Redefine Properties Limited (RDF) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to our annual ESG road show. It's slightly different this year. As for obvious reasons, we can't be with you in person, unfortunately. And thank you for the opportunity of us sharing an insight into our ESG journey today. Our conversation today should be brief. I'm going to introduce our ESG subject. I'm then going to be supported by our Head of ESG, Anelisa Keke, who will take you through our ESG overview. And then we'll close with some questions and answers from yourselves, if there are any. We are ably supported by a squad of ESG specialists today: Leon Kok, as you know, is our CFO; Ilse Swanepoel is our Head of our Utilities; Marijke Coetzee is the Head of our Marketing and Communications; and we are also ably assisted by Renske Coetzee as Head of our Human Capital here at Redefine. So any questions at the end that Anelisa and I cannot answer, we will be deferring to our specialists for support. Okay. So just moving on to the essence of who we are. I think it goes without saying that it's not about your ESG performance per se, it's more about the impact where you will derive benefit, and it will be plain to see if your efforts are working or not. And to do this, one has to put your purpose at the heart of all your ESG initiatives. And as we go through Anelisa's presentation, I hope you will see that coming through very strongly as she takes us through the various slides on ESG. Also, the whole COVID situation post the pandemic will have a lasting impact on our people work, live and play. And this is where our relevance is absolutely important, and this is where our contribution and participation in ESG initiatives will stand us in good stead. Just lastly, I wanted to just touch on values. I think it's so important in this environment that we remain connected through values because as we work through a non-touch approach or a work-from-home one, we have to operate on a consistent basis, and the glue that keeps us doing so would be our values. Moving on then just to our sustainable initiatives and interventions. You'll see that our mission has been very carefully crafted to ensure that the pandemic is addressed in terms of its outcomes. Now we all know that COVID has not created new challenges, all it has done, it has exposed existing ones and it's accelerated issues that perhaps we were pondering on previously. And I'm not just talking as a company for Redefine, where, as you know, our funding model as well as our capital allocation strategy was previously already tested, is now even more so. But similarly, from a societal point of view where the divides are getting bigger and bigger and becoming more and more concerning, especially for the vulnerable ones as a consequence of this pandemic. And this is where our mission comes to the fore in dealing as an organization with building a company that embraces inclusive capitalism going forward. I think it goes without saying that from an operating in a new normal environment point of view, the ability to communicate has become even more prevalent. And for us to communicate with all our stakeholders during this time has required a collaborative approach, which has never been seen before. And this is not just with the usual stakeholders that are mentioned here, but it also speaks to our peers as well as other industry bodies. It would also include state agencies, and with that, too, would come yourselves as well. So I think, for us, it's so important that we continue this dialogue. I think COVID has once again emphasized the need for collaboration and support, but it goes once again to the heart of a more inclusive society. We cannot operate in a vacuum no longer. I'm now going to hand over to Anelisa, who's going to be taking you through our ESG overview in a lot more detail than I have at this point in time. So thank you very much.

Good afternoon. So my name is Anelisa. And as Andrew has said, I'm the Head of ESG at Redefine Properties. My job today is to take you through our ESG journey so far and to paint a picture of where we are headed. And I'd like to remind you that the presentation material as well as the supplementary information will be available on our website. Should you want to discuss any particular aspect of our ESG strategy, we encourage you to send through your comments as well as ask them in our upcoming one-on-one meetings. So we are serious about ESG. And to put it in context, the UN Global Compact has identified the next 10 years as the decade of action when it comes to implementing the 17 sustainable development goals. Doing this will require each company to effectively take on ambitious targets and to implement them by 2030. With that in mind, we have decided to take on a much more aggressive approach when it comes to developing our ESG strategy because we firmly believe that the REITs of the future will be those that successfully integrate their ESG strategy into every aspect of their operations. And indeed, our ability to attract talent, to attract funding, to get the best suppliers, to get the best tenants and, of course, to keep our stakeholders satisfied will depend on the extent to which we have successfully integrated all aspects of ESG into our business. So our approach to integrating ESG presents multiple opportunities, but it also poses some challenges, and it's useful to understand both as we craft our new ESG strategy. One of the opportunities is obviously aligning our public sustainability disclosure to international best practice, which will improve our stakeholders' grasp of our ESG performance and give them confidence that we are actively managing all of our ESG-related risks and taking steps to mitigate them accordingly. Now we have said and I will continue to say throughout the presentation that we are on an ESG journey, but we are not walking that journey alone. We must take into account our tenants, our employees and our suppliers and, indeed, you, in order for us to truly achieve our ESG strategy. To that end, we do intend on reaching out to our tenants and suppliers as well as our employees and actively introducing measures to improve their understanding of ES&G. So let's talk about the challenges. As you all know, there are multiple reporting mechanisms as well as multiple ESG rating agencies and indices, especially on the international market. And it is often difficult for companies to actually understand what the commonalities are and how to effectively meet the expectations of the stakeholders that those ratings agencies, et cetera, are actually catering to. And we believe that our commitment to the foundational 10 principles of the UN Global Compact as well as the sustainable development goals will help us crystallize some of the common themes and make sure that our ESG strategy is achieving exactly what we wanted to, which is to future proof this business. Obviously, COVID-19 will have profound effect on our operations long after the lockdown has ended, and that effect will also be felt by our suppliers and our tenants, respectively, which is why we need to have an agile stakeholder-inclusive approach that takes into account the constantly changing requirements in light of COVID-19 as well as the recovery from COVID-19. So let's, at a high level, talk about our ESG journey so far. We have introduced a number of interventions over the years, which have been well received by all of our stakeholders and which are already comprehensively discussed in our ESG report. Put from an environmental perspective, we are well known for our green building program, and we look forward to disclosing the additional green building certifications that we will have in place by the end of this financial year. We have also taken steps to reduce our carbon emissions through our solar PV program, which is one of the -- was highly regarded in the country as well as embracing other various technologies such as renewable energy initiatives to effectively help us manage our climate-related risks. We've taken steps to improve the understanding of our -- both of our suppliers and our tenants in our green buildings through using green leases and green tenant guidelines. From a social perspective, you're all aware of our famous challenge convention, and we look forward to taking that forward with more stakeholders in the future. We've managed to maintain our Level 3 BEE rating, and we are committed to improving our performance across our BEE scorecard. Our employee engagement and ethics scores exceed benchmarks and demonstrate to all our stakeholders that our employees believe in our vision and believe that our leadership is equipped to lead them ethically and responsibly. From a governance perspective, our Board of Directors is made up of a majority of nonexecutive directors with an independent nonexecutive chairperson at the helm. And with our recent appointment of Ms. Diane Radley, we have managed to increase the percentage of female representation on the Board, which is obviously a very good thing. Internally, we have taken steps to introduce a conflict-of-interest policy as well as a gift declaration and procurement policy. And all of these policies read together essentially support our commitment to anti-bribery and corruption measures. We continue to maintain our whistleblower as well as our grievance mechanisms in order for all of our stakeholders, in fact, to have a mechanism in place whereby they can report any potential wrongdoing. So let's talk about where we are headed. So apart from expanding our green building profile -- program in our office portfolio, we also intend on introducing a comprehensive climate risk management strategy, the components of which will be introduced to the market in due course. But we will take into account international best practice around, for example, an environmental management system as well as science-based targets. The ultimate objective is to make sure that these environmental considerations are applied and considered throughout our portfolio, and that we can take the learnings from our green building certifications and make them more widely known. We also intend on adopting a responsible investment approach because, ultimately, ESG needs to be incorporated into every stage of our asset management process. From a social perspective, we intend on adopting a formal human rights framework because we recognize that human rights not only form the basis of the sustainable development goals, but also Chapter 2 of the constitution, i.e., the bill of rights. We have also developed a supplier code of conduct, which we will roll out shortly, that incorporates ESG factors because, ultimately, it is not just about us implementing ESG, we need to encourage our tenants and our suppliers to also take ESG into account when developing their own strategies. From a governance perspective, we -- as you all know, our ESG reporting is perhaps one of the best in the country, and we intend on improving that and aligning it to international standards so that you, as investors, as well as our other stakeholders can effectively compare apples with apples when looking at our ESG performance and impact against that of our peers. We also intend on reviewing and refreshing our internal governance structures to make sure that they reflect the current realities of Redefine Properties. So protecting the health and ensuring the safety of our stakeholders has always been a key priority, and we have always taken steps to ensure that not only our buildings compliant with all the relevant regulations, but that we have independent audits conducted on an annual basis. Now COVID-19 has pushed health and safety to the forefront, which is for the best. And perhaps for the first time, multiple stakeholders have demanded answers as to what we are doing to essentially help our employees through this crisis. We have used a combination of our existing measures, such as Ask Nelson, in order to allow our employees to get the mental help and counseling that they need. And we have also equipped our line managers to understand that they need to constantly check in with their employees, not just about their performance, but really about how they are coping. As a company, we have also taken it upon ourselves to regularly communicate with our employees regarding the progress of our overall strategy and how we are navigating the multiple challenges of COVID-19 in order to assure our employees that we remember them, and they are still very much part of this organization. From a tenant and supplier perspective, we have taken it upon ourselves to make sure that our tenants are fully aware of the ESG and COVID-19 protocols that they must observe in order to enforce social distancing, mask-wearing and other related initiatives. Our suppliers, of course, are required to wear personal protective equipment, and we have taken steps to make sure that social distancing is observed at all times in our buildings. Similarly, our shoppers, visitors and communities are made aware of the rules regarding social distancing. And all regular touch points in our buildings are regularly sanitized. Should they have any concern, they are free to reach out to our COVID-19 compliance officers who are appointed for each building and whose contact details are made available. So when it comes to ESG in allocating capital, we intend on taking a new approach to responsible investment. And what does that mean? It effectively means that we need to take into account ESG considerations in every stage of the life cycle of our assets. And at this juncture, I would like to remind you that it goes beyond environmental. Yes, from an environmental perspective, the environmental management system will help us achieve this goal, and we will investigate life-cycle assessments to make sure that we are managing the environmental impact of our assets throughout their life cycle. But on the -- but in addition to that, the social impact and the governance impact of our investments needs to come to the fore, and we're confident that the -- our investment committee will exercise board level oversight of our strategy in this regard. Ultimately, we need to effectively monetize the impact of ESG considerations in our asset valuations and deepen our sustainability reporting in this regard. So we have outlined what were the kinds of initiatives that we intend on introducing. A lot of it will depend on, as I've said, impact assessments as well as regular due diligences that comprehensively take into account ESG-related measures. The benefits of this, of course, have been well documented. But we do believe that these issues will take on far more prominence in the years to come, and it is best to start planning for them now. So lastly, you can't manage what you can't measure, and we're very much aware of that, which is why we benchmark our ESG practices against local and international best practice standards. We participate in the GRESB Index, the MSCI Index and the SAM Corporate Sustainability Index. And we're proud to announce that for yet another year, we have been included in the FTSE4Good Sustainability Index. When it comes to our environmental performance, we also take into account the requirements of the Greenhouse Gas Protocol, and we participate in the CDP Climate Change and CDP Water initiatives. So we are also aware, as you are, that there are multiple international ESG risk ratings agencies that can be found and that effectively issue unsolicited ESG assessments of Redefine Properties. We've taken it upon ourselves not only to understand the findings from those ratings agencies, but to proactively engage with them to make sure that, in future, their ratings properly reflect Redefine's ESG strategy as well as the implementation of our various initiatives. And all of these indices and agencies have been remarkably instructive in showing us where some of our material gaps are. But ultimately, we want to know what you think, which is why we intend on sending out a list of questions after this webinar for you to complete, which range across ES&G, respectively. And I know you may resent me for giving you homework, but ultimately, we need to make sure that you, as an investor, are comfortable with our ESG performance and that our approach to ESG does indeed reflect international best practice. Because for everything that I've said, ultimately, when it comes to our ESG performance and our ESG impact, we are accountable to you. And on that note, I would like to hand back to Andrew for closing statements. Thank you so much for your time.

Okay. Well, thank you, Anelisa. That was very insightful. Okay. So just moving on to the closing of our webcast today. I think it's safe to say that as we journey along through what is going to be a very painful economic recovery and that COVID remains a threat, our ability and our creation of sustained value will increasingly rely on how we manage the competing concerns of all our stakeholders. So for us, it's very important as a people-centric organization to take this situation as an inflection point to position Redefine for a future that we all want and also, but very importantly, one that will contribute to the creation of a more inclusive, a more sustainable and a more resilient operating context. So thank you very much for your time this afternoon. We are not, by any stretch of the imagination, done. We would invite any questions you may have. We will then endeavor to answer them to the best of our ability. And failing any today, you are more than welcome to schedule a one-on-one engagement with the greater team that is represented here today. So I'm just going to reach down here and see if there are any questions. I'm going to refresh this because it's showing me a blank screen, which means that we've answered all your questions, which is a good thing. Well done, Anelisa. I'll just give it a few seconds, if you don't mind, just to make sure, if someone maybe has some fatigue with typing and so forth. Okay. I'll just refresh once again. Okay. It would seem that there are no questions for today. With that, I thank you for your time, and I wish you well, and we hope to see you in person very soon. Thank you.