Good morning, ladies and gentlemen, and welcome to the ESG discussion with Jones Lang LaSalle. At this time, all participants have been placed on a listen-only mode, and we will open up the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Derek Bingham. Sir, the floor is yours.
Hi, everybody. Thanks for joining us. Sorry for a bit of a delay there on the kickoff. I'm Derek Bingham. I co-lead the GS Sustain research team. We're very fortunate to have with us today the team from JLL. They're a world leader in real estate services, and to give us insights on what we're calling the next wave of ESG reporting, this whole spate of acronyms we're hearing a lot about, but may not know why they're relevant for investors. For one, the IEA estimates that buildings account for nearly 40% of total direct and indirect CO2 emissions. The team has a lot of relevant experiences in tackling some of the biggest ESG challenges there are, and have been gracious enough to share some of their learnings with us today. Really appreciate them joining us.
Before we get underway, I'm going to pass to Senior VP of Investor Relations at JLL, Karen Samhat, for a quick word on forward-looking statements. Karen.
Thank you, Derek. Before we dive into content, on our cautionary note, you will find forward-looking statements made on this webcast, including predictions, projections, or other statements about future events are based on current expectations and assumptions that are subject to risk and uncertainty. We do not undertake any duty to publicly update any forward-looking statements discussed in today's call. With that, I will turn it back over to Derek for an overview of today's exciting agenda.
Thanks for that, Karen. Thanks for being with us today. Just one note, you may have a little bit of delay as we control the slides on our end. It's looking pretty good on my end so far in terms of it flicking through. If you're not seeing it immediately, just stay tuned. It looks like it's working well. Our star guests for this conversation are Richard Batten, who is Chief Corporate Responsibility Officer, and Cynthia Curtis, who's Senior Vice President of Sustainability at JLL. Keep in mind, we're going to aim to leave some time after our discussion for questions. There's ability to submit questions through the webcast. You'll have ability, if you're dialed in, to submit via the operator. You can also email me at any time during the call, and we'll try to work those in. Let's get to it.
First thing, I'm going to pass to the team for a quick overview of their latest sustainability highlights, and then we're going to follow up and dig in on a few of those new favorite acronyms. Richard and Cynthia, over to you.
Thank you very much, Derek, and good morning, good afternoon to all. The sustainability report that we issued back in June is a standalone document. It's comprehensive. I encourage you to have a look at it. It is long, but that is by design. Our sustainability credentials are often assessed based solely upon information that is freely and publicly available. That is why everything we're doing on the subject should be included there. We set out, on this slide, some of the key highlights in our report, the detail, if you look at the report in more detail, you'll see that there are many more highlights, both of what we've already achieved and what we're intending to do.
I should comment on one of the highlights included in the report where we are reducing energy consumption by corporate office employee and also our building-related greenhouse gas emissions per corporate office employee. For 2018, we had a target of reducing by -2% for each of them, and we've actually come up with figures of -15% and -16%, respectively. A fantastic performance on the surface of things, but we think a lot of that could be down to the fact that our data gathering is becoming a lot more efficient as we get more and more into this process. More of which later. We base our sustainability agenda on our Building a Better Tomorrow program. Of the four pillars of clients, people, workplace, and community, the slide here highlights the areas of focus for us in our first target-setting exercise, taking us up to 2020.
That is all the targets set 2020 with, you'll notice, the exception of the one improving gender balance in our leadership teams, which is a 2021 target because that particular target also is part of our Global Executive Board rolling long-term incentive plan, and that one is being reassessed in 2021. It's all very well setting the targets that we did, how have we done against them? Here you can see that we are on track for most of the targets taking us to 2020, and some we've actually already achieved. One of the biggest issues for the likes of JLL, a company of 92,000 people working in 60 countries, is accuracy and consistency of data.
The improvements we were talking about earlier can be put down to a large part, down to a governance structure that we put in place to support the program, and it's definitely contributing positively here. That is being put down to regional and country level through the operating areas of the business. We know we still got a lot more to do. At the end, very happy to take any questions on any of the targets we set. We spend a lot of time trying to get feedback from our stakeholders as to what is important to them, be it our shareholders, our clients, or our own people.
In respect of the investor community, apart from occasions like this webinar today, we also engage with the likes of Ceres, who give us very useful feedback on targets and strategy, and that is taken into our strategic forming exercise. The leverage with our clients is always a topic of discussion. We manage, either directly or indirectly, something like 1,500 times the amount of space we ourselves occupy. There is potential to create a huge impact. Our difficulty is actually measuring it. You can see on this slide the specific areas where we are actively engaging our clients. Our clients are all at different stages in their own sustainability journey, so our impact is very different in each case. We get good feedback via our client surveys as well as informal responses, so we are well aware of their expectations.
In respect of our people, we have a global sustainability network of over 2,000 people representing all of our offices around the world, and they certainly let us know what their expectations are as well. Now, we had reported to you previously that we've been rolling out new finance and HR systems on a global basis as part of our AIM 2020 data initiative. This is not just a key part of running the business, but it's absolutely essential for our sustainability data as well. Now these are in place, we've now reintroduced our global people survey. This time it's operating a little differently. Rather than a one-off survey annual capturing a moment in time, we're now using a survey whereby we survey a proportion of the company at more regular intervals.
The intention really being getting 25% of our staff every quarter so that we get everybody during the course of the year, but then that allows us to assess trends more effectively. You'll see from the slide that we've introduced for the first time questions on sustainability and ethics, and the results are here. Very happy to take questions, but generally we're happy with the first responses we've had. Also know that there's still work to be done. Well, that's a general introduction. I would urge you to have a look at the report if you haven't done so. That's what we've been up to, and I'm going to hand it back to Derek now, who I think got some questions for us to ask us more importantly about what we're doing next. Back to you, Derek.
Thank you for that. When we reengaged with you earlier this year, we heard about some of your focal initiatives, and virtually all of them were these acronyms, I would say, that are relatively new and where I think there's a real need for some education. That's where I really wanted to spend most of our time in this conversation for our listeners. Maybe we start with reporting constructs and starting with SASB, maybe one that most on the call know best, since it's been around a long time, but relatively recently, standards actually kind of finalized and codified. I know a lot of companies are kind of working through their first swings at reporting on SASB this year. Could you tell us a bit about your SASB process?
Why has it been something that you want to focus on, and what does it entail for you?
I'll take that one. As you can see here, as Richard just mentioned, we've really stepped up the ways and the frequency with which we engage our stakeholders and the SASB, TCFD, our webinar here, et cetera. These are just some of the examples of how we're being more proactive with one of our key stakeholders, which are our shareholder investors, as well as the investor community writ large. To drill down on SASB, the Sustainability Accounting Standards Board, it was established, just as you say, I think most folks are familiar with it, to provide investors with industry-specific data that's comparable, consistent, and financially material. That's really the SASB difference, where it's focused on financially material information and works within the established financial regulatory system, the construct that exists today.
While we heard from our investors that they give us high marks for our disclosure, they also said that SASB would be helpful for them. Again, for having that comparable data. That kind of prompted us to say, "Yep, we're ready to move forward with it." We've identified as part of the real estate services SASB standard that's applicable. We have not yet published. We anticipate publishing this fall. Our first report, and it will be based on our 2018 metrics. I thought what would be helpful perhaps is to show folks what is included in the topics and metrics for the real estate services disclosure. These are the things that we will be reporting against.
Yep, perfect. Why don't we stay on the reporting topic? Again, we can come back if people want to dive in on any of these a little more deeper, because I want to leave time for questions. TCFD is something that's coming up a lot in discussions, and I think that's one that is a lot less known about. Could you give us the quick primer maybe on TCFD and what is it asking companies to do that goes beyond maybe what they were already doing?
Sure. TCFD, the Task Force on Climate-related Financial Disclosures, as you can see it's really a set of recommendations for consistent disclosure, voluntary, of course. It's for consistent disclosures for use by companies in providing information to investors, lenders, insurance underwriters, about what their climate-related financial risks are. The task force was chaired by Michael Bloomberg, was established by the FSB, the Financial Stability Board, who at that time was chaired by Mark Carney, and it was established at the request of the G20 finance ministers. They released the recommendations in 2017. There was a period of comments. They've run pilots, and as you can see here, it's separated into four, as it says, thematic areas. There are recommended disclosures for each of the categories of governance, strategy, risk management, and metrics and targets. TCFD, I would say, is unique in a couple of ways.
One is that it was private sector-led, there was a keen eye on balancing the objective with the level of effort required. A real attempt to not have it be onerous, but have it fit more seamlessly within the construct of an enterprise risk management approach, for example, or strategy development. The other unique aspect of TCFD is that it's designed to reflect the impact that climate change will have on a business rather than the other way around, rather than what the business is doing to reduce its impact. That's a real difference between a TCFD versus other reporting frameworks, like CDP or GRI, which focus much more about what is the business doing, what is the company doing, and this is about taking that reverse look.
I think Mark Carney summed it up beautifully when he said, "The more we invest with foresight, the less we will regret with hindsight." That's really what TCFD is intended to do, provide that additional lens. Let me move to the next slide here. Like everything in the sustainability space, we always talk about it as a journey, and TCFD falls most definitely into that category. To date, as I mentioned, we've agreed to adopt the framework this past June. Actually, when they issued their latest status report, which was issued in June, there were 785 supporters listed on that. I know it is still kind of new-ish, Derek, as you mentioned, but there is growing uptake. Which doesn't mean that, oh, by the way, all 785 have issued reports. They haven't. You don't have to report externally if you don't want to.
You could do the work and retain that information internally. Our thinking is, again, with our commitment to transparency, we would be looking to publish something.
The mechanics of that, in terms of disclosing that information, are you saying that it's a standalone document, or does it become part of some other reporting?
We've seen it both ways.
Yeah.
For those who have reported, they've had standalone documents. Citi is one, for example, but others have incorporated it in. The thing, too, about TCFD, which is what we're in the midst of doing right now, is chunking it out. We're taking it in logical steps because it can be a little daunting. Looking at determining what our reporting options are. Are we going to focus, have our first initial scope be geographic-based or line of business-based? To be limited to finance the physical risks and opportunities versus the transitional risks, secondly. There's a number of different considerations, and we're working through that right now.
I think it'd be fair to say.
Go ahead.
Yeah. Cynthia, we're looking to create a standalone document, in due course, but it may well be part of our sustainability report initially, I think is one of the initial plans, I think, isn't it?
Mm-hmm. Yeah.
Then when you're facing this, I wonder if you have thoughts on how this compares in terms of challenge, requirement of resources, just the kind of the scope of the lift versus some of the other things you've done before, say, versus, say, reporting on SASB. Is it significantly different in terms of its challenge? Maybe related to that, if you're an investor looking for signaling, is a company that reports on TCFD signaling something unique, that investors ought to be taking note?
Good question. I think, well, first and foremost, the challenge is data and determining potential impact 10, 20, 30 years out, we know is a challenge. Doing that modeling is a challenge. I think what it signals to investors is that, again, we are fully supportive of, and committed to transparency, but also that we take this seriously. We recognize there is inherent risk associated with climate change, and we want to be smart about our approach of how we respond. That requires actionable information. I think TCFD, we've kind of concluded that the work that will go into this, will help produce some of that more actionable information.
Okay, well, I feel like the way we've structured this is we keep kind of moving up the path in terms of graduate level coursework, so to speak, in terms of sustainability reporting. I want to move to maybe arguably the next level, and that's science-based targets. Rich, I know that's something that you have a lot to share with us on that. Maybe you can educate us a bit similarly in terms of what is a science-based target, and what has it entailed and required for your team, to address that?
Okay. First of all, what is a science-based target? Simplistically, it's a target that is set, which is gonna focus JLL as a company to not contribute any more than 1.5 degrees centigrade to global warming by 2050, in accordance with the 2015 Paris Agreement. That's simplistically what it is. To ensure that JLL keeps within the 1.5-degree limit. What it means is that we have to track emissions under what are known as Scope 1, 2, and 3 emissions. Scope 1 is essentially our work fleet. We have a lot of engineers driving about in white vans. We've got to track the emissions coming from those.
Scope 2 is our workplace emissions, and Scope 3 are sort of third-party emissions where we're not totally in control, which will include air travel in our case, and it will also include the emissions generated by our clients where we're managing their buildings. To answer the second part of your question, what does it entail? Well, we have agreed to commit to science-based targets. We did that to set a target. We did that at the end of 2018. During the course of this year, we've created our own data management plan. That's the first piece. We have agreed our data software that we'll be using on a global basis. We've now assessed the 2018 data returns, and we've set our baselines for 2018. There's a detailed breakdown in the report that you can see of our emissions.
In simplistic terms, from where I was before, if our workplace creates X amount of emissions, our fleet of white vans that we have create one and a half times the amount of our workplace, and our air travel creates twice as much as our workplace. We've assessed initially that our clients emit something like 96 times the amount of our own emissions. You can see the biggest issue is in capturing accurate client data, and we'll come on to some of the issues arising out of that. You'll also see at the back end, we've thrown in a couple of good examples of where we are able to work with our clients. There are a couple of case studies there. Majid Al Futtaim, who are based in Dubai, their holdings are all throughout the Middle East.
You can also see a case study on what we've done down in Brisbane, which is a fantastic case of reducing emissions from one of our own buildings. Where we get involved and can get engaged, it can work. Our issue is trying to get the information off our clients.
Yeah. Would it be, do you think, appropriate or accurate to think of these signals in terms of maybe graduated level of strength? Cynthia mentioned TCFD, for example, as a signal of commitment to transparency and the level of seriousness that you're taking the climate issue. SBT seems to me to be yet another level, which is then, okay, this is a commitment to a certain level of performance and with accountability because there's an external monitoring component to it. Is that a fair characterization?
No, it's a very good characterization. It might sort of come back to the fact that the issue of climate and are we talking on a detached view about climate change, or you'll hear a lot more about the fact that it's not climate change, we're actually in a climate crisis. I think the urgency and everything that you hear from the IPCC reports is talking about the urgency to act now. We're talking on the reporting side about transparency and risk. Here, on science-based targets, we're actually talking about the need to reduce emissions to avert what a lot of people believe is an actual climate crisis that we're in. In our case, those sort of next steps of creating those country plans and for us as a business, and we're bringing our targets into 2040.
For us as a business, it will mean from the Scope 1 and Scope 2, we'll move 100% to renewable energy globally. We'll move 100% to electric vehicles globally. We'll also be making operational improvements to our building. The challenge, though, as I was saying before, is actually engaging with our clients so that we do get engaged with the clients to help them reduce their emissions, which some of them are asking us to do, but not all of them. Obviously, there are costs involved in doing all of this, and that must be taken into account as well. I think the whole issue of climate, to answer your question specifically, is the whole thing is being ramped up to another level by government, by our people, by school kids around the world as well.
Yeah. That's very helpful. I want to get to questions from the listeners. Again, you have the ability to submit those via the webcast. We'll give you the opportunity to dial in if you're on the phone. You can send emails to me, and we'll get through as much as we can. If we can't, we certainly invite everybody to follow up with the JLL team through investor relations or through myself, and we'll try to get you answers to your question. While you're thinking about your question, and just before we poll, I have one question just kind of following up on that. We've talked a lot about these initiatives, and they all involve an enormous amount of data capture.
That brings to mind the need for capturing mechanisms and technology to be able to do all of this, to measure and assess and report. I wonder, Richard, if you could maybe touch a little bit on that point in terms of the incorporation of technology in all of this.
Yes, of course. The biggest issue is data collection. What I was talking about our AIM 2020, that is a massive investment, but it's creating massive improvements for us around all of our business, pulling all of the information into a central piece. Specifically around the Science Based Targets initiative, we have created the global data software to capture the emissions in a format that we can actually use in our dealings with SBTI. I think technology is what is going to drive our business, not just sustainability, but the whole real estate business going forward. We're not just engaged in making our new systems internally, but we have got a top-deck investment arm, Spark, in Silicon Valley, and they are now looking to invest in top-deck digital startups.
One of the investments we've made recently is in SMC, which is a Software Motor Company. This is software that drives the motors, that drives the air conditioning units. We've just invested there quite heavily, and that is a business that when we trialed it on two of our buildings, reduced energy requirement and therefore emissions by 50% overnight with just the introduction of this new software. Those are the sorts of issues that we're also looking to get involved in from, if you want to call it Green PropTech. That's a very good example of it. We'll be looking for more of those going forward.
Perfect. Holly, I wonder if you could poll for questions. In the meanwhile, we'll be taking a look at what's come in through the webcast.
Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, if you have a question, please press star one. Please hold while we poll for questions. There are no questions in queue at this time.
Well, assuming we've got a lot more people on the webcast.
Yeah. Actually, Derek, I have a question here that's come in with regards to SASB. They're asking whether or not there were topics that we thought were more material to real estate services, perhaps more downstream in our business model that weren't captured in the few topics covered by SASB. Were the SASB metrics aligned with our existing reporting goals and strategy? I would say, Richard certainly jump in here, is I think actually what Richard was just speaking to, which is the part of our science-based target and what it means for our clients and for ourselves. That's far broader than SASB. I think that, yes, each one of these has their own objective. There definitely are considerations that are material to our business that are not included in SASB.
They really, as I mentioned, some of the things, some of the questions that are asked, the metrics are not ones that we have previously reported. It is requiring capturing some new data sets. I don't know if I would say it's not aligned with our reporting strategy overall, because it really is about ensuring that we're responding in the best and most transparent way that we can, to the inquiries.
Right. I have one that through email came. The question is kind of on the lines of reporting initiative on the UN Global Compact, something that has been out there for a long time. Any views on that initiative in terms of what you hear in the marketplace and corporate participation?
Well, I can start, Richard.
Yeah
jump in. I think, the UN Global Compact is, I would say it's almost table stakes now. It's been out there for a long time. Most companies are signatories. We are, have been for many years. I would say that the next evolution of where the UN is the Sustainable Development Goals, the SDGs, which you can see up here on the screen. The SDGs are what I would say is kind of a big game plan of targets and indicators, those were also developed and introduced by the UN in 2015. The intent there is to help facilitate and support the aspirations that are laid out, frankly, in the Global Compact, that are laid out in the Paris Climate Accord. That game plan is split into 17 SDGs spanning everything from clean water to decent work to sustainable cities and communities.
What we did at JLL is we did our own evaluation process and determined that the six SDGs you see here are where we have the greatest opportunity for impact. There are a number of organizations, many of our clients, most of our clients, frankly, are also adopting SDGs. The benefit there is it provides that consistent vernacular, consistent terminology that helps promote partnership and collaboration. The other piece of it is that it is now helping to guide our strategy and our initiatives. We initially like, again, most other organizations, we already had our goals set out when the SDGs were released. We looked at what goals we had and how they supported certain of the SDGs. Now we're really shifting that focus to having them provide more of a framework for our initiatives and strategy going forward.
You can see examples if you look at our report, our sustainability report, where we're showing the applicability and the relationship of certain SDGs with our targets and our areas of focus.
Yeah, really glad.
This is important.
Yeah. Oh, go ahead.
Can I just add, Derek, I think that is not to say that the UN Global Compact has been left behind. It is more focused on the 10 principles of labor law, human rights, et cetera. Those are still absolutely crucial to a business and how it runs itself with, yes, there are some environmental ones, but there's anti-corruption included, all that sort of stuff. That is absolutely crucial for governance. I think where the SDGs are now picking up is actually helping a framework to move forward into the future, rather than the UN Global Compact being more about governance is how I would view it.
Yeah. Really glad you brought that up. Another great example of an acronym with a lot of momentum, though different than the others I think we discussed. Just in terms of, it's not something where there's big necessarily technical requirements. Would you say that's fair in terms of gathering the data, but more a common parlance in terms of how you frame impact?
Yeah, I think that's fair. I think that's fair to say.
Okay. All right.
Yeah. I think interesting you brought the word up. Impact going forward is going to become ever more important. We're not just doing. The SDGs are not leading us down a route to create improvement for improvement's sake. They are looking for us to be assessing what that impact is. You will hear words coming out as we go forward about social purpose, and if a company has social purpose, then what social impact is that company making? I think the impact is going to be important going forward. For some, connected within this purpose and impact is also you're hearing more about social value. What value do you create? From JLL's perspective, we're far keener on assessing impact.
There is no consistency of valuing that impact yet in the market, and we're far more concerned with actually assessing impact than spending a lot of time going down some dead ends trying to assess value. Just the comparative value of that impact. We're not going down that route yet, just for the listeners' benefit.
Good. Well, we're running up against the end of our time. Is there any last question or questions that we wanted to address before we wrap, Cynthia?
The only question is, let's see. How do ESG rating firms' methodologies impact our disclosure? Do you try to get a good rating, and do they matter to your company?
Richard, do you want to take this, or would you like me to?
No, I will definitely. I'd love to take that one. Yes, they do matter to us. As I say, we are assessed and compared with other people, with other companies, whether they're competitors or not. It's absolutely essential that we perform, and we are seen to be performing, and so it is part of what we do. We would like to spend more time driving our progress going forward, like the science-based targets. We cannot leave aside some of these ratings. Yes, they are very important to us.
There's also been some questions about providing the slides. Derek, I'll let you address how that works.
Yep, it's something that we can send across. Maybe the easiest thing to do is just to shoot me an email, and we can get you a soft copy. That'll do it. Anything else? All right. Well, I just really want to thank Richard and Cynthia and Karen for joining us, for taking the time to share with us the insight on these topics that are really warm in the marketplace, that I think everybody is wrestling with. I know I learned a lot about how we should take these as signaling as investors. Richard and Cynthia, thank you very much for taking the time with us.
Thank you, thank you all on the call.
All right, everybody. Thanks so much for joining. Okay. Take care. Bye-bye.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.