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Mall REITs Are Pushing Ahead on Environmental Sustainability Goals

As climate change concerns take center stage, sustainability on the environmental, social and governance fronts has been a top focus of many mall operators in recent years.

Environmental Social Governance, or ESG, criteria serves as the framework for assessing a company’s sustainability impact. It’s not just because mall operators, more often referred to as real estate investment trusts, want to be good corporate citizens. Many are finding that investing in ESG can help generate cost savings over time, as well as become a vehicle for attracting investors who believe in responsible investing.

Retailers, the kind of fashion tenants most often found at the malls, are also focusing on their own efforts. And if they’re a Kimco Realty Corp. tenant, they’re given a list of guidelines for sustainable store operations either during the build-out stage or in a retrofit scenario.

On Monday, Nordstrom shared its 2025 goals, including a science-based target to reduce greenhouse gas emissions and a reduction in single-use plastics by 50 percent by phasing out plastic bags from its more than 245 Nordstrom Rack stores. The department store will also use sustainably sourced raw materials in 50 percent of Nordstrom Made products made of polyester, cotton and cellulosic fibers, extend the life of 250 tons of apparel, ensure 15 percent of all product is considered sustainable and donate $1 million to support textile recycling innovation.

“Through this COVID-19 crisis, we’ve been given a unique opportunity to reimagine our future and rethink what kind of company we want to be for our customers, employees and shareholders. It’s clear that to deliver value to our stakeholders and communities, environmental sustainability needs to be a priority for our company,” Pete Nordstrom, Nordstrom’s president and chief brand officer, said.

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Walmart Inc. in May issued its first-ever sustainability report on company-wide initiatives addressing its carbon footprint at its global supply chains and in-house efforts, such as its plan to reduce supply chain emissions by 1 billion metric tons by 2030. Another goal is having its electricity needs supplied by 50 percent renewable energy by 2025. Target Corp. has similarly been ramping up investments in renewable energy, installing LED lights in its buildings. It also has a Texas wind power project that offsets electricity usage at 60 area stores.

While mall REITS aren’t in a position to sustainably source raw material for apparel production the way Nordstrom can, what they have turned their attention to is looking at their shopping center infrastructures and zeroing in on cutting down their carbon footprint, on top of considering options for renewable energy and water usage.

Unless the REIT is Simon Property Group, which has already met its 2020 sustainability targets, most are in the process of reviewing operations under the current macro-economic outlook due to the coronavirus pandemic. And some mall REITs are evaluating current projects. Most that are close to completion will likely stay the course, while new developments not yet started will be delayed. And a few, like Retail Properties of America Inc. with its Carillon redevelopment project in the District of Columbia, are being halted as original operating plans are reviewed for a possible reduction in scope and spend.

Below is a look at the sustainability efforts of some mall REITS. Each is at a different stage, depending on when they started their focus on sustainability, as well as the size of each REIT portfolio.

Simon Property Group

Simon Property group, the largest U.S. mall owner, focuses on four areas of sustainability: environment, customers, communities and employees.

Simon has already exceeded its 2020 sustainability goals. “We will continue to set goals on our material ESG topics, enabling us to measure and track issues that matter most for our stakeholders and us,” Mona Benisi, global vice president of sustainability, said.

Among the targeted environmental achievements, Simon has already improved three key categories–greenhouse gas efficiency by 5 percent to 10 percent and portfolio-wide energy efficiency by 20 percent, as well as its 2020 target for improving portfolio-wide water efficiency by 20 percent, which has a completion goal by 2025. It has also diverted pre-consumer food waste from landfills at selected properties. For its consumer-focused goals, Simon has electric vehicle charging stations for customers at all of its properties, and has met its 2020 target for installation of WiFi at 90 percent of its properties, which has a completion goal by 2025.

On the employees front, Simon is encouraging staff to volunteer in their communities and is building awareness of sustainability issues. It is also engaging with key tenants on sustainability issues relevant to shoppers. From a community standpoint, the company continues with its strong support of Simon Youth Foundation, mostly through donating commercial space and scholarships for the organization’s graduates. And the company continues to participate in community engagement at all of its properties.

For the balance of 2020, Simon will focus on reducing its greenhouse gas emissions and commit to setting science-based reduction targets. It is relying on guidelines provided by Science Based Targets Initiative. The REIT isn’t yet a member of the United Nations Global Compact, so hasn’t yet aligned its sustainability strategy with the UN Sustainable Development Goals, and is assessing whether it should.

Simon also plans to name a diversity ambassador who will be charged with enhancing the company’s diversity and inclusion strategies, as well as create an action plan for completion over the next few years.

Taubman Centers

Taubman boasts that sustainability is embedded in its policies and corporate governance relating to the design, construction and operations of its centers. Sustainability goals with a target date of 2025 include reducing by 20 percent both energy consumption and greenhouse gas emissions, and reducing water consumption by 10 percent. The REIT is also working on increasing its renewable energy by 10 percent by 2025.

As part of its 2013 Smart Building Initiative, Taubman installed fiber optic infrastructure throughout the The Mall at Short Hills in New Jersey, which in turn helped the property analyze energy usage. Since then, the Short Hills mall has converted to LED lighting in the interior common areas and on all exterior light poles, resulting in a reduction in annual energy usage by more than 20 percent in those areas. It’s also installed 3.5-megawatt solar panels on the center’s roofs and parking decks. The panels generate enough energy to power about 50 percent of the mall’s common-area heating, cooling and lighting, or what Taubman says is the equivalent of the annual energy usage of 510 homes. Recovery of the installation costs should be completed over the next few years with assistance from Jersey Central Power & Light and the State of New Jersey’s Solar Renewable Energy credits.

Simon increased the number of electric vehicle charging stations at its International Plaza in Tampa, Florida. Relying on a Bloomberg New Energy Finance report in 2018 predicting 11 million sales of electric vehicles by 2025, Taubman tested demand in 2015 by installing four charging stations at the center. It added four more in 2018 and 12 more last year, bringing the total to 20 at the start of 2020. The charging stations are free to use and the average plug-in session is about two hours. The center also converted to LED light for the interior common areas and at its parking deck. It also includes water bottle refilling stations to cut down on soda cans and bottles, and it uses retention ponds to capture rainwater runoff for reuse in its drip-water irrigation system.

Simon Property in February agreed to acquire an 80 percent stake in Taubman for $3.6 billion. So far the transaction is still expected to close later this year.

Kimco Realty Corp.

Kimco believes that any improvement in the sustainability of its shopping centers  also requires the collaboration of its tenants. The mall operator focuses on three key categories: energy, waste and water.

Some of the sustainability efforts initiated in each category by Kimco have included the installation of energy-efficient upgrades to lighting at more than 200 properties over the past three years, a waste management program that has diverts 55,000 tons of refuse from landfills annually, new landscaping designs that incorporate native plants and efforts to reduce soil erosion and water use, and the inclusion of electric vehicle fast-charge stations at select shopping centers.

The REIT partnered with the U.S. Environmental Protection Agency’s Energy Star program to tailor guidelines with its retail tenants. Those guidelines includes Kimco’s three areas of focus plus a fourth for food service tenants.

Tenants are encouraged to use a programmable thermostat to reduce heating and cooling during non-business hours, and time clocks to turn the sales floor, signage and other lights off when not in use. Other tenant sustainability tips include planning for quarterly HVAC maintenance for A/C systems, and using Energy Star appliances as well as high-efficiency fluorescent or LED lights.

For waste management goals, the guidelines suggest reducing paper waste by using double-sided printer settings, recycling paper waste and other electronics and appliances, and working with vendors and suppliers to determine opportunities for reducing packaging materials.

For water usage, the partnered guidelines suggest installing faucet aerators to improve the efficiency of washroom sinks, regular checks for toilet leaks, and the replacement of older plumbing fixtures with WaterSense labeled products.

Retail Properties of America Inc.

Retail Properties of America (RPAI) says a key focus in working on sustainability goals is partnering with best-in-class partners who share similar values in corporate responsibility. So far it has started active and near-term real estate development and expansion projects totaling $400 million that support the local and global communities.

Beginning on July 1, RPAI will begin to receive energy from renewable resources such as wind and solar at 27 of its Texas properties located in deregulated power jurisdictions. The REIT inked power purchase contracts to cover over 25 percent of the properties in its portfolio. And like other REITS, RPAI since 2013 had invested $50 million in the replacement of over 7 million square feet of roofs with new energy-efficient roofing systems.

The REIT monitors water usage at over 70 percent of its portfolio, timing weather patterns to eliminate unnecessary landscape watering. And water reduction also has benefited at properties in locations where drought could be a problem through xeriscape landscaping, an approach that requires little irrigation.

In addition, 55 vehicle charging stations have been installed at select neighborhood and community centers. And it has a waste recycling program both at company headquarters and at its malls. The company has also partnered with Grounds to Grow On, which converts single-use K-cups coffee pods into recycled products such as aluminum cans and shipping pallets, while coffee grounds are turned into compost. So far nearly half of its portfolio properties use LED lighting within common areas and parking lots. The company, best known for is open-air shopping centers, constructed its Four Corners center in Ashburn, Va., using repurposed shipping containers.

Tanger Factory Outlet Centers

So far Tanger has achieved its 2020 target goal of 6.8 million kilowatts of annual production from solar systems in at least five centers.

Among the goals for 2020 that are still in progress include an improvement by 8 percent in both greenhouse gas efficiency and portfolio-wide energy efficiency and the installation of electric vehicle charging stations at all centers. It is also identifying collaborative opportunities with retailers to create synergies around sustainability efforts.

For goals targeted for 2022, the goals so far include full LED conversion, 60 percent waste diversion and a 20 percent reduction in portfolio-wide water usage. Another goal is to have all of its centers certified as “Storm Ready” by the U.S. Department of Commerce and the National Weather Service.