Net Zero Pathway (2022 update)

Net Zero Pathway

Cadogan has a 300-year history of property ownership, management and development in Chelsea, with stewardship at its heart. Our longterm commitment comes with responsibility to ensure that we are making a positive contribution towards a sustainable environment, protecting the area’s unique heritage and supporting a thriving community.

Our goal to become a net zero emission Estate by 2030 is part of our wider sustainability vision for the future, Chelsea 2030. This document sets out how we will become a net zero carbon business by 2030, reducing our emissions across our areas of impact to drastically reduce our carbon footprint, with responsible principles of offsetting the remainder.

We recognise our role as one in which we can bring people together, supporting innovation and acting as a catalyst for change. With the next few years probably the most important in our history in terms of global climate change, proactive, radical collaboration and true working in partnership is more vital than ever.

AIM

TARGET

CARBON EMISSIONS NET ZERO EMISSIONS

2030 DETAIL

Net zero emissions across Cadogan’s scope of influence

AIR QUALITY

SUPPLIER CONSOLIDATION

ZERO-EMISSION SUPPLIERS

ELECTRIC VEHICLE INFRASTRUCTURE

At least 40% of commercial tenants to join offsite consolidation scheme

80% suppliers to deliver by zero-emission transport

All service bays and residential parking lots to have EV charging by 2025, and all new developments after 2021 to include EV charging

GREEN INFRASTRUCTURE

IMPROVED GREEN INFRASTRUCTURE

Improve quality and quantity of green infrastructure, including a 25% increase in the Urban Greening Factor

WASTE WASTE REDUCTION

Send zero commercial and operational nonhazardous waste to landfill

Reuse or recycle over 90% of commercial and operational non-hazardous waste

WATER WATER USE REDUCTION Reduce absolute mains water consumption by 50%

WELLBEING & CULTURE

EMPLOYMENT & SKILLS

Increase local employment and support skills development

HEALTH & WELLBEING Make a measurable improvement to our communities’ health & wellbeing

COMMUNITY COHESION

Enhance community cohesion between local stakeholders

FIGURE 1: CHELSEA 2030 TARGETS

Baseline

Our net zero target has been developed in line with the parameters of the Estate’s reach and influence. With £5,104m of gross property value1, Cadogan’s assets include retail, residential and commercial property. The target boundaries are set by the limitations of geography and function, including all assets under management2 and direct operations, along with upstream/downstream impacts that can be influenced by Cadogan3

A holistic assessment of emissions for the year to 31 December 2019 resulted in a carbon footprint of 35,664 tCO2e - with 88% of our impact being Scope 3 emissions4 as indicated in Figure 2.

Embodied carbon (total emissions generated in creating a building or asset) constituted 16% of the baseline footprint, resulting from three major developments: 196-222 King’s Road mixed-use scheme, 1 Sloane Gardens hotel, 115-116 Sloane Street hotel, as well as commercial white-boxing and over 24 property refurbishments.

Occupier operations also have a substantial impact, with 58% of the baseline footprint coming from commercial and residential portfolios. Energy use in these spaces is outside direct control, so working in partnership with occupiers and stakeholders across the Estate to facilitate decarbonisation is key.

35,664

88% of baseline emissions fall into scope 3

16% of baseline emissions come from developments

1 Cadogan Estates Annual Report and Accounts 2022

2 Excluding non-managed long leasehold properties, where leases typically last over 100 years

3 For further detail see Appendix B

4 Scope 3 emissions are indirect emissions from an organisation’s value chain

58% of baseline emissions come from occupier activity

2019 carbon footprint in tCO2e:

2019 BASELINE FOOTPRINT

0.2% 0.002%

Pathway Best Practice

This pathway to net zero has been developed with best practice guidance from the UK Green Building Council (UKGBC) and the Better Buildings Partnership (BBP), as signatories to the BBP Climate Change Commitment.

Chelsea’s historic nature, conservation area requirements and development pipeline have been taken into consideration, with both bottom-up calculations of building decarbonization potential, and topdown assumptions on industry-wide transformation. Our greatest focus is on the areas with maximum impact potential: supply chain, embodied carbon in developments, and occupier operations.

Together the pathway is intended to deliver a 2030 footprint reduction of 53% compared with 2019, in line with science-based goals and the Paris Agreement, and offset the remainder according to parameters set out in Pathway Action 4.

In line with common practice, much of the Scope 3 baseline has been estimated. Estimation methodologies

have been updated since Version 1 of this document, according to best practice information available at the time of calculation. Current emissions methodologies are set out in Appendix C. Given the importance of scope 3 emissions, improvements in data access, quality and analysis will play an essential role in the pathway to 2030.

It is expected that this pathway will continue to evolve over the coming decade, as the industry better understands the intricacies of net zero accounting, technology develops, and processes adapt to a lowcarbon economy.

The pathway is intended to deliver a 2030 footprint reduction of 53%

Total CO2e (in tonnes)

Embodied carbon: developments

Embodied carbon: supply chain

Landlord carbon

Occupier operations

Remainder

FIGURE 3: REDUCTION PATHWAY

Pathway Action 1

TACKLING EMBODIED CARBON

Embodied carbon comes from the design and construction of a building, from extraction of materials, through manufacturing, processing, transportation and assembly of every element before operation. Embodied carbon from the construction and refurbishment of buildings makes up about 20% of built environment emissions6

As operational emissions from buildings continues to decrease, the UKGBC estimates that embodied carbon will form over 50% of built environment emissions by 2035.

The 2030 net zero pathway sets clear embodied carbon targets, with a downward trajectory as seen in Figure 4, for stages A1-A5 (“cradle to post-completion”) of all development projects. This allows for supply chain development and adaptation, ensuring shared learning and ability to maximise benefits across the value chain. This also applies to capital goods suppliers and other purchased goods and services, since 5.5% of the 2019 baseline footprint came from these sectors.

MOVING TO NET ZERO

Design Standards: sustainable design standards for all development projects addresses climate risk and covers embodied carbon targets, operational energy use and water intensity targets, as well as innovative opportunities arising from circular economy models. These standards will continue to evolve and be improved towards 2030.

Supply Chain Engagement: proactive engagement with partners, suppliers and the wider industry regarding sustainability expectations and environmental performance continues, alongside sharing best practice and supporting suppliers in the development and implementation of their own emissions reduction strategies. As part of this, we will continue to engage through Better Buildings Partnership to understand and implement the Net Zero Carbon Buildings Standard when it launches.

Improved Data and Reporting: tracking whole life carbon for every development project above £1.5m spend, alongside our internal carbon benchmarks for minor projects, is improving the quality of footprint data. Supply chain tracking and reporting will also continue to increase, as transparent and comparable data reporting helps drive improvement across the board.

6 UKGBC (2023) Climate Change: www.ukgbc.org/climate-change-2

FIGURE 4: EMBODIED CARBON TARGETS kg CO 2 e / m 2 (WHOLE BUILDING GIA)

CASE STUDY 30-33 Sloane Street

From inception, Cadogan’s mixed-use development at 30-33 Sloane Street was planned to be net zero carbon.

Initial scheme scoping between cut-andcarve or façade retention options determined that operational carbon emissions of the latter would be 5% approximately per annum lower, with increased upfront embodied carbon emissions offset within 18 years through significantly lower operational emissions. The proposed scheme prioritised the circular economy with increased flexibility, adaptability and accessibility provided by the better floorplates and ceiling heights.

The scheme’s embodied carbon is currently measuring at 550kgCO2e/m2 (for stages A1-A5), which meets RIBA’s current best-practice rating of <600kgCO2e/m2 for office buildings and is progressing towards the RIBA stretch target of <475 kgCO2e/ m2. Savings have already been achieved through reduction in concrete thickness, specification of low-carbon concrete and retention of the existing façade. We will continue to target reductions through material re-use, such as sourcing re-used steel sections and remanufactured raised access floors.

The scheme is aiming for BREEAM Outstanding, NABERS 5 stars and WELL Gold, and is scheduled for completion in 2027.

SUPPORTING CHELSEA 2030 TARGETS

SUPPLIER CONSOLIDATION

ZERO-EMISSION VEHICLES:

Minimizing transport trips and reducing the number of vehicles on the roads will not only improve air quality, but also reduce embodied carbon.

Ensuring that remaining transport is undertaken on zero-emission vehicles will reduce embodied carbon of materials.

BEYOND 2030

Cadogan will continue to work in partnership with stakeholders to reduce its embodied carbon, using our influence to support improvements materials, technology, processes, and knowledge sharing.

Pathway Action 2

REDUCING OPERATIONAL IMPACTS

Cadogan’s operational carbon emissions come from landlord managed electricity and gas. While this only accounts for 12% of the baseline footprint, it is within direct control so will be reduced as far as possible.

Operational emissions from commercial and residential occupier spaces constitute 58% of the overall footprint, requiring a collaborative approach to reducing emissions. Legislation is rapidly changing in this area, ranging from a push for gas-free homes to tightening MEES requirements, and this is expected to continue.

Chelsea is a challenging environment with historic properties, conservation areas and Listed buildings, but clear energy intensity targets for all new and existing buildings are phased into the pathway to 2030.

MOVING TO NET ZERO

Energy Efficient Retrofit: An extensive programme is underway to survey all assets and programme in relevant works, including (but not limited to) replacing windows, installing insulation and shifting towards low-carbon heating. Following a comprehensive review, costs to implement energy efficiency and low-carbon measures across the Estate are modelled at £75m. Together with a focus on design for performance, there will be an increase in operational performance measurement against energy use intensity targets, exploring the use of operational

REDUCTION PATHWAY

performance standards. This move mirrors an industry shift from theoretical to operational measurement and supports a proactive management strategy, using a data-informed approach to minimise unnecessary emissions and tackle best practice behaviours.

Occupier Fit-Out Standards: working in partnership with occupiers, Cadogan sets guidelines for sustainable occupier fit-out: requiring all relevant occupier works achieve an Energy Performance Certificates of B or higher, alongside measures in energy and water efficiency, the circular economy and material reuse. These standards will continue to evolve as industry knowledge develops.

Occupier Engagement: occupier engagement and data sharing is essential to measure performance against targets, share best practice, and facilitate collaboration across Chelsea to reduce emissions. As of 2022, we have actual data covering 36% of occupier space.

FIGURE 5: OPERATIONAL ENERGY USE TARGETS k WH/M 2 /YEAR (GIA)

CASE STUDY Passivhaus

In 2018-19 Cadogan trialled the EnerPHit standard (Passivhaus for retrofits) on a refurbishment of a mews house, while retaining its charm, heritage character and luxury.

Sitting in the heart of the Hans Town conservation area, 126 Pavilion Road is a nineteenth century stable house, which makes it one of the oldest houses in the UK to meet Passivhaus standards. The refurbishment was so successful that it is one of only 1 percent of domestic refurbishments to be certified as BREAAM ‘Outstanding’.

The refurbishment focussed on superefficient fittings, enhanced thermal insulation and airtightness, and innovative material procurement. The result was a property that the residents love, with improved thermal comfort, enhanced site ecology and biodiversity, and an 85% reduction in energy consumption compared to a traditionally built mews house.

The building has set a new precedent in environmental performance, meeting the demand for a more energy efficiency property in a desirable location. Cadogan is taking the learnings from the project into future residential projects.

WASTE

Reducing waste generation, promoting material reuse and driving the circular economy will also reduce the carbon emissions associated with the transport and management of waste.

WATER Increasing water efficiency and reducing the volume of mains water consumed will have a knock-on effect on reducing the emissions associated with the provision, management and heating of water.

BEYOND 2030

Cadogan will continue to improve the efficiency of its building stock, collaborating with partners across the value chain to ensure use of the best technology most suited to Chelsea’s historic environment and collaborating to improve performance.

SUPPORTING CHELSEA 2030 TARGETS

Pathway Action 3

MAXIMISING RENEWABLES

Growth in renewable energy generation is fundamental to the transition to a low-carbon economy and, with energy demand expected to grow, will play an increasingly important role in the energy mix. How Cadogan procures energy is therefore important at both a company and a grid level.

A small 20kWp array on George House generates over 18,000kWh of renewable electricity a year. Following a review of all Chelsea rooftops and identification of over 20 opportunities for retrofit of solar arrays, in 2022 an 80kWp array was completed in Duke of York Square, expected to generate over 69 MWh a year.

Using industry best practice to avoid double counting, Cadogan uses location-based emission factors for all electricity consumption, aside from direct onsite generation, or contracted renewable procurement through a private wire or corporate power purchase agreement (PPA). Despite not accounting for renewable grid energy in Cadogan’s net zero trajectory, this is reported annually as part of the organisation’s commitment to support the decarbonisation of the national grid.

REDUCTION

MOVING TO NET ZERO

Install onsite renewables: onsite renewables will continue to be a focus, installing solar panels and ground- and air-source heat pumps where feasible.

Explore Power Purchase Agreements: procuring landlord energy through renewable corporate power purchase agreements would cut emissions and facilitate additional clean energy generation. Due to the Estate’s small direct procurement this may prove challenging, but innovation in contracting and collaboration with partners should lead to new solutions.

Community Power: Working with occupiers, suppliers, local businesses and residents, the cocreation of a zeroemission energy service could be explored, to provide affordable access to a clean, secure supply of power.

BEYOND 2030

Continuing to prioritise the installation of onsite renewables as far as possible, Cadogan will engage with the wider community in facilitating access to renewable generation.

Pathway Action 4

OFFSETTING

Once emissions have been reduced by 53%, the remainder will be addressed through offsetting in 2030.

Offsets used will be additional, measurable, and real, and will be in accordance with the following principles:

• Independently verified,

• Permanent,

• Avoiding leakage,

• Sourced from parties with integrity, and

• Provide co-benefits.

Given the rapidly changing nature of the offset market and understanding of best practice, our approach will continue to evolve. Current plans are to embrace a portfolio approach to offsets, initially favouring local reduction credits and nature-based removal credits, and transitioning to more permanent removals over time.

MOVING TO NET ZERO

Develop evolving strategy: the offset landscape is expected to change significantly as 2030 approaches, and so whilst the principles set out here will remain, it is expected that the details of Cadogan’s approach will evolve.

GREEN INFRASTRUCTURE:

Increasing the quality and quantity of our green infrastructure will result in additional carbon absorption across the Estate.

COMMUNITY COHESION:

Through our twinning programme to replicate successful projects elsewhere in the community, we could tackle fuel poverty through installing insulation or other energy efficiency measures, or install renewable generation. For any twinning projects to be counted as an offset they will be independently verified and assured.

BEYOND 2030

Emissions will continue to be reduced beyond 2030, as the industry and technology develops. Cadogan will continue to offset their footprint annually every year after 2030, maintaining net zero and collaborating with partners to ensure that actions and offsets are effective and meaningful.

SUPPORTING CHELSEA 2030 TARGETS

REDUCTION PATHWAY

Net Zero Emissions

COLLABORATION & PARTNERSHIP

Collaboration and collective action across the value chain is required to achieve net zero, as set out in the Pathway Actions, but also plays a vital role in supporting innovation across Chelsea and the wider industry.

Cadogan is proud to be involved in a range of industry groups and partnerships driving positive environmental change and managing climate risk in the built environment. This will continue, sharing learnings and ideas to support the industry’s overall transition to net zero.

Please get in touch if you would like to work with Cadogan on achieving this goal.

GOVERNANCE

To achieve net zero, emissions footprint needs to be considered across every aspect of the business and every element of the Estate. Each department recognises its responsibilities and reports on progress regularly, and internal reviews ensure that the carbon implications of decisions are incorporated into decision making.

Our Chief Executive has ultimate responsibility for climate-related risks and opportunities. Climate related risks and opportunities are considered in long-term strategy setting, acquisitions and investment decisions.

DATA & VERTIFICATION

One of the biggest challenges in the built environment is the complexity and fragmentation of environmental data.

Operational data is fundamental to the effective management of internal processes and already very high quality. Scope 3 data is improving with more accurate estimates (see Appendix C for a detailed scope 3 methodology), but will continue to develop with a comprehensive Data Improvement Plan addressing embodied carbon data, occupier utility consumption data, supplier emissions data, and improved postcompletion evaluations for finished projects.

Progress on the transition to net zero is reported internally on a quarterly basis, and to the public on an annual basis, every year to 2030. Scopes 1 and 2 are independently verified through limited assurance, and as data quality improves scope 3 will be too.

Ongoing ownership and management of all sustainability and climate-related risks and opportunities is led by the Head of Sustainability, with support from all departments. Our commitment to address climate-related risk and achieve net zero emissions is embedded across the business, with all teams owning relevant targets and key performance indicators reported internally on a quarterly basis

A dedicated Decarbonisation Working Group provides specific oversight and coordination to estate decarbonisation and the journey to net zero, reporting to the Board annually.

Appendix A - Design Strategy Summary

EMBODIED CARBON

All developments meet relevant embodied carbon targets Reduced supplier emissions

OPERATIONAL CARBON

All buildings meet energy use intensity targets

- New Design Standards

- Supply chain engagement

- Improved data and reporting, including whole life carbon assessments

- Reduced vehicle and transport emissions

- Energy efficient retrofit Energy use intensity targets and subsequent operational measurement

- Occupier fit-out standards

- Improved occupier engagement, data and reporting

- Whole life carbon assessment

- Carbon intensity (kgCO2e/m2 GIA)

- Energy intensity (kWh/m2 /year)

- Carbon intensity (kgCO2e/m2 /year)

ON-SITE GENERATION & RENEWABLES PROCUREMENT

Maximise renewable generation, reduce reliance on national grid and ensure all energy procured by Cadogan is additional and renewable

- Install renewables on new builds

- Consider PPA for landlord elec and gas

- Encourage occupiers to move to renewables

- Support additional renewable generation on Scottish investments

- MWh on-site capacity

- Location and marketbased emissions (tCO2e/year)

OFFSETTING Offset remaining emissions that cannot be reduced

THIRD-PARTY VERIFICATION; INDUSTRY STANDARDS AND CERTIFICATION

Annual transparent reporting against targets

- Consider internal shadow carbon pricing

- Develop ongoing offset strategy that is additional, transparent, verified and has societal cobenefits

- Conduct third party assurance of environmental KPIs in Cadogan sustainability report

- Annual reporting against targets

- Continue with independent building and management system certification (BREEAM, Passivhaus, WELL etc) where appropriate

- Total emissions offset (tCO2e)

- Quantity and types of offsetting used

- Independent third-party assurance statement

Appendix B - Scope Boundary

SCOPE 1 Landlord gas Yes

Landlord refrigerants Yes

Landlord refrigerants Yes

Landlord refrigerants Yes

SCOPE 2 Landlord electricity Yes

SCOPE 3 Purchased goods & servicesDevelopments Yes

Emissions Calculation Methodology

Emissions from landlord-purchased natural gas, including the gas subsequently consumed by occupiers. This includes properties managed by a third party who buy gas on Cadogan’s behalf. Actual consumption in kWh is converted into emissions using DEFRA emissions factors.

Landlord refrigerant losses are measured through top-ups paid by Cadogan, and multiplied by DEFRA emissions factors to report emissions.

Emissions from landlord-purchased fuel oil, including that which is subsequently consumed by occupiers. This includes properties managed by a third party who buy fuel oil on Cadogan’s behalf. Actual consumption in litres is converted into emissions using DEFRA emissions factors.

Emissions from landlord-purchased diesel, excluding diesel purchased for construction activities which is reported under Scope 3: Purchased Goods & Services – Developments. Actual consumption in litres is converted into emissions using DEFRA emissions factors.

Emissions from landlord-purchased electricity, including electricity subsequently consumed by occupiers. This includes properties managed by a third party who buy electricity on Cadogan’s behalf. Actual consumption in kWh is converted into emissions using location-based DEFRA emissions factors.

This category includes emissions from developments: site energy (including FERA), waste generation, and embodied carbon of materials used in construction. We work with a consultant to calculate the total embodied carbon emissions for each medium and large development, with these emissions reported in the year of project completion. Where embodied carbon data is not available, emissions are calculated by multiplying procurement spend by EEIO emission factors for each relevant economic sector of spend. Site energy and waste data are reported per project using data provided by relevant contractors.

Purchased goods & services - Other Yes

Landlord water Yes

Supplier-reported emissions (pro-rata for turnover derived from Cadogan activities) are calculated from energy reporting and DEFRA emissions factors. Where primary supplier data is not present, emissions are calculated by multiplying procurement spend by EEIO emission factors for each relevant economic sector of spend.

Emissions from landlord-purchased water, including water subsequently consumed by occupiers. This excludes water used in construction activities and water procured directly by occupiers, but includes properties managed by a third party who buy water on Cadogan’s behalf. Actual consumption in cubic meters is converted into emissions using location-based DEFRA emissions factors. Capital goods Yes

This category reflects emissions from capital goods purchases made by Cadogan in 2022, including but not limited to new vertical transport, HVAC equipment and machinery. Emissions are calculated by multiplying procurement spend by relevant EEIO emission factors – noting to deduct spend from supplier emission estimates above to avoid double counting.

Fuel and energy related activities Yes

Upstream transportation & distribution Yes

Waste Yes

Business travel Yes

Employee commuting Yes

Upstream leased assets No

Downstream transportation & distribution No

Processing of sold products No

Use of sold products No

End-of-life treatment of sold products No

Downstream leased assets Yes

Transmission and distribution (T&D) and well-to-tank (WTT) losses associated with landlord-procured electricity and natural gas. This excludes FERA associated with Scope 3 energy (development energy, occupier energy, business travel, commuting, and other transport), as this is included with the respective scope 3 energy emissions figures for those categories.

This category includes emissions generated from the transport of materials delivered to, and waste removed from, our 2 major construction sites. Data is not extrapolated to medium and minor sites. The calculation multiplies primary transport data by the relevant DEFRA emissions factor, and includes FERA.

Emissions associated with waste produced by the landlord, and occupier where reported. Where we don’t have tenant reported waste data, we have not extrapolated across the portfolio. Emissions exclude development and refurbishment waste, which is included in Scope 3: Purchased Goods & Services – Developments. Emissions are calculated by multiplying weight of waste by the relevant DEFRA emission factor for different treatment methods.

Calculated by multiplying distance and type of travel by relevant DEFRA emission factor, and includes relevant FERA.

Emissions associated with the commute of Cadogan employees and homeworking, as reported with no extrapolation. Calculated by multiplying distance and type of travel, and number of homeworking days, by relevant DEFRA emission factor.

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

Emissions associated with occupier-purchased energy (including FERA), and refrigerants where reported. Occupier water emissions are excluded, and occupier waste is included in Scope 3: Waste. Where actual energy consumption data is available, emissions are calculated by multiplying metered consumption by relevant DEFRA emission factors. Where no actual data received from occupiers, emissions are calculated by multiplying the Net Lettable Area by the most relevant Building Energy Efficiency Survey (BEES) benchmark.

Franchises No

Investments Yes

N/A: Cadogan does not lease assets, so there are no emissions to report in this category.

Emissions from the four Cadogan owned hotels is calculated by multiplying actual metered energy consumption by relevant DEFRA emission factors, including FERA.

Kate Neale Head of Sustainability

sustainability@cadogan.co.uk

www.cadogan.co.uk