal structure. This change is necessary for better peer grouping and providing sector-specific indicators.

Impact of change: No significant impact.

RC6

New indicator - open text box

Rationale for change: Multiple participants indicated interest in the opportunity to communicate key sustainability achievements over the reporting period. This non-scored, open text box will be for reporting purposes only and included in the Benchmark Report.

Impact of change: No significant impact.

Management

MA1.1

Additional text boxes - explanations

Rationale for change: Each radio button contains a new text box for providing additional contextual information. The new structure allows participants to define specific objectives/targets/KPIs. Previously this opportunity was included in Q1.2.

Impact of change: Information will be validated and scored.

MA1.2

New indicator - sustainability objectives

Rationale for change: Scope changed to emphasize actions taken to achieve objectives tied to MA1.1. This change supports the Debt Assessment emphasis on implementation actions. Scope of the Open Text Box is expanded to require a description of metrics used to track implementation progress.

Impact of change: 2018 Assessment participants must select applicable checkboxes then provide necessary context for validation and scoring.

MA3.2

Additional changes - investment committee review

Rationale for change: Scope changed from a narrower focus on the presence of a senior decision-maker with sustainability responsibility to now emphasize the investment committee process including sustainability-themed items reviewed during loan approval. The open text box scope request context on the loan review process along with actions committee takes to mitigate sustainability risks.

Impact of change: Participants must select applicable checkbox(es) and provide substantive context to receive points. This open text box will be validated and scored.

Policy & Disclosure

PD1.1

Internal guidance - decision making framework

Rationale for change: A range of guidance levels inform this indicator, and are provided to ensure better representation of participant actions. Evidence is mandatory and will be validated.

Impact of change: The level of internal guidance in place impacts scoring.

PD1.2

Additional checkboxes - asset metrics, project scope and property type

Rationale for change: Participants requested an opportunity to report more granular aspects to this internal guidance. Certain options connect to Q8 in the 2017 Debt Assessment.

Impact of change: Participants must select applicable checkbox(es) and provide substantive context to receive points. This open text box will be validated and scored.

PD2

New indicator - post-close data monitoring

Rationale for change: As lenders gather more sustainability-related metrics, a systematic approach to data collection is needed for improved risk management. Presence of a written guidance document signals the presence of a systematic approach.

Impact of change: The new indicator substitutes Q9 and will be scored in 2018.

PD3

Enhanced indicator scope

Rationale for change: Scope of this indicator has improved to emphasize lender engagement and involvement with evolving industry practice.

Impact of change: The engagement scope impacts scoring.

Due Diligence

DD4

New indicator - sustainability scorecard

Rationale for change: Multiple 2017 Debt Assessment participants reported implementing sustainability-related scorecards to inform borrower and collateral analysis. This indicator allows participants to report the technique utilized.

Impact of change: This new indicator substitutes Q14 and will be scored in 2018.

Monitoring

ME1.1

Indicator refinement - borrower emphasis

Rationale for change: This refinement is focused on sustainability-related KPI tracking specific to the borrower.

Impact of change: The new indicator substitutes Q16 and will be scored in 2018.

ME1.2

Indicator refinement - asset emphasis

Rationale for change: Indicator structure changed to offer opportunity to focus on asset type, relevant KPIs, and update frequency.

Impact of change: Update frequencies will be validated and scored.

ME3

Granular certification levels

Rationale for change: Multiple participants reported tracking energy rating levels and the types of achieved building certificates within the loan portfolio. This new indicator structure allows participants to report certification level exposure.

Impact of change: Percentage coverage of all applicable certifications and levels is necessary to complete this indicator.

ME4

Building certification monitoring capabilities

Rationale for change: To decrease reporting burden and improve data quality, new building certifications must be selected from the dropdown menu, then reported based on portfolio percentage coverage.

Impact of change: The ability to granularity identify building certifications, by level and points achieved, will be used in scoring.

Risks & Opportunities

RO1.1

Additional checkboxes - valuation frameworks

Rationale for change: Focus of the indicator is how lenders include sustainability attributes in the valuation assignment. Participants may choose from existing frameworks or otherwise explain their approach.

Impact of change: The refined indicator substitutes Q23.1 and will be scored in 2018. Open text box is mandatory, and will be validated and scored.

RO1.2

New indicator - post-close valuation attributes

Rationale for change: This indicator identifies the post-close valuation process as to the inclusion of sustainability attributes. Participants may select all applicable textbox(es) for this indicator.

Impact of change: The indicator replaces Q23.2 and is scored.

RO4

Long-term sustainability risk identification

Rationale for change: The 2018 GRESB Debt Assessment includes additional checkboxes to better reflect key long-term sustainability risks faced by lenders. Participants may select applicable checkboxes when submitting this indicator.

Impact of change: No significant impact.

Fund Indicators

FUND1

Sustainability oversight - responsibilities and organizational reach

Rationale for change: Updated indicator structure allows participants to better define scope of the sustainability taskforce/committee.

Impact of change: No significant change.

FUND3

New indicator - asset improvement plan

Rationale for change: Multiple 2017 participants noted they require borrowers to provide asset improvement plans as condition of loan approval. This indicator allows participants to elaborate on the applicability and scope of asset improvement plans.

Impact of change: All information components are used to score this indicator.

FUND4

New indicator - social impacts

Rationale for change: Social impact review is necessary for commercial real estate lenders to integrate and track portfolio impacts.

Impact of change: Participants may select applicable checkboxes. This indicator will be scored in 2018.

FUND5

New indicator - long-term risk mitigation strategies

Rationale for change: This indicator asks participants to describe their approach to mitigating long-term sustainability risks in the real estate loan portfolio.

Impact of change: Completing this open text box is mandatory; this indicator will be validated and scored.

Bank Indicators

BANK1

Refinements - additional description opportunity

Rationale for change: Multiple 2017 Debt Assessment participants reported requiring specific metrics/thresholds for green loan product/program eligibility and/or internal impact targets.

Impact of change: Additional information contained in text boxes will be validated and scored.

BANK3

New indicator - green certification review

Rationale for change: Specific points achieved during green building certification provide supplementary information for risk management and review. Lenders should focus beyond the building certification level to include the specific points achieved.

Impact of change: This new indicator is scored.

BANK4

New indicator - dedicated capital

Rationale for change: Multiple 2017 GRESB Debt participants maintain capital commitments earmarked for financing property efficiency upgrades. This indicator allows participants to report progress, targeted impacts and achievements.

Impact of change: All components of this indicator will be scored in 2018.

BANK5

New indicator - notification process

Rationale for change: Advanced borrower and asset-based data tracking can identify future portfolio risk issues. Participants may select all applicable criteria and provide relevant context in the open text box.

Impact of change: All components will be used for validation and scoring.

Entity & Reporting Characteristics

Entity Characteristics

2017 Indicator

Reporting Characteristics

2017 Indicator

Management

Sustainability Objectives

2017 Indicator

2.5 points , MP, G

2.5 points , IL, G

1.5 points , MP, G

Sustainability Decision Making

2017 Indicator

1.5 points , MP, G

2.5 points , IL, G

1.5 points , MP, G

Policy & Disclosure

Sustainability Policies

2017 Indicator

2.5 points , MP, G

3 points , MP, G

1.5 points , IL, G

1.5 points , MP, S

Sustainability Disclosure

2017 Indicator

3 points , MP, G

1.5 points , MP, G

Due Diligence

Property & Borrower Review

2017 Indicator

3 points , MP, G

3.5 points , MP, E

3 points , MP, S

4 points , IL, S

Monitoring

Portfolio Monitoring

2017 Indicator

2.5 points , IL, G

3 points , IL, E

2.5 points , IL, E

4 points , IL, E

4 points , IL, E

Risks & Opportunities

Market Transformation

2017 Indicator

3 points , IL, G

2 points , IL, G

3.5 points , IL, E

3 points , IL, G

4 points , MP, G

Fund Indicators

2 points

1.5 points

2.5 points

2 points

3 points

Bank Indicators

2.5 points

2 points

1.5 points

2 points

3 points