Nuveen's Small Strategic Goals Feed Into Overall Sustainability Plan
As a partner in the Better Buildings Challenge, Nuveen Real Estate committed to aggressive energy reduction goals for its real estate portfolio by 2020. In support of this initiative, the organization annually develops a series of individualized Property Energy Targets (PETs) that provide a roadmap for each asset as well as a pathway toward the larger organizational energy reduction goals. Among other benefits, PETs allow Nuveen Real Estate to be able to aggregate the individual contributions of each property, and roll them into a broader forecast for planning purposes. Improving energy efficiency is a Nuveen Real Estate priority, and organizational leadership uses the annual PET program to re-emphasize the Better Buildings Challenge goals by proactively compiling and planning energy and water efficiency opportunities at each property for inclusion in annual business plans during budget season.
At Nuveen Real Estate, sustainability is an integral part of standard operational excellence, and improving sustainability performance is part of its ongoing Global Real Estate Asset Management effort. Working with property managers to set individualized Property Energy Targets (PETs) on an annual basis, and aggregating them across the portfolio, helps instill this philosophy by: 1) providing clear objectives for Nuveen Real Estate and third-party property management staff; 2) establishing a formal ongoing improvement cycle; 3) addressing the “it’s not in the budget” issue that plagues many sustainability opportunities in the real estate industry; and 4) setting clear targets for incremental sustainability improvement for each property.
This approach fully aligns with Nuveen Real Estate's commitment to improving the energy and water performance of its assets. Doing so has been shown to reduce utility costs, enhance an asset’s competitive standing, improve tenant attraction and retention, and provide engagement opportunities with tenants and occupants.
The creation of each PET starts with on-going collaboration between Nuveen Real Estate and third-party property management teams across the organization’s U.S. assets. Potential energy efficiency opportunities are identified at its wholly-owned office, retail, and multifamily properties, and resulting Target Improvement Projects (TIPs) are quantified for cost, savings, and simple payback. This data is then captured in a PET worksheet (shown in the graphic under Tools and Resources), which includes an overall energy reduction goal for each property.
Timing is a key component to this process, with the development of the PETs coordinated to coincide with the capital budgeting process. This ensures that cost-effective projects are evaluated by property teams and asset managers at the right time, so planning can occur for the next fiscal year.
Progress is tracked on a monthly basis through ENERGY STAR® Portfolio Manager to determine the extent to which the implementation of the activities included in each PET reduce energy consumption and costs, and improve the ENERGY STAR score.
Building off the lessons learned in the PET program pilot phase, which occurred prior to 2016, Nuveen Real Estate is currently formalizing the program methodology and related outreach strategy. Great care has been taken to address the reality that there are unique circumstances for each property, and that a cookie-cutter approach that looks only at the bottom line results will not be equitable. For example, significant changes to operating hours, or certain tenant-driven requirements, could affect energy use figures in a way that cannot be avoided. Nuveen Real Estate emphasizes the positive and empowering aspects of this approach -- like being able to quantify the business case for each project -- while being responsive to the natural concerns staff will have regarding its implementation. All properties will participate in 2016, and Nuveen Real Estate may develop formal training in the form of webinars and guidance documents. Whereas staff who are engaged in the PET process will become better attuned to linking their financial and sustainability goals, the program does not intend to penalize teams who are off target. Rather, it is expected that staff will, over time and through practice, develop the internal expertise to make the program a success.
Tools & Resources
Visual representation of the innovation case study
For property management teams, the PET program is a natural extension of the financial budgeting activities they are already comfortable with. A key outcome is that it will help make it easier for them to understand the opportunities available to specific asset types. They will be able to more readily make the business case for sustainability improvements, by leveraging Nuveen Real Estate’s benchmarking effort to generate data and continually monitor progress. Over time, it is expected that this type of analysis and thinking will become part of the everyday culture for these teams, just like tracking energy use in ENERGY STAR Portfolio Manager did some time ago.
Nick Stolatis, Senior Director of Global Sustainability and Enterprise Initiatives, puts it as follows:
“The Property Energy Target (PET) Program allows us to set specific goals that account for the unique operations and opportunities of each of our assets. By providing clear expectations and guidance for how to meet these objectives, our third-party property management teams are equipped for success. Implementing these projects and actively pursuing the PETs allows us to reduce cost and improve the performance and marketability of our assets.”
Furthermore, by connecting high-level organizational sustainability goals to property-level sustainability performance, Nuveen Real Estate will be able to better, and more broadly, operationalize its values. The ability to aggregate the results of individual properties across portfolios and funds will makes it possible to more accurately forecast future energy usage. In addition, the benefit of identifying specific projects is that Nuveen Real Estate can more accurately quantify the cost savings of expected capital projects. All of this will help Nuveen Real Estate continue to achieve significant and consistent energy savings results: since 2008, Nuveen Real Estate has improved energy performance by an average of more than 2.75% per year, and is well on its way to meeting its 20% reduction goal by 2020. It is expected that the PET program will contribute to helping Nuveen Real Estate maintain its impressive savings rate, if not improve it.
Energy performance for each property is reported quarterly, with progress tracked against that property’s specific reduction goal. While hard metrics for measuring the success of each property are not yet defined, and may be significantly influenced by the unique circumstances at each property, the broader success of the program is measured by the steady improvement in energy efficiency as a metric that the PET program contributes to. Participation rates, however, are monitored carefully: the PET program was first introduced in 2012 and has been growing over the last couple of years; it is expected that in 2016 there will be 100% participation.
Nuveen Real Estate's Property Energy Targets (PETs) bridge the gap between its individual properties' energy reduction targets and the company's larger institutional sustainability and financial goals.
Connecting the impact of individual asset sustainability performance to broader institutional sustainability and financial goals
Setting individualized goals that can be aggregated and tracked to achieve larger institutional goals
Equipping third-party property management teams with the tools to reduce cost and improve asset performance and marketability