Global Sustainability Perspective

October 2011

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Global Sustainability Perspective, October 2011

Trends in Sustainability Communications and Reporting

Throughout 2011, Jones Lang LaSalle sustainability professionals have been reflecting on global sustainability reporting and communication trends, as well as the latest developments of specific interest to the real estate sector. A summary of these trends is provided below. Trend 1: Use of Web 2.0 applications to engage with stakeholders Companies are, in an innovative way, beginning to exploit the possibilities offered by Web 2.0 applications to reach out to different stakeholder groups in particular their customers - and to engage in dialogue with them. Encouraging dialogue can attract attention. It can also allow companies to gain useful feedback and, potentially, to promote behavioural change. For example, Timberlands Responsibility Website includes a feature called Voices of Challenge where stakeholders can add comments about different aspects of Timberlands Responsibility strategy and Sustainability performance. In the property sector, use of Web 2.0 applications has focused on videos and blogs. Examples include Jones Lang LaSalles global Green Blog and European property company SEGROs Sustainability live. Web 2.0 refers to web applications that facilitate information sharing, user-centred design and collaboration on the World Wide Web. Web 2.0 applications allow users to interact and collaborate with each other in a social media dialogue, in contrast to static web content created for passive viewing only. Examples of Web 2.0 include social networking, blogs and video sharing sites.

Of course, we may find that Web 2.0 applications are not as useful for real estate players as for those more consumerfacing sectors. In real estate, customers are of course tenants rather than individual consumers. But the concept of developing different sustainability communications for different stakeholder groups rather than trying to reach all of them in one Sustainability Report is definitely as relevant for this industry as any other. And in the real estate sector, we are already seeing a split between: 1 Environmental and social accountability to investors, major tenants and employees through corporate-level communications 2 Sustainability engagement with tenants, local communities, local authorities and other stakeholders at an individual property or development level. We expect this trend to accelerate throughout the remainder of 2011 and beyond. Trend 2: Transparency and trust are critical While the expansion of digital media brings new opportunities, it also poses challenges. Brand value is becoming increasingly difficult for companies to control as the fast-growing use of social networks means that concerns about a company can quickly be publicised to a large audience. Coupled with this, there is a pervading loss of trust in governments and business in the wake of the global economic crisis and concerns over climate change. There is no trust without transparency, and if companies are perceived to be withholding material information or reporting only selectively on their performance, then their trustworthiness will suffer in the eyes of the public. However, demonstrating a high level of transparency about impacts on society and the environment can help to reduce these risks significantly. Inviting stakeholders to post direct feedback on a companys website (such as in the Timberland example mentioned above) is one way in which companies are increasing openness and transparency. Another way is to use stakeholder panels composed of external experts, inviting members of the panel to provide critical feedback in a Sustainability Report. Examples here include Lafarge and Balfour Beatty. And when it comes to reporting, readers do not expect perfect performance but they are impressed when companies tackle sensitive issues head on rather than avoiding them. A leading example here is Marshalls, a British landscaping company, who have taken a very honest and upfront approach to child labour.
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Global Sustainability Perspective, October 2011

For the real estate sector, we consider that transparency is already important in developed markets and is likely to increase rapidly in the developing markets of the Middle East and Asia. At the moment, the lens of transparency focuses on environmental impacts during the development, operation and occupation of real estate. We can see this in the recent release of the Global Real Estate Sustainability Benchmark (GRESB), where the larger part of the score is based on environmental performance. Jones Lang LaSalles forward-looking perspective, however, is that the requirement for transparency is likely to spill over increasingly into social impacts, especially in Europe, where the private sector may be expected to fulfill some of the social obligations formerly provided by the state before austerity measures took hold. We envision that, globally, local communities and local governments are going to be far more questioning about the socio-economic benefits of new developments, and the real estate sector will need to be ready to provide robust and honest answers. Trend 3: Integrated reporting Investors are increasingly demanding that sustainability is truly integrated into corporate strategies and is reflected in companies reporting. Consequently, the number of integrated reports reports that demonstrate the interconnections between an organisations strategy and financial performance and the sustainability context it operates in - is steadily growing at a global level. In particular, it is gaining significantly more traction in some markets, such as South Africa (where integrated reports are required by the Johannesburg Stock Exchange) and Brazil 1 . Currently, companies take different approaches to integrated reporting. Some (such as the Portuguese property company Sonae Sierra) report on their financial, environmental and social performance separately, but within the same report to demonstrate the importance of all three aspects. Others (including Hammerson of the UK) have focused more strongly on communicating the value they derive from their sustainability strategy by applying Accounting for Sustainabilitys Connected Reporting framework. We expect to see greater consistency in the future with the development of an integrated reporting framework, led by the International Integrated Reporting Committee (IIRC). This is an important landmark in the evolution of integrated reporting and the IIRC recently released a discussion paper which sets out an initial proposal for the framework. The IIRC proposes five guiding principles which should underpin the preparation of an Integrated Report: Strategic focus Connectivity of information Future orientation Responsiveness and stakeholder inclusiveness Conciseness, reliability and materiality

CorporateRegister.com; CR Reporting Awards 2011 Global Winners & Reporting Trends (March 2011)
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Global Sustainability Perspective, October 2011

Trend 4: Real estate sector specific reporting standards - EPRA and GRI guidance In the March 2011 edition of Jones Lang LaSalles Global Sustainability Perspective we reviewed key developments in corporate ESG reporting requirements at a global level and in different regions worldwide. Since then, two key developments have taken place with important implications for the property sector: the launch of EPRAs Best Practices Recommendations on Sustainability Reporting and the launch of the Global Reporting Initiatives Construction and Real Estate Sector Supplement (GRI CRESS).

EPRA Best Practices Recommendations (BPR) on Sustainability Reporting was launched during the EPRA Annual Conference in London in September 2011. EPRAs aspiration is for its sustainability BPR to provide a consistent way of measuring sustainability performance in the same way that EPRA BPR on financial reporting make the financial statements of listed real estate companies in Europe clearer and more comparable. The sustainability BPR are based on GRI CRESS guidelines, and comprise two key components: The EPRA Sustainability Performance Measures (the current version of the BPR covers environmental indicators but the scope of the BPR is likely to broaden in years to come) Core recommendations for sustainability reporting which should be adhered to by all EPRA members, alongside additional recommendations which are based on EPRAs observations of good practice. These observations cover issues such as: reporting by meaningful segmentation (e.g. by country or asset type); normalisation (e.g. kWh/m2); like-for-like analysis; and landlord and tenant consumption arrangements EPRA also introduced the EPRA Sustainability Awards to annually assess compliance by the listed real estate sector against the Sustainability BPR from 2012 onwards. The Global Reporting Initiative (GRI) offers the worlds most widely used sustainability reporting framework. In September 2011, the GRI launched its Construction and Real Estate Sector Supplement (CRESS), a version of the GRIs G3.1 Sustainability Reporting Guidelines tailored for the construction and real estate sector. The CRESS includes new requirements and general guidance on the Guidelines content, so as to ensure that sustainability reports by construction and real estate companies effectively cover the sectors key issues. It also introduces eight new sectorspecific performance indicators. In particular, the CRESS covers the following key issues for the sector, expanded from the G3.1 Guidelines: Design, operation and retrofitting of buildings Building energy intensity, water intensity, and GHG emissions relating to buildings in use Green building certifications Management and remediation of contaminated land Economic legacy impacts from activities and provision of facilities for local communities Policies and practices regarding resettlement and displacement
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Global Sustainability Perspective, October 2011

Assessment of negative and positive impacts on local communities and community engagement at each stage of the property lifecycle Reporting of labour and health and safety impacts in relation to the total workforce, including contractors and subcontractors The content of the CRESS was developed over a two-year period through a multi-stakeholder process which was supported by Jones Lang LaSalles in-house experts on sustainability reporting. Organisations involved included ProLogis, Lend Lease, Oxford Properties, Hermes, Hindustan Construction Company (HCC), Citycon, the United Nations Environment Programme (UNEP) and the UNs specialised agency, the International Labour Organization (ILO). With the introduction of these two guidance documents, we hope to see greater consistency and transparency in the measurement, monitoring and reporting of sustainability impacts in the real estate sector.

Legislative Update
Sustainability Legislation for the Real Estate Sector Making sure that we keep you up to date on major energy, carbon and related sustainability legislation in the major markets, below are the latest changes that may impact the office space you are managing or the real estate investments you are holding. Global / United Nations At the beginning of October, Panama hosted the last of three meetings held since the Cancun Climate Change Conference last year in preparation of the Durban Conference starting at the end of November. The meetings are intended to help governments prepare their negotiation positions going into the Durban meeting at the end of November. The Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), Christiana Figueres, stated during the Panama meeting that Governments have recognized very clearly that the current level of effort is not enough and that it is important to increase both the level of emission controls on greenhouse gases as well as the capacity of countries to adapt to climate change. However, there were some positive outcomes in Cancun, notably the creation of a $100 billion a year Green Climate Fund to help developing nations adapt to climate change and to facilitate technology transfer mechanisms between industrialised and emerging economies. But the key issue remains prolonging the Kyoto Protocol for a second commitment period beyond 2012. Opinions on how this goal may be achieved diverge in the preparation for the Durban meeting and some countries propose to delay any decision until 2015. Currently, only the European Union stands firmly behind the Kyoto Protocol prolongation beyond 2012. The U.S. government continues its refusal to commit to any binding carbon reduction targets, as long as major emitters - such as China, India or Brazil - are not joining the collective global effort in combating climate change. Canada, Russia and Japan have announced they are not in favour of prolonging the Kyoto Protocol at the meeting in Durban. In our next edition of the Global Sustainability Perspective we will provide you with feedback from the Durban Climate Change Conference (COP17) being held in South Africa from 28 November to 9 December.

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Global Sustainability Perspective, October 2011

UK Introduced in March 2011, the UK Energy Bill aims to encourage investment in energy efficiency measures for homes and commercial real estate. This September, the Bill went through the Report stage and Third Reading in the House of Commons, and in October it will go through the Consideration of Amendments in the House of Lords prior to receiving Royal Assent. The June amendment - supported by a number of organisations such as the UK Green Building Council and the British Property Federation - to require Display Energy Certificates (DECs) for commercial buildings was not retained by the UK government during the September session. The question therefore remains if the UK government will put into practice the Carbon Plan, a UK government-wide plan of action on climate change that sets out initiatives and deadlines for the next five years, its commitment to extend DECs to commercial buildings by October 2012, and what the next step will be to boost the uptake of commercial green buildings. The UK government also intends to launch a number of consultations this autumn on energy performance certificates as well as building regulation changes. France A continuing stream of decrees is being published as part of the French Grenelle Environment Laws. Here are the main updates since our last Global Sustainability Perspective edition. A decree on what to report in greenhouse gas inventories requires companies with over 500 employees to report greenhouse gases from direct and indirect emissions (electricity and district heating etc.). The law also applies to public institutions with headcounts over 250, to municipalities with over 50,000 residents and to central government. The report needs to include reduction measures and goals for a three-year planning period. The urban planning law will contain a new requirement to further the use of eco-friendly materials and products in building construction. The new decree will no longer allow urban planning laws to prohibit the use of eco-friendly construction materials or installations, such as photovoltaic installations on building roofs. The building code receives a new obligation for building owners to install electric vehicle charging stations in new and existing buildings. Electric charging stations must be installed and cover at least 10% of a building's car parking capacity, for new buildings from 2012 and existing buildings from 2015. A similar obligation applies for bicycle storage installations. China China is studying how to enforce a total cap on energy consumption by setting targets for local governments, a government report stated in August. The proposed total energy gap is intended to slow emissions growth and fuel consumption by setting quotas, and some details of how China could enforce the cap have been disclosed by the National Development and Reform Commission (NDRC). Any proposed projects that have not passed an energy saving assessment will not be approved for construction, it added. However, the cap would still allow for a 26% increase in total energy consumption by 2015. As an advisor to developers of large construction projects, we expect the central government to ramp up efforts to control energy intensity. Though new construction has slowed somewhat in the more developed Eastern regions of the country, the volume of new projects in these areas is still extremely high by any Western countrys measure. In the less developed Western cities and central tier 2 cities, new construction growth is accelerating, following the path of leading cities like Shanghai and Beijing. With so much new property and the consequential energy demands pulling from an already pressured electricity grid, energy efficiency has become the urgent need of a nation which requires fast growth (8% to match population growth) with strained domestic energy supplies.

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Global Sustainability Perspective, October 2011

However, it is also important to bear in mind Chinas typical process for introducing new regulations as demonstrated by the recent tax overhauls. Before introducing sweeping reforms which add cost to companies, government traditionally pilots a variety of different execution strategies in select cities such as Shenzhen, starting with initial standards which align with existing best practice before tweaking the regulations and increasing the standards. Should China move forward with firm caps, it can be expected that implementation will be conveyed well in advance and the impact to developers of the highest quality properties will be marginal. On the renewable energy front, there has been an important change with the introduction of feed-in tariffs for solar power. Since August, project developers can now sell solar-generated electricity to utilities at a price of about $0.15 per kilowatt hour. And in some cases, depending on the timing and location of solar projects, the price is slightly higher. Analysts attribute the birth of this long-awaited scheme to two urgent needs: keeping the nation's promise to use nonfossil fuels amid nuclear development setbacks, and feeding its hungry solar manufacturers for whom overseas markets are no longer sufficient. Up to now, China has lacked efficient financial incentives to nurture its own solar energy use. In many cases, analysts say, project developers here could barely break even, let alone get a decent investment return. Australia On 1 November 2011 the Australian property industry will be subject to the full disclosure requirements of the Commercial Building Disclosure (CBD) program that started in the summer of last year and is designed to improve the energy efficiency of Australias large office buildings. The program was operating in a transitional capacity from 1 November 2010 with only a NABERS Energy rating required at transaction. From 1 November 2011 a full Building Energy Efficiency Certificate (BEEC) will be required during eligible property transactions. The BEEC needs to be provided during the sale, lease or sub-lease of commercial office space greater than 2,000 sq m with only limited exceptions (for example new buildings with an occupancy certificate less than two years old). Each BEEC will be a publicly available document that can be downloaded from http://www.cbd.gov.au. The Building Energy Efficiency Certificate (BEEC) comprises the following:
Disclosure Requirements NABERS Energy rating Tenancy lighting energy efficiency assessment Energy efficiency guidance Transition Period 1 Nov 2010 1 Nov 2011 Yes No No Full Disclosure Requirements From 1 Nov 2011 Yes Yes Yes Completed by Whom? Accredited Assessor Accredited Assessor Department of Climate Change & Energy Efficiency (DCCEE)

A limited number of exemptions apply for genuine cases wherein disclosure requirements cannot be satisfied:
Exceptions (granted automatically no action required) New buildings (occupancy certificate < 2 years old) Strata title properties Sale through shares, units or partial interest Short-term lease (< 12 months including options to extend) Mixed-use buildings < 75% office (of the NLA) Exemptions (Application required. Exemptions are granted at the discretion of DCCEE) Police or security operations Where NABERS rules cannot be applied

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Holistic Evaluation of Sustainability Investments

The environmental and social impacts of property are rapidly becoming central to its overall performance, as investors and occupiers alike recognise the importance of sustainability to the long-term viability of their business. Several efforts have been made during the past few years to help build a consensus within the sector about the most appropriate sustainability metrics to use. A number of industry initiatives have emerged to enable property stakeholders to track this important aspect of environmental asset efficiency in meaningful ways. One of the most significant emerging trends in property is the shift towards an increased acceptance of open plan environments and a general move away from private cellular space to more agile and flexible workplaces. The goal is to reduce occupancy costs, accommodate activity growth at minimal expenses and create a collaborative space that, at the same time, increases staff productivity. Sustainability investments and ROI A well-managed property requires regular scrutiny of its plant and equipment, and of energy-consuming practices, to identify further savings that might be achieved through sensible and timely improvements. Going beyond the low cost quick wins and behavioural changes, one should involve a robust investment appraisal with a view to identifying those sustainability improvement measures that offer the best value per invested dollar. Financial modelling techniques should certainly account for important variables that are likely to currently impact on the commercial viability of sustainability solutions; for example, rising utility prices, carbon emission related taxes or rising insurance premiums. More challenging criteria to be factored into the financial model are the upside value potential that certain investments might secure for the property owner, such as attractive rental values or reduced vacancy rates, by virtue of better futureproofing the asset to changing investor/occupier requirements. Whatever the financial modelling technique utilised, the aim should invariably be to evaluate the net present value (NPV) of sustainability improvement measures. Such measures can then be grouped according to their value potential to property stakeholders with differing investment horizons. Innovative ways of overcoming what has become known as the split incentive (where the owner pays for the capital improvement and the tenant recuperates the associated operating cost saving) are emerging. One example are the socalled green leases where both landlords and tenants agree on how to share some of the costs and benefits of sustainability upgrades and ensure transparency around performance data.

Planning sustainable investments into asset lifecycles The timing at which a particular sustainability initiative is considered within an assets lifecycle is a fundamentally important criterion in determining its commercial viability. Planning for sustainability investments as an intrinsic part of any propertys asset refurbishment cycle allows the sustainability measures to be integrated within existing capital budgets by aligning the planned preventive maintenance (PPM) schedules and Asset Replacement interventions. Holistic property performance must include consideration of sustainability. It also emphasises the important role that changing property usage, including the move towards flexible working policies, can play in reducing propertys exposure to rising energy prices and carbon liabilities. There is a need for robust financial models to systematically factor in complex environmental and economic parameters in the appraisal of value that can be generated from investments in sustainability improvements.

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Global Sustainability Perspective, October 2011

Stop Press: Jones Lang LaSalle CSR Report 2010

Our 2010 CSR Report is now published - learn how our sustainability performance can benefit you Jones Lang LaSalle released its annual Corporate Social Responsibility (CSR) Report at the beginning of September. The Report shows how Jones Lang LaSalle and LaSalle Investment Management have taken significant strides towards integrating CSR and sustainability into our business. It also profiles a range of industry-leading initiatives that add value to our role as experts in real estate. The new Report, entitled Where we stand: Building beyond tomorrow focuses on five material areas: energy and climate; client service excellence; green buildings; community commitment; and workplace, wellbeing and diversity. It provides a robust insight into the success of Jones Lang LaSalles own CSR commitments through our internal sustainability program, ACT: A Cleaner Tomorrow, as well as the numerous sustainability achievements related to work with our clients around the world. Colin Dyer states in his opening message: Our CSR Report tells the story of our achievements and challenges throughout 2010. Our CSR activities will always be a work in progress, but we believe reports such as this can inspire efforts toward being first for our people, first with our clients and shareholders, and first in the communities where we do business. Jones Lang LaSalles 2010 CSR Report is based on guidelines from the Global Reporting Initiative (GRI) to an initial, self-evaluated disclosure level C. Additional information is available from Jones Lang LaSalles dedicated CSR website and from a podcast where our Global Chief Operating and Financial Officer, Lauralee Martin, discusses our CSR commitment. We welcome your feedback on this edition of our CSR Report and on our overall sustainability and CSR strategy. To retrieve your comments, we have created a five-minute survey. We look forward to hearing from you as we aim to improve our approach to CSR.

Research - Sustainability and Offices in 2020

There has been considerable change in the office real estate sector over the last 10 years. The future is difficult to predict but the worst position one can take is not to even try. Jones Lang LaSalles Offices 2020 research aims to go beyond the existing forecasts and to establish new insights into the office market between now and 2020. As part of this endeavour, we have polled a selection of industry experts in Europe on the key future issues perceived as most pertinent to them today. The programme will consider the top issues facing office real estate investors, developers and occupiers across Europe, the Middle East and Africa. Offices 2020 explores the shape of offices to come and covers issues and challenges including sustainability, location, asset management, technology, fit-out and finance. In this summary, we are providing you with the key findings that concern the sustainability issue in the offices context. Based on a preliminary survey by Jones Lang LaSalle, 83% of real estate professionals think sustainability is currently the most pressing issue facing office real estate and will be for the next 10 years. From almost nowhere a decade ago, this subject has raced to the top of our worry list. In seeking to understand sustainability and its impact on the offices sector, we have identified five significant drivers. For

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Global Sustainability Perspective, October 2011

the most part these are interconnected, self-reinforcing and require continual vigilance as they evolve and spearhead the developments in office real estate.
The key drivers of sustainability Environmental Change - This needs little commentary these days. Acid rain, holes in the ozone layer, global warming, damage to ecosystem services, climate change, resource depletion, air water and ground pollution, deforestation, wasteful practices the list is long and compelling. Legislation - Governments have responded, slowly at first, and subsequently with a torrent of environmental legislation. From Kyoto, Copenhagen to Cancun, the issues have been discussed at the very highest political level and policy decisions taken at supra-governmental, regional, national and local levels. Two key obligations are: by 2020 all new buildings need to be nearly zero energy by 2050 emissions from all buildings need to be as near to zero as possible Ethical Business - many corporations have radically revised their view of what they do and how they do it. Ethical concerns have spread well beyond ecological issues, of course, to include things like child labour, workers salaries in the developing world, and health and safety issues in the Middle East. In short, the business of business is no longer business, but profits, social and environmental the triple bottom line. Cost Control - Finance Directors have been quick to understand that the sustainability agenda is yet another way to squeeze costs inside the business. Whether cynical or enlightened, the fact is that being green is now business common sense. Management Levers - Sustainability is such a powerful force in our society that its influence on employees' comfort and motivations has not been lost on HR and business managers. Overall, employees seem more satisfied to work in sustainable buildings and, in an age where finding and keeping talent and commitment is a regular HR nightmare, offices have an increasing role to play. These sustainability drivers will ensure that the green agenda will continue to grow and grow over the decade. Many new trends linked to sustainability will emerge and continue to change the landscape. Each trend poses new management challenges and new risks but also new opportunities. Here is just a selection of some of the trends we can foresee: Stricter legislation - every new piece of legislation at a European or national level will have the power to surprise on the downside, leading to investor frustration While the vast majority of buildings remain 'non-green', a trend towards 'light' refurbishment programmes will give many more buildings a boost towards eventual conformity with legislation Green leases or at a minimum Memorandums of Understanding Continual technological innovation Green city governance Occupiers will become far more educated about their sustainability requirements and be more imposing Occupiers will be likely to push the boundaries further with a demand for second-hand furniture and non-toxic cleaning products The list of trends is long and exhaustive. One of the things we can ascertain is that a sustainable building will quite quickly come to mean a quality building. Given the forceful, accelerating drivers and the emerging trends, it is clear that organisations would be wise to keep up with the pace of change. On the other side, there are very few inhibitors to this dynamic, if any. Those who succeed will recognise sustainability as a force for rapid change that stirs up much in the industry and which offers opportunity rather than constraint. Click here for more Offices 2020 research.

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Global Sustainability Perspective, October 2011

Certification Updates: LEED 2012 (USA); HQE 2011 (France)

LEED Certification Recast Ready for 2012 The U.S. Green Building Council (USGBC) periodically reorganizes its LEED rating system in response to feedback from green building practitioners as more is learned about best practices to reduce the impact of building design, construction and operations on the environment. The last major reorganization was in 2009. The 2012 reorganization will introduce the most sweeping changes since the system began. The USGBCs original goal was to minimize the environmental impact of buildings within the boundaries of strategies that could be carried out in a cost-effective manner. As green building knowledge and practices improve and the cost of LEED has become negligible compared to the benefits, the USGBC now seeks to evolve the system so that LEED certification eventually recognizes buildings that have a neutral or even positive impact on the environment. The 2012 version aims to move the system toward that goal. In addition, each successive reordering of the LEED system has addressed the feedback that the USGBC has received from green building practitioners. One of the biggest proposed changes is the increase in credit categories from 7 to 10, with new categories to ensure practitioners follow an integrative process to measure building performance, as well as the separation of location and transportation credits into their own category. The number of prerequisites may also increase from 9 to 15, in recognition of the additional baseline criteria that every building should have to be worthy of certification. Another major change is the realignment of the types of LEED. The existing New Construction (NC) and Core & Shell (CS) certifications will be rolled up into a new Building Design & Construction (BD+C) system that will include a range of property types: commercial, schools, retail, data centers, warehouse and distribution centers, hospitality and healthcare. The Existing Buildings: Operations and Maintenance (O+M) system also includes all those property types except healthcare, and the Interior Design & Construction (ID+C) standard covers not only commercial interiors but also retail and hospitality properties. Systems for homes and neighborhoods continue to have their own criteria. A welcome change for many practitioners is a closer alignment of credits among the different rating systems. Whereas in the past versions similar credits had different names requirements in different systems, there is much more uniformity in the proposed 2012 system. Also, in some situations two or more existing credits have been combined into one more comprehensive credit. While there are a number of new credits being introduced and several being reused from other rating systems, during this first public comment period, no point values have been assigned yet. The main focus of the comment period is to evaluate and revise the credit requirements. This brings up the obvious question if the proposed rating system will raise the total points achievable in LEED from 110 to higher total, or if credits will start being counted at point values. The proposed draft also moves closer to USGBCs goal of developing a performance-based rating system instead of prescriptive requirements. While a performance-based system will obviously require more evaluation, calculation and documentation by the project team, it will also allow more opportunities for alternatives to compliance.

Our perspective Although the comment periods were the most appropriate times to offer opinions on specific changes, our extensive work with building owners, investors and tenants worldwide - as well as the hundreds of LEED buildings we have helped certify, lease and/or manage - gives us a unique perspective on where the system is headed. In general, the changes under discussion do an admirable job of addressing most of the concerns that we hear about LEED. In particular, the emphasis on measurement and verification and the introduction of credits for following an
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Global Sustainability Perspective, October 2011

integrative process will help ensure that LEED certification signifies a high-performing building, which was not universally the case in the early days of the system. We are pleased to see the inclusion of retail and hospitality properties in the new version. Many retail and hotel owners we work with have expressed an interest in certification, but the existing systems do not work well for those property types. It is an interesting decision for USGBC to develop one system for retail, hotel, office and other property types, rather than creating individual systems for property types with very different issues and goals. Creating one system for all property types has clear advantages, but it may create challenges that prevent retail and hospitality owners from adopting LEED as quickly as we would like. Another trade-off lies in USGBCs decision to raise the bar on certification overall, by eliminating most of the easy to get credits and increasing the number of prerequisites. Many owners already tell us that LEED is too difficult for them to get, and these changes may prevent more owners from maximizing energy and sustainability in their buildings. However, we recognize that LEED is designed to be an elite standard indicating superior performance, and making certification more difficult to achieve serves that purpose well. A question in our minds is how changing LEED standards will affect legislative efforts to make buildings greener. In the U.S., many states and cities have passed laws that large commercial new-construction projects - and even existing buildings in some cases - must conform to LEED standards. This has already created some confusion as some legislation contains language that conformed to the LEED standard at the time of passage, but no longer conforms today. These points of confusion will surely increase as certification requirements become more stringent. To put it another way, the evolution of LEED as a benchmark for high performance is inconsistent with the idea that every building must achieve that benchmark. These points are not meant to suggest that LEED standards should remain frozen in time. One of the best things about LEED is its evolution as an effective worldwide standard, and that it requires the will to change. USGBCs process for getting feedback from the market and acting on that feedback, is vital to its continued success.

French Green Building Certification System HQE recast Since its beginning in 2005, the French green building certifications system HQE (Haute Qualit Environnementale or High Environmental Quality) for commercial property has built separate reference frameworks depending on the building lifecycle and the building type that was to be certified. As such, in France there exists a separate reference framework for office and educational buildings for new construction or for their in-use phase. Another framework would certify warehouses or hotels etc. When there was a development programme that contained at the same time offices, retail and, for example, hotel buildings, each asset had to be certified independently across all the 14 assessment categories. On top of building-specific criteria, there was a complementary assessment of the project management that included an analysis of the project management quality, the communication among project stakeholders and the documentation process. In order to streamline the certification system for new mixed-use developments and to reduce time and effort, the French certifying body, Certivea, is introducing an assessment recast. For mixed developments it proposes to use a generic assessment framework that applies to all different asset types that form part of the development programme. And for each different asset type, it uses a building specific analysis that comes in addition to the generic framework. In addition, if there are several separate activities in the same building, then a developer can choose to apply the assessment framework to the activity-specific portion of a building to which it corresponds most. In contrast to the existing assessment methodology, where a building was only certifiable if a reference framework existed for that specific type, from now on a building with any kind of activity it houses can be assessed, using a system of equivalent points that Certivea may provide based on custom-made audits.

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Global Sustainability Perspective, October 2011

This new method allows, for example, for only having to assess the construction method and the site once, if it concerns one and the same mixed development programme. As a consequence, only the individual asset specific categories need to be analysed. After a public consultation period that lasted from May to June of this year, the new methodology is currently being fine tuned, taking into account the comments and feedback from various working groups. It is expected to come into force some time in October 2011.

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Global Sustainability Perspective, October 2011

Global Energy and Sustainability Services Contacts:

Dan Probst Chairman, Energy & Sustainability Services +1 312 228 2859 dan.probst@am.jll.com

Julie Hirigoyen EMEA Head of Sustainability Services +44 (0)20 7399 5330 julie.hirigoyen@eu.jll.com

Peter Hilderson Asia Pacific Head of Energy & Sustainability Services +61 2 9220 8735 peter.hilderson@ap.jll.com

Peter Belisle Americas President of Energy & Sustainability Services +1 213 239 6033 peter.belisle@am.jll.com

COPYRIGHT JONES LANG LASALLE IP, INC. 2011. This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forwardlooking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.

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