ESG Report 2021 - Hill Group by Hill Group UK

ESG Report 2021

Sustainability – The Hill Way

ESG Report 2021

Contents

Mosaics, Oxford

1. CEO Message

5. Governance Performance

2. Our Strategic Approach

6. Summary of Key Performance Indicators

3. Environmental Performance

7. Independent Limited Assurance Statement

4. Social Performance

ESG Report 2021

1. CEO Message

Building a sustainable future It gives me great pleasure to report on our environmental, social and governance activities. Increased transparency around our ESG performance and target setting will help us to drive performance standards and ensure that Hill plays a full part in tackling climate change. Andy Hill MCIOB Group Chief Executive

Throughout 2021 we made important progress in a number of key areas.

Sustainability – The Hill Way At Hill, we have always aimed to be leaders and innovators in our sector, and this includes environmental and social issues. I am proud of what we have achieved in this space over 22 years in business. We have delivered some of the most sustainable schemes in the UK and, as regeneration specialists, a community focus is at the heart of what we do. One of our driving forces at Hill is creating real, tangible social value that leaves a positive, lasting impact on communities now and in the future. So I am delighted that we now have, for the first time, a consolidated articulation of our commitments and a clear approach to measuring our impacts on the environment and the communities in which we work. This inaugural annual ESG report is a culmination of these efforts. In 2021 we strengthened our commitment to sustainability in our Vision statement and, following the COP 26 gathering in Glasgow in November 2021, it is even more important that, as a responsible business, we continue to push harder and more effectively to manage our environmental and social impacts.

We set headline objectives for three important areas: reduction of carbon emissions; promotion of biodiversity net gain; and development of a social value strategy for implementation across the whole of our business. We adopted a new data collection software tool, Impact Reporting, to enable us to capture a range of information across social and environmental activities on our projects and to facilitate reporting against a wide range of key performance indicators (KPIs). We are now well placed to report comprehensively on our progress against the aspects of environmental, social and economic performance that are most important to our business. In 2021 we took part, for the second time, in NextGeneration’s sustainability benchmarking appraisal of the UK’s top 25 homebuilders. We were pleased to move from ninth to sixth position in the table, maintaining our status as the highest placed privately owned housebuilder in the UK.

Agar Grove, Camden Agar Grove in Camden is the UK's largest Passivhaus regeneration development and has won praise from experts for its "radical nature, saving residents money on energy and encouraging them to live sustainably." We have delivered Phases 1 and 2 and have now commenced Phase 3 construction.

OUR VISION

To be the UK’s leading, most trusted housebuilder, creating exceptional homes and sustainable communities NextGeneration provides us with a very useful objective measure of our progress against a wide and robust range of sustainability criteria, and identifies scope for improvement. NextGeneration’s 2021 report described our performance as “particularly impressive”, given our private housebuilder status, and we will be striving for continuous improvement in 2022 and beyond. Towards the end of 2021 we were delighted to secure the first Sustainability Linked Loan (SLL) in the homebuilding sector. We refinanced our revolving credit facility (RCF) with a syndicate of high street banks so that it is now based on an interest rate linked to our future performance against four mutually agreed sustainability KPIs and targets. This demonstrates our commitment to being at the forefront of the sector and leading the industry.

I hope that you enjoy this review of our ESG aims and actions. Whatever type of stakeholder you are, we trust you will be interested to review our progress in 2021 against the ESG agenda and recognise our commitments to do even more in 2022 and beyond. COP 26 served to remind us all that the timetable for taking action to impact the effects of climate change is here and now, and at Hill we are keen to play our part.

Further to this ambition, we recently carried out our second staff sustainability survey and a materiality review at board level to help us focus even harder on what our internal and external stakeholders see as the most important priorities for sustainability going forward.

ESG Report 2021

2. Our Strategic Approach

Our ESG pillars and our goals Environmental

Social

Governance

y Creating net zero carbon homes

y People come first

y Strategy and responsible business

y Taking care of our natural resources

y Communities and customers y Tackling homelessness

y Reducing our environmental impacts

Towards the end of 2020 we developed a strategic approach to sustainability which we rolled out during 2021. We chose to keep the three pillars of Environmental, Social and Governance (ESG) at the centre of our strategy because this terminology is instantly recognisable to all our stakeholders – registered providers (RPs); local authorities (LAs); banks and institutional investors; customers; and employees.

y Reporting and assurance y Future proofing

At the same time we identified action areas under these three headings and communicated them to our staff in clear and accessible language so that we can build an understanding and culture of sustainability and a belief that everyone in the business has a part to play. Similarly, the language we adopt needs to resonate with our residents, supply chain and the communities in which we work.

Tackling Homelessness Our Foundation 200 pledge to gift 200 homes to help tackle homelessness made great progress. Pictured are homes being installed at Ermine Road, Haringey, London in 2021.

The Way Forward Our key themes were allocated to focus groups who worked throughout the year, meeting every four to six weeks and representing approximately 10% of our staff numbers. Membership of the focus groups was drawn from a range of appropriate disciplines and demographics across the business. We established a Sustainability Leadership Group (SLG) to receive regular feedback from the key themes focus groups in 2021 and make recommendations for implementation of new approaches to the group board. The SLG met bi-monthly during 2021 and provided leadership, support and direction to the overall strategic initiative.

"Being a part of the Sustainability Leadership Group during 2021 was a great honour. This experience and involvement with Hill’s senior leadership has really furthered my knowledge of sustainability approaches industry-wide, as well as Hill’s specific approaches. It feels good to know that I have played a part in the recommendations put forward to the Board, which resulted in the business setting objectives for reducing carbon emissions, biodiversity net gain and adding social value. These will have a positive effect on our environmental and social impact. Hill builds a lot of projects in my local area so it is great to see that our objectives will make a real difference to the places and communities where we work."

Group Board

Sustainability Leadership Group

Maisie Webb, 2020 Trainee of the Year

Focus Groups

Membership of the SLG consisted of two Group Board directors and a number of other senior staff from different disciplines. Maisie Webb, Assistant Contract Surveyor and Hill’s 2020 Trainee of the Year, was also a member of the group during 2021. Head of Sustainability Brendan Ritchie joined Hill in July 2020 and, has worked with senior colleagues to develop this new strategic approach. His role is to ensure that proper oversight is given to each of our key themes and to create a free flow of innovative ideas, proposals and data reporting around our priority areas.

Key People Head of Sustainability Brendan Ritchie is one of a number of important new leaders in our business.

As a result, in April 2021 we committed to three important objectives in the areas of carbon, biodiversity and social value.

ESG Report 2021

2. Our Strategic Approach Cont.

Hill Objectives 2021

CO2

Carbon

Biodiversity

Social Value

Hill is committed to reaching net zero carbon in our business operations and in the homes we build.

We will leave a positive environmental legacy by achieving biodiversity net gain (BNG) across our portfolio of land.

We are dedicated to having a positive impact on every community we have the privilege to work in and in 2021 we measured the social value we added on all our activities.

We will reach net zero carbon in our Scope 1 and 2 business operations by 2030 and net zero operational carbon in the homes we build by 2030.

Healthy Living Mosaics is the first phase of a forward looking new community of 885 new homes on the northern edge of Oxford which is committed to enabling good health and wellbeing. It was selected as one of the 10 national NHS Healthy New Town demonstrator sites.

Key Themes Under each pillar we have established a structure of three key themes which epitomise Hill’s bespoke and identifiable approach to sustainability. Our key themes are aligned with the most pertinent external sustainability guidelines and requirements from: y The UN Sustainable Development Goals y The Sustainability Reporting Standard for Social Housing y UK Green Building Council y RIBA y NextGeneration sustainability benchmarking

Focus Groups Our focus groups are made up of members of staff with relevant areas of interest, each with a clear remit.

Focus on Environmental 1. Creating net zero carbon homes This group was tasked with developing our approach towards achieving our target of net zero operational carbon in the homes we build by 2030 with an initial focus on how they will perform in use. 2. Taking care of our natural resources The areas of focus for this group were the reduction/management of physical waste, water usage and urban drainage; the promotion of ecological and biodiversity enhancement; and energy use and emissions throughout all our business operations. 3. Reducing our environmental impacts This group looked particularly at procurement and the environmental impact created by our supply chain and considered how we can engage with our suppliers to improve the sustainability of their operations. It also looked at embodied carbon, whole life carbon and circular economy principles.

Focus on Social 1. People come first The focus here was on our own staff: their wellbeing; job satisfaction; diversity and inclusion; work life balance; and health and safety. It considered new approaches such as: increased BAME representation in management trainee intake; diversity and inclusion development; and site welfare initiatives. 2. Communities and customers This group looked at our impacts on the places and communities where we work – added social value and social impact in particular. Members researched and recommended a suitable measurement tool, Impact Reporting. Subjects such as Considerate Constructors, community engagement, customer engagement, design and placemaking, affordable housing, local employment and training and health and wellbeing were also included in its remit. 3. Tackling homelessness Hill's Foundation 200 team manages the delivery of our gifted modular homes and the contract supply of SoloHaus homeless units to clients working to reduce homelessness. This focus group concentrated on documenting and evaluating the social value added by this initiative.

Focus on Governance 1. Strategy and governance The strategy remit was around our Vision, strategic framework and net positive commitments, whilst Governance included requirements under leadership and governance and building sustainability capacity. 2. Reporting and assurance This group looked at risk management, materiality, integration, reporting recognition, internal and external assurance. 3. Future proofing The remit included our approach to research investment and change; future proofing through innovation around, for example, post-occupancy evaluation (POE); innovative construction; modern methods of construction and net zero carbon homes. The key outputs of the focus groups are detailed in sections 3, 4 and 5 which follow.

ESG Report 2021

3. Environmental Performance

Environmental Performance

We have set ourselves challenging targets over the next few years.

Carbon Reduction In April 2021 we set some important headline objectives to reduce our greenhouse (GHG) emissions. We committed to achieving net zero carbon in both our business operations and the homes we build.

Business Operations We will achieve net zero carbon in our Scope 1 and 2 business operations by 2030.

Our New Build Homes We will achieve net zero operational carbon in the homes we build, also by 2030. These stretching targets position us among the leading homebuilders who have committed to demanding carbon reduction targets.

ESG Report 2021

3. Environmental Performance Cont.

Summary of greenhouse gas emissions 2021 Greenhouse gas emissions

For Streamlined Energy and Carbon Reporting (SECR)

Other emissions

Category

Year ended 31 December 2020

Year ended 31 December 2021

Scope 1 emissions (t CO2e)

3,464

5,449

Scope 2 emissions (t CO2e) location based

666

980

Scope 3 emissions (t CO2e) – business travel in employee owned cars

657

881

Total SECR emissions in t CO2e

4,787

7,310

Carbon intensity (t CO2e/£million turnover)

7.9

9.7

Scope 3 completed homes energy in use (t CO2)

Data not collected in 2020

109,413

Scope 3 physical waste (t CO2e)

2,494

1,168

Scope 3 water usage (t CO2e)

Reporting Methodology

Carbon Footprint Results

We have followed the 2019 Government Environmental Reporting Guidelines and have used the 2021 UK Government's Conversion Factors for Company Reporting. Our footprint has been calculated in line with the Greenhouse Gas Reporting Protocol – Corporate Standard and ISO 14064 – part 1. We report on an operational control basis, meaning that our data covers energy use from premises where we have the authority to introduce and implement operating policies.

A graphical representation of the relative size of the elements of our carbon footprint that we measured in 2021 is shown below. Elements of our total carbon footprint that we will be looking to measure in the future are those associated with: y our upstream supply chain y end of life impacts of our completed homes (demolition and reuse)

Scope Our reporting scope covers all construction sites, including temporary welfare accommodation, mobile plant, both Hill and contractors’ fuel and our main operational offices. We have allowed for all forms of contracts, including joint ventures. NB: We have not included for the two off-site manufacturing facilities where we have a 50% joint venture interest.

Scope Scope Scope Scope Scope Scope

1 2 3 3 3 3

business travel in employee owned cars completed homes energy in-use emissions from physical waste emissions from water usage

Moving towards

100% purchased renewable electricity supplies

On site switch from

diesel to biofuel

Scope 1 and 2

Our indicative progression for scope 1 and 2 carbon emissions to net zero by 2030 is shown in the illustration below.

Our 2020 scope 1 and 2 carbon emissions were significantly deflated by the effects of the Covid-19 pandemic. Sites were shut down for several months, many staff were not utilised at full capacity, and working from home reduced car travel and office occupation.

Scope 3 Emissions Our 2021 scope 3 data includes, for the first time, the emissions from completed homes in use energy consumption (annual total x 60 years).

With a 21% increase in turnover from 2020, and a return to more normal working conditions in 2021, our scope 1 and 2 carbon emissions went up to a more representative benchmark level.

Roadmap for reducing our scope 1 and 2 business operations to net zero by 2030 7000

6,429 6000

Introduction of biofuels and green renewables electricity supplies to all our sites will result in a significant reduction in our scope 1 and 2 carbon emissions

t C02e

5000

4000

3000

2000

Net zero carbon objective by 2030

1000

Y/E 2021

2022

2023

2024

2025

From the start of 2022 we will be introducing some very significant changes, which will initially help to reduce our scope 1 and 2 emissions. We will be switching from diesel fuel to green biofuel on sites, and we will be progressively moving to 100% purchased renewable electricity supplies across all our operations.

2026

2027

2028

2029

2030

Potential offsetting of 'difficult to tackle' emissions

Thereafter we will be on a similar direction of travel towards our objective of net zero carbon in our business operations by 2030. This will, of course, be challenging against a background of planned growth of the business and a projected £1.2bn turnover in 2025, up from approximately £750m in 2021.

Our indicative projection above therefore shows an initial reduction as these changes are implemented in 2022.

ESG Report 2021

3. Environmental Performance Cont.

Carbon Emissions

As a business we have already completed many low carbon developments, including Passivhaus schemes, and by the time the Future Homes Standard arrives we anticipate we will already be building to that standard on many of our developments.

The second headline objective that we set around carbon reduction was to achieve net zero operational carbon in the homes we build by 2030. The new homes we completed in 2021 produced 1,823 t CO2e. The accepted protocol is to multiply this by 60 to give a projected total for regulated operational carbon emissions over the notional 60 year lifetime of those homes. This gives a total of 109,413 t CO2e contribution to our carbon footprint for 2021 (classified under scope 3 completed homes energy in use).

We have been planning homes which do not rely on gas well ahead of regulations for some time and these are now coming on stream. Examples include Croxley Green, Hertfordshire; Finchingfield, Essex; Attleborough, Norfolk; Marleigh LLP1, Cambridge; and Douglas Bader Estate, Barnet.

From this baseline we have committed to the indicative roadmap below to achieve our net zero target by 2030 target.

The general direction of travel towards our objective of net zero operational carbon in the homes we build will be underpinned by initiatives such as:

We are fast approaching the new 2022 Building Regulations Part L changes and in 2025, the introduction of The Future Homes Standard (FHS) will drive down carbon emissions to ensure that homes are zero-carbon ready and no longer use fossil fuels as their energy source. Post 2025, homes will be served by low carbon air source heat pumps, fuelled by electricity from an increasingly decarbonised grid, leading to net zero operational carbon by 2030.

y Low carbon electricity supply to new developments to power air source heat pumps and end use of fossil fuel (gas). y Post occupancy evaluation (POE). y Increased use of onsite renewables. y Battery storage development and implementation. y Further Passivhaus developments. y Increasing early implementation of FHS. y On-going 'fabric first' improvements using innovative products and materials to reduce energy demand.

Roadmap for reducing the operational CO2 of our homes to net zero by 2030

y Pilot projects to evaluate and learn about new approaches before implementing at scale.

Completed homes energy in-use 2021: 1,823 t CO2

85.45

Indicative reduction of annual CO2 emissions from Hill homes as we drive towards net zero operational carbon by 2030

Y/E 2021

2022

Part L changes 2022

2023

2024

2025

2026

FHS Part L changes 2025

2027

2028

Average SAP score of a Hill home delivered in 2021, measured across over 2,000 homes

2029

Increasing decarbonisation of the electricity supply grid

2030

Potential offsetting of 'difficult to tackle' emissions

In 2021 we had over 300 homes under construction that will have their space heating and hot water supplied via air source heat pumps. 100% of our current planning applications have moved away from the high CO2 emissions associated with fossil fuels and feature low-carbon air source heat pumps.

Creating Net Zero Carbon Homes During the first part of 2021 we modelled some of Hill’s typical house and apartment types to investigate how they would fare when compared to the proposed Interim Part L changes 2022 and the proposed Future Homes Standards 2025. We established that, with our current specifications which promote a fabric first approach, we are well placed to achieve compliance with emerging regulations. This is because our work in London and Cambridge, and compliance with many local authority policies, has driven us to develop building performance that often exceeds current Building Regulation requirements.

MARLEIGH MOVES AHEAD OF LEGISLATION The early Phases (1a to to 1c) of our development at the new community of Marleigh in Cambridge were designed and are being constructed with gas as the energy source for heating and hot water. However, the impending introduction of more demanding Building Regulations Part L in June 2022 and the expected Future Homes Standard (FHS) in 2025, when gas will no longer be allowed, prompted Hill and our JV partner the Marshall Group, to make the decision to get ahead of the curve and introduce key elements of the FHS from Phase 1d onwards, two years ahead of the the new regulations, despite the extant planning permission. The main FHS change will mean that from 2025 the new homes sector will adopt low carbon energy supply via electrically powered air-source heat pumps (ASHPs), in place of gas. Now, instead of all Phase 1 homes being served by gas, 242 of the total of 547 homes will have ASHPs.

The move away from energy provided by fossil fuels in 2025, and the adoption of heat pumps as a means of providing space heating and domestic hot water, helps our homes to comply with future Building Regulations due to the heavy bias towards these technologies in the impending legislative changes.

Furthermore, in Phase 2 which achieved planning consent in October 2021, all 421 homes will feature ASHPs, again ahead of regulations.

We are already designing and constructing low carbon, Passivhaus and zero-carbon ready homes well in advance of The Future Homes Standard and have a number of live projects where Passivhaus and net zero carbon approaches are being developed side by side to compare issues such as:

In making the decision to become early adopters the partnership first evaluated the relevant issues: capacity in the grid to supply the ASHPs and the electric vehicle charging points; increased number of electricity sub-stations; space on the development plan for the additional sub-stations; cost comparisons; the premium added to the cost of the homes and customer acceptance of new technology and systems in the homes.

y Out-turn build costs y Certification costs y Impact of design shape and form on performance and costs y Integration of renewables

Marleigh will therefore be one of the largest housing developments to commit to these low carbon technologies at scale in the UK.

Weighing up all the factors we took the bold decision to invest in the future of net zero ready homes now, ahead of regulations and planning.

y Approach to peak hot water demand y U-value and thermal bridging specifications

ESG Report 2021

3. Environmental Performance Cont.

Taking Care of Natural Resources Our research and focus group discussions resulted in our objective to ‘leave a positive environmental legacy by achieving Biodiversity Net Gain (BNG) across our portfolio of land’. Our internal quality management procedures were revised to reflect this commitment and we now have a pipeline of projects that were submitted for Planning in 2021, where the DEFRA Metric 3.0 was used to predict the BNG that will be achieved. We are averaging a predicted BNG of 25% across these proposed developments. On some development sites it is impractical to achieve a mandated BNG target but we have gained experience of biodiversity off-setting to an adjacent site in the ownership of the local authority (see case study opposite).

25%

Average Biodiversity Net Gain achieved on pre-planning developments

BUILDING WITH NATURE – HOUSING DESIGN AWARDS Our ability to deliver developments which improve the ecology and biodiversity of the places we create was recognised in the 2021 Housing Design Awards. Our Knights Park development at Eddington, Cambridge received the Building with Nature accolade for our attention to landscaping, sustainable urban drainage design, and habitat creation and enhancement for biodiversity. The development promotes walking and cycling with extensive paths and walkways linking to green open spaces and connecting to the centre of the city. Residents’ wellbeing is promoted by this feeling of being close to nature. Knights Park, Eddington

Capstone Fields, Hardwick We needed to employ biodiversity off-setting, an innovative approach which enabled us to target 10% Biodiversity Net Gain (BNG) on Phase 2 at Capstone Fields. Phase 1 is under construction.

ANOTHER BIODIVERSITY FIRST – THROUGH OFF-SETTING One of our sites in South Cambridgeshire set us an interesting biodiversity challenge. Capstone Fields Phase 1 consists of 155 units being developed with our joint venture partner, Latimer Developments, part of Clarion Housing Group. For Phase 2, an additional 23 homes, a net gain assessment concluded that we were just under one habitat unit short of a net neutral biodiversity position. After exploring all opportunities we were unable to reprovide the habitat unit for Phase 2 on site as we had already plugged all possible biodiversity enhancement gaps on the previous phase. An alternative, off-site solution, was therefore required. We considered a number of different approaches with the Environment Bank; the district council; and the county council, all to no avail. The solution lay with Hardwick Parish Council. As a result of our existing relationship with the parish council we were able to explore sites it owns within the village to establish whether there was potential to enhance biodiversity. A site was identified and the parish council confirmed that its climate action group was already planning to undertake works to enhance the asset. Hill has undertaken a baseline and net gain assessment of the land and sought to secure the provision of the required habitat unit. We have committed the following works to achieve a 10% net gain: y Contribution for stripping out existing diseased vegetation. y Contribution towards replacement tree planting. y Management and maintenance contribution for a 30-year period. We are delighted that our commitment to BNG has been illustrated by our pursuit of several potential solutions, before arriving at one that meets local needs and will enhance the ecological and biodiversity value in the village.

BIODIVERSITY NET GAIN We have been featuring BNG in our planning applications for some time now in support of our business objective of leaving a positive environmental legacy across our portfolio of land. Most recently we gained consent for a development of 160 homes at Killingdown Farm, Croxley Green where we predict a 9% net gain in habitat units and a 17% gain in hedgerow units. BNG will be achieved through activities such as relocation of a badger sett and the installation of 40 bird boxes designed specifically for house sparrow, starling and swift. Additionally we will install a minimum of 16 bat boxes on predominantly south-facing aspects.

ESG Report 2021

3. Environmental Performance Cont.

Work under this theme also focused on approaches to reducing carbon emissions from our business operations in line with our objective to ‘achieve net zero carbon in our Scope 1 and 2 business operations by 2030’. In the case study opposite we share how we used a photovoltaic array at our North West Cambridge site to temporarily power our site welfare accommodation, and we are now considering a similar approach on all new projects.

REDUCING OUR SCOPE 1 CARBON EMISSIONS Our carbon footprint data tells us that our biggest source of CO2 emissions is our site use of diesel to power plant and generators, so it was clear that this was an area to look at for alternatives and quick wins to help reduce our scope 1 carbon emissions. We researched the options and decided that, as a business, we should switch to green biofuel and discontinue diesel use on all sites as we head into 2022.

Towards the end of 2021 we decided to start replacing diesel with green biofuel on all our sites and to switch to a 100% purchased renewable electricity supplies for all our operations. In the case study opposite we describe how one of our sub-contractors is following our lead in making the switch to biofuels. These important changes to how we provide energy to our site plant and welfare facilities will make a significant reduction to our Scope 1 and 2 emissions in 2022 and beyond.

We will switch from normal diesel and instead use Green D+ HVO (enhanced hydrotreated vegetable oil), which is a fossil free, paraffinic fuel made from 100% renewable raw materials. This is a more environmentally friendly fuel, suitable for all diesel-powered vehicles and industrial powered generators. It is produced from waste fats and vegetable oils with the fats transformed into biofuel by hydrogenation. Green D+ HVO, is a drop-in replacement for gas oil/red diesel and can be used in all diesel engines. Crucially its carbon factor is around 1/150th that of normal diesel. Therefore, when 100% of our sites are using it in 2022, we expect to make a significant reduction in our CO2e emissions.

Greener Alternatives Our supplier, New Era Limited, celebrated the launch of their new product by rebranding their fleet of delivery tankers with Green D+ HVO.

Renewable Energy Photovoltaic array serving the site offices and welfare facilities.

Reducing Our Environmental Impacts We recognise that a very significant proportion, estimated to be some 60 to 70%, of our carbon footprint derives from our upstream suppliers of materials and products. We contacted 100 of our major supply chain partners to give them notice of our sustainability objectives with a view to following up with them in 2022 to start the process of sharing ideas and strategies for carbon reduction.

REDUCING OUR SCOPE 2 CARBON EMISSIONS Having set our net zero by 2030 target we are challenging the business to come up with innovative approaches that will help us achieve our objective. Our Rubicon development at North West Cambridge has risen to that challenge with the use of a photovoltaic panel array, which is being used to provide a renewable electricity supply to power site offices and welfare facilities.

Our demolition supply chain partner, Rye Group Limited, has also committed to the switch to Green D+ HVO for all their plant. Demolition is a common feature of our developments in dense urban areas and brownfield regeneration and the heavy plant employed requires significant quantities of fuel. This change will massively reduce carbon emissions, relating to fuel use, by around 90% at a stroke. We will be working with all our supply chain to ensure that diesel use quickly becomes a thing of the past and green biofuel becomes the new norm on all our projects.

The panels, which will ultimately be sited on the flat roofs of the apartment blocks that we are building, were purchased early and used in this innovative way to reduce the amount of imported electricity required and reduce our carbon emissions by an estimated 20%. Naturally the energy from the PV panels does decrease significantly during the winter compared to the summer months, but we will soon have a whole 12 months of data available to calculate accurately the quantity of CO2 that has been saved, not forgetting the actual cost saving on electricity bills.

ESG Report 2021

4. Social Performance

Social Performance We recognise that people and communities are at the heart of the projects that we deliver. Our driving force is to ensure that our social, economic and environmental impact makes a positive contribution to the people and communities with which we work. By defining our commitments and measuring our impacts we are able to report the broader benefits that we and our projects contribute to society.

ESG Report 2021

4. Social Performance Cont.

Our Commitments and Overarching Approach In April 2021 we made important commitments to social value: y We are dedicated to having a positive impact on every community we have the privilege to work in.

Social Value: The Hill Way

1 Education to Employment

y In 2021 we measured our added value on all Hill activities. y This will allow us to create a social value plan and set targets for 2022 and beyond. By the end of 2021 we had developed a Social Value Plan that focuses on four key themes for delivering:

2 Business Support and Mentoring

y Education to employment. y Business support and mentoring. y Community belonging and connectivity. y Safe and healthy lives. These themes are based on what our partners tell us are the important issues for the communities they represent, along with local socio-economic research.

3 Community Belonging and Connectivity

4 Safe and Healthy Lives

2021 delivered a total of

£170,909,002 of social added value

SOCIAL VALUE IN HACKNEY NextGeneration has commended our award winning development in partnership with Peabody, Fish Island Village, as a holistic approach to creating a thriving community. A key vision for the development was to complement the already established local community in Hackney. It is an eclectic and vibrant new neighbourhood with more than 585 new homes and commercial space. Featuring three new public plazas to encourage collaboration and connection, this exciting new area has become increasingly popular with professionals and city-dwellers. Fish Island’s long established artistic community has not only been accommodated, but given a central role in the way the area has been developed. Instead of chain supermarkets and coffee shops, the lower floors of the new residential blocks will be filled with spaces for artists and makers, and this will result in Fish Island Village becoming a visitor destination.

We worked hard to reflect the collaborative and creative nature of Fish Island and Hackney Wick and supported local artists with a hoarding project and a gallery of artwork, which was available for purchase, used in brochures and displayed in communal entrances of apartment blocks.

146 shared ownership and affordable homes 5,341m² of commercial space for creative start-up businesses 4,500m2 operated by London based social enterprise The Trampery

Enhancing a Community The redevelopment at Fish Island has embraced and encouraged local social enterprise The Trampery and supported artists and makers.

In addition London based social enterprise, The Trampery, delivers workspaces and accelerator programmes to support entrepreneurs, start-ups and scale-ups who pursue social and environmental benefits alongside profit.

ESG Report 2021

4. Social Performance Cont. Inclusivity We support learning whenever we can and gave these youngsters at Teviot Estate a helping hand with our gift of computers.

1. Education to Employment As one of the Top 15 housebuilders in the UK, Hill is facing the challenges of the industrywide skills shortage and its risks to business growth and project delivery. We recognise our role in engaging future talent and promoting routes and opportunities in our industry. We believe career aspirations can start at any age and that inclusivity creates innovation. We are working to ensure the routes to careers into our business are as inclusive as possible, engaging our role models to inspire the next generation of Hill leaders.

Education Hill will engage with schools on all our projects, encouraging career aspirations, increasing the number of females choosing science, technology, engineering and maths (STEM) options and raising awareness of the range of careers in the industry. We will achieve this through tailored approaches relevant to age and curriculum, and we aim to see young people experience several careers engagement initiatives with Hill, from primary school through to their transition into employment, in line with Gatsby benchmarks. The eight Gatsby benchmarks provide a framework for improvement in careers provision and have been adopted as part of the Government's careers strategy and statutory guidance for schools and colleges. We support the Construction Youth Trust, a charity which aims to inspire and enable young people to overcome barriers and discover a career in construction, through attending talks set up by the charity.

7,286 hours of schools engagement 250 staff hours volunteered for schools engagement 511 children engaged

Delivered in 2021

ENGAGING AT TEVIOT The Design Engineer Construct (DEC) is an off the shelf offer to enable young people to engage with the built environment education and has been developed in line with Gatsby benchmarks and Fusion skills, which are defined as the competencies, characteristics and tools which individuals need to flourish. Hill and Poplar Harca have gifted the DEC programme to Langdon Park School, a secondary school on the doorstep of our Teviot estate regeneration development in Poplar. In September 2021, Langdon Park School integrated the DEC programme into the Key Stage 3 curriculum, providing a platform to increase awareness of professional roles in the sector among 11 to 14-year-old pupils. Students learn how to design, plan and build a variety of buildings using industry standard practices and software and can experience how cutting-edge technology such as 3D and 4D modelling, AR and VR, are transforming the creation of the built environment. In addition we are also working with Langdon Park School on opportunities for work experience placements, extra-curricular projects and summer workshops for Key Stages 4 and 5, 14 to 18-year-olds.

Site Skills Our site teams and sub-contractors arrange visits to encourage young people to embrace trade skills and apprenticeships.

Hill and our supply chain delivered 11,311 weeks of trade and higher apprenticeships amounting to £2,345,942 added social value.

Delivered in 2021

Early careers programmes are very important to Hill. In 2021, 18% of our employees were graduates of, or current participants in, our successful Management Trainee Programme, which began in 2003 with one trainee. Many of these graduates are now working at senior levels, including regional director. Hill has had a target of 5% apprenticeships across our projects and we work with our supply chain to encourage them to create opportunities to allow more apprentices and trainees in our industry. We will work with schools, colleges and partners working with candidates who are not in education, employment or training (NEETs) or care leavers to engage and promote our opportunities.

Employment Hill has multiple routes into career opportunities, encouraging all applicants whether they are straight out of education or looking for a career change. We recently visited Brixton Construction Skills Centre to talk to young people from Lambeth about trades, job opportunities and apprenticeships, as well as different routes into the construction industry. Subsequently five of the attendees took part in a full induction and orientation at our Knights Walk site in Lambeth and sampled activities such as tiling, painting and carpentry with our sub-contractors. Feedback from the day was great, with one attendee describing it as “the best day on the programme yet”.

Gold

2021/22

Cambridge Investment Partnership, an equal partnership between Hill and Cambridge City Council, has recently offered nine new apprenticeships to local young people people, through our partnership with the K10 construction apprenticeship programme. One of these, Karl Davis, commented; "The team are great, and they are giving me so many opportunities to learn. I spend every Monday at college and four days on site".

Learning on the Job In addition to our existing apprentices, in 2021, our Cambridge Investment Partnership created nine new apprenticeships in the city, as part of a wider initiative which is delivering a total of 21 new apprenticeships in Cambridgeshire.

Earn as You Learn Hill is a member of The 5% Club, a dynamic movement of employers committed to earn and learn as part of building and developing the workforce they need as part of a socially mobile, prosperous and cohesive nation.

ESG Report 2021

4. Social Performance Cont.

Supporting WiC Hill sponsors WiC Project Manager Shelley Lawrence to raise awareness and aspirations for women looking for a career in construction.

Hill Academy During 2021 we worked on a new programme, to be introduced in 2022, to open up non-graduate career opportunities for people who want to pursue a career with us but do not want to go down the degree route. These might be career changers, such as candidates from our Women in Construction programme, or returners to the workplace following a period of unemployment or imprisonment. Hill will cooperate with specialised partners who work with under-represented groups to support opportunities for recruitment, helping to drive inclusivity in the business. The Academy programme will include a twoweek work placement before moving into a site assistant role. Once probation is successfully completed the candidates will study for their NVQ Level 4 construction site supervisor apprenticeship.

Women in Construction (WiC) Hill is a platinum sponsor of Women in Construction, which aims to promote the various construction roles available to women, many of whom have not considered a career in construction before due to the lack of role models, careers advice and parental encouragement to girls. With a dedicated WiC resource in place, partnered with Hill's strong positive influence on its supply chain and local competitors, the impact has been high, with the programme engaging 170 women to date. The trailblazing programme was also recognised as the Best Training and Recruitment Initiative at the 2020 Housebuilder Awards. In December 2021 Hill and WiC commissioned an independent social return on investment (SROI) analysis to review a two-year period of the total project. This analysis determined that the WiC/Hill programme creates a social return on investment with every £1 Hill has invested in the programme returning £3.50- £4. Of this, circa £450k of value has been created for the women through employment, improved career prospects and improved wellbeing, with a further £140k of value for the local economy through NI contributions and reduction in benefits received.

Below are some of the comments we have received from participants in the WiC programme: "I thoroughly recommend this programme for anyone who is interested in the construction industry." "I couldn't recommend this programme highly enough. It's opened my eyes to a whole new world of opportunities, and it's given me the confidence and insight I needed to realise my passion. Thank you!" "The virtual work experience provided by WiC was impeccably organised and delivered and very well supported by team Hill."

Diversity information for our projects is captured as part of the induction information and allows us to understand whether our workforce reflects the communities that we are working in.

23% of Hill employees are female 17% are from BAME backgrounds* 1,578 hours of diversity and inclusion training *3% provided no data/preferred not to disclose

Delivered in 2021

Not Just Cricket The annual cricket match between Hill and Network at Rectory Park is one of a number of community events enjoyed by residents.

LOCAL LABOUR The regeneration of the Rectory Park Estate in Northolt involved the phased demolition of 270 homes and the creation of one, two and threebedroom apartments and houses, a community centre and play facilities. In partnership with Network Homes and Ealing Council we maximised opportunities and added value over and above the planning requirements. We engaged a workforce of over 40% locally employed labour, with our final phase averaging 60% and provided: y Three full-time employment and training opportunities for a site manager, a labourer and a trainee plumber. The labourer had continuous employment during the work and the trainee plumber qualified during the period. y We worked with K10 and provided a number of apprenticeship opportunities for local young people across various trades including plumbing, carpentry, dry-lining, bricklaying and scaffolding.

Blooms in Ealing Biodiversity in evidence at Rectory Park.

In addition to our employment and skills initiatives at Rectory Park we: y Donated £50,000 and our services to develop a new community orchard and a wildlife area to help create a sense of place for the community and encourage biodiversity. y Sponsored £1,500 for day trips. y Contributed approx. £10,000 for resident summer fun days.

ESG Report 2021

4. Social Performance Cont.

2. Business Support and Mentoring Support for local businesses is always a focus as a strong local economy will mean increased job opportunities for local people. We engage with and strengthen small and medium enterprises (SMEs) and support local charities and social enterprises. We will focus in delivering this through the following key areas:

Local Spend and Engagement Hill is committed to a minimum target of 25% of our contract value spent locally. We hold Meet the Buyer events on projects in conjunction with ConstructionLine, local Chambers of Commerce and business to business organisations. Hill also breaks down packages to encourage smaller businesses to compete for work.

Business Development Workshops We want to be able to develop our supply chain, and potential supply chain, and support SMEs to effectively compete for business opportunities available. Following Meet the Buyer events we will identify companies with the potential to compete for packages and help them to prepare for the tendering process.

HOMES FOR FEATHERED FRIENDS The site team at our Cambridge Investment Partnership development, Cromwell Road, recently donated timber to Red2Green, a local charity helping people with learning disabilities, who use it to make bird boxes to sell and raise funds. The charity is dedicated to helping young people and adults with autism or learning disabilities achieve their goals in training, education, work, friendship and fun.

Voluntary, Community Organisations and Social Enterprises Hill will identify key community organisations from as early as bid stage, helping us to understand issues and barriers in the local area. We will encourage these organisations to partner with us in running projects that directly benefit the communities surrounding our projects. We will work together to gain further or match funding to maximise the reach and longevity of initiatives and to secure a lasting benefit.

£219,532,534 spent with MSME* businesses in our supply chain *Micro, Small, and Medium Enterprises (MSME)

Delivered in 2021

Local Supply Chain We make every effort to engage local businesses wherever we are working to maximise local labour opportunities.

McArthur's Yard, Bristol McArthur's Yard occupies a prominent harbourside location in the heart of Bristol's historic docks.

MEETING THE SUPPLIERS Hill is currently working on three high profile projects in Bristol, including McArthur's Yard, and in autumn 2021 we held a Meet the Supplier Engagement Day at Bristol Rovers Football Ground. Our Special Projects Regional Director Cain Peters, and our Deputy Regional Director Allan O’Brien, met with around 75 local business representatives including architects, engineers, mechanical and electrical sub-contractors, piling contractors, plasterers and bricklayers, to outline the opportunities available and explain Hill’s procurement process. Local businesses were able to register their interest which will help us to build a pipeline of local suppliers in our newest operational area. This event also opened up opportunities for our Foundation 200 homeless initiative.

CRAFT AND PRODUCE MARKET AT RAYNERS GREEN In October 2021 Hill held a craft and produce market at Rayners Green, our collection of homes in Fordham, Cambridgeshire. A collaboration with Scotsdales Garden Centre, Rayners Green includes two, three and fourbedroom detached and semi-detached homes, designed to complement the existing architecture in the village. The market showcased products from a range of local, independent businesses, while prospective homebuyers were able to meet the local community, explore the site and visit the development's show home.

ESG Report 2021

4. Social Performance Cont. Celebratory Lights Hill sponsored the lights outside a London church, initially for a multi-faith Christmas concert, and they will remain in-situ to be lit during other religious festivals.

3. Community Belonging and Connectivity Many of Hill's projects encourage and support a strong sense of community and our ongoing focus is on how we can enhance and build on that sense of belonging by running community initiatives and events that encourage people to come together. A key priority for us is maintaining community cohesion and a sense of belonging throughout the entire development programme. We have a track record of implementing initiatives that will have a lasting and positive impact and truly reflect the needs of the local community. We work closely with local stakeholders, especially residents, to deliver community festivals and fun days for all ages and support smaller scale projects, such as improvements to community gardens and capacity building for social groups. Hill is committed to working with communities and existing organisations to increase the work they do and continue to deliver community belonging in and around our projects. Our areas of focus are: support for foodbanks and community food projects; furniture poverty; access to laptops and digital inclusion. Hill is a founding partner of Action Funder, which engages with community organisations to ensure our charitable funding delivers programmes that maximises the impact to the wider community. For example, during summer 2021 we donated £2,000 towards the Holiday Hunger Activity Fund for residents in the area of our High Path regeneration project in Merton. This government initiative helps young people who receive free school meals to access four hours of activities per day, and a free meal, over the summer holidays. High Path is part of Clarion Housing Group's Merton Regeneration Project to create 2,800 homes.

ENGAGING WITH THE COMMUNITY IN BARNET We have a number of new projects starting imminently in Barnet, north London, and we are already connecting with the local community. In December 2021, St Mary’s at Finchley hosted a multi-faith Christmas concert to promote unity in the community and raise funds for Barnet’s NHS staff as a thank you for their outstanding support during the pandemic. We gifted over £3,500 to cover the church’s Christmas tree lights and their installation, which will remain on the 25m conifer tree outside the church entrance to be used for all future religious holidays such as Eid, Hanukkah and Diwali, as well as Christmas.

£249,899 donated to charitable causes and community groups 482 staff hours volunteered

Delivered in 2021

BRICK BY BRICK Children on the Aylesbury Estate in Southwark, where we are carrying out Phase 1 of a regeneration project, took part in four online sessions with a ceramics specialist who explained how bricks are made and used.

They then created their own designs and we selected one from each child to be fired onto glazed bricks and placed onto the facades of the new block. In spring 2022, we plan to hold a ceremony when the children will see their bricks placed into the facades as a lasting legacy.

"I drew the Aylesbury community holding hands and a beautiful background."

One of the students participating commented: "I have cherished memories of my primary school as well as the sense of pride that comes with being part of that community. I couldn’t help but make Michael Faraday School my brick’s main focus, especially since the architecture of the newer building is so unique and makes a bold and vibrant statement in the heart of Walworth. There are a

number of famous influential people, such as Michael Faraday himself and Charlie Chaplin, who I decided to draw mounted onto the pink elephant in front of the Elephant and Castle shopping centre. The pink elephant is a well-known symbol of the Elephant and Castle and, even though the much loved shopping centre is in the process of demolition, I hope to encapsulate and preserve its memory in my brick.”

ESG Report 2021

4. Social Performance Cont.

Garages To Homes The first of our Foundation 200 units are located on a disused garage site at Dundee Close, Cambridge.

4. Safe and Healthy Lives Everyone has the right to live a safe and healthy life and that means having access to services and outdoor space free from crime. Poor health and crime issues will put increased pressure on local health services, so it is important for us to build safe and sustainable communities by tackling these issues from first principles.

Gifting £15m to Help Tackle Homelessness The Foundation 200 programme was launched in 2019 to mark our 20th anniversary. It is a pledge to gift 200 modular homes to homeless charities as part of a £15m social impact fund running over five years, providing safe, comfortable and sustainable homes to single people experiencing periods of homelessness. We aim to provide a safe roof over their heads while they rebuild their lives with the support of local homeless charity partners.

The 28 Foundation 200 homes delivered in 2021 will benefit 109 homeless people by 2030 and support around 800 people during their 60 year lifespan.

Delivered in 2021

These homes are designed for a single person and come fully equipped with everything residents need, including all furniture, white goods, bedding, towels, cutlery and crockery; and even pictures hung on the walls. Each modular home provides the individual with a safe and comfortable space to get back on their feet, find work and move towards independence. Thanks to air source heat pumps and mechanical ventilation heat recovery systems, they are extremely energy efficient, with running costs of less than £5 per week.

"After all that time at hostels, in night shelters and on the streets, you can shut your front door and lock it and just be you or be with the people you choose to have as company. It's just ideal." Foundation 200 resident

Foundation 200 homes have been designed to meet Future Homes Standards and they exceed building regulations for energy efficiency and sound insulation. With a design life of 60 years and Buildoffsite Property Assurance Scheme (BOPAS) certification, they provide a shortterm respite for vulnerable individuals who have nowhere to call home. Each home is delivered fully furnished with a kitchen, living and dining area, bedroom and bathroom.

Embedding Social Value

Supporting Safe and Healthy Lives

Best Practice at Teviot

Alongside Foundation 200, Hill is committed to delivering initiatives to focus on five key issues in the communities we work in:

The regeneration of the Teviot estate with our joint venture partner Poplar HARCA will truly position the residents at the heart of our delivery. Our unrivalled commitments will create in excess of £278m of social impact for the community across the development’s 15 year programme and ultimately produce a sustainable legacy, which will be felt by the community for many generations to come.

y Knife and violent crime y Gangs y Online safety y Mental health awareness y Improved physical health

HEALTHY LIVES IN ACTION As part of our commitment to encouraging healthy lives, we recently donated £1,000 to Merton Saints BMX Club, a small group of riders, supporters and enthusiasts based in South West London. The funding has enabled free BMX sessions for local children who live in close proximity to High Path, part of Clarion Housing Group's Merton Regeneration Project.

Maximising our delivery is important and we want to see added value on every pound that we, and our supply chain, spend. Hill will agree appropriate KPIs and targets with our supply chain partners on our projects. These will be aligned to our four key themes and targets will be informed by contract value, duration and the nature of works on the project.

The joint venture uses the HACT wellbeing valuation methodology and the UK Social Value Bank to measure the value of services, activities and programmes we deliver ourselves and in partnership. This approach has been informed by people’s actual experiences so the values are based on how people live their lives and the success of a project is judged by how it affects people’s wellbeing. The delivery plan has been designed to focus on creating social impact through 12 key outcomes, identified as priority areas by residents, following extensive consultation. A programme board has been established to manage the delivery process. The programme board, chaired by HACT Chief Executive Andrew Van Doorn, oversees the performance and viability of the delivery plan and assesses the plan’s progress, quality of delivery and any risks that might impact the plan going forward. In addition there is also a community group, comprising estate residents and community stakeholders, which makes sure that the resident’s perspective is always at the forefront of decisionmaking in relation to the delivery.

ESG Report 2021

5. Governance Performance

Governance Performance

The Governance pillar of our ESG strategy was supported by the work of a focus group which included two Hill Group Board Non-Executive Directors and the Group Deputy Chief Executive. The group met bi-monthly during 2021 to address the key themes of: responsible business; reporting and assurance; and future proofing. The group also oversaw our participation in the NextGeneration sustainability benchmarking exercise and the development of a Sustainability Training and Communications Plan. Some of the key outputs from the Governance Focus Group in 2021 are outlined in this section.

34 4

35 35

ESG Report 2021

5. Governance Performance Cont.

NextGeneration NextGeneration is an independent, annual sustainability benchmark of the 25 largest homebuilders in the UK, which has been developed in collaboration with the industry over the last 15 years. We took part in the exercise for the second time in 2021, with the homes we completed in 2020 being assessed. NextGeneration works by inspiring companies to report against a range of criteria relating to high quality sustainable homebuilding. Its executive committee consists of Homes England, UKGBC, Lloyds Bank and the initiative’s Environmental Water Waste secretariat, JLL.

Site Management

Management

Why do we take part in NextGeneration? NextGeneration enables homebuilders, Government, registered providers, investors, employees and the public to understand the sustainability of homebuilders’ operations and the new homes they build. RANKING

It aligns the Environmental, Jointvery 1st closely with 2nd 2nd Social and Governance (ESG) pillars upon which SCORE Hill’s approach to sustainability is based. It 100% 87.5% 99.2% therefore provides a robust framework against which we can measure our performance.

After taking part for a second time, we have been able to validate aspects of ESG where we are performing well and identify areas where we have room for improvement. Knowing where the opportunities for continuous improvement lie will help to focus our efforts and drive our sustainability performance to higher levels in 2022 and beyond.

How did we perform? Overall we had a very satisfactory result in 2021, with our headline score moving up to 62 from 48 in the previous year, an increase of 29%. We moved from ninth to sixth place in the table and recorded our most improved scores in the strategy and governance, waste, and socioHealth and Community and Socio-economic economic development areas. Safety

Customer

Development

As illustrated in theEngagement infographic below, we demonstrated areas of particular strength in a number of criteria, in particular: environmental site management; water; waste management; health and safety; community and customer engagement; and socio-economic development. In their 2021 Report, NextGeneration commented: 3rd

Joint 1st

“It is also noteworthy to mention that, this year, Hill ascended from ninth to sixth place, 96.9% 91.7% 84.4% increasing their score by 14 points. Ranking this highly as a non-listed homebuilder, with fewer mandatory reporting requirements, is particularly impressive”.

Strengths

Environmental Site Management

Water

Waste Management

Health and Safety

Community and Customer Engagement

Socio-economic Development

2nd

3rd

Joint 1st

87.5%

99.2%

96.9%

91.7%

84.4%

RANKING

Joint 1st SCORE

100%

Mosaics, Oxford

Responsible Business A key initiative that underpinned our approach to responsible business was the development and roll-out of a Sustainability Training and Communications Plan. Engagement is tailored to the roles and responsibilities of appropriate staff members. For example: y All directors and heads of departments received training on our sustainability and ESG approaches and strategies in a half-day session y Over 250 staff received a short online training presentation explaining our strategic approaches and our objectives around carbon, biodiversity and social value y All management trainees recruited in 2021 had an online briefing on sustainability at Hill

SUSTAINABLE LOAN FIRST

y All new staff joining the business throughout the year received a sustainability briefing as part of their induction

Hill has always aimed to be a pioneer in housing initiatives and at the end of 2021 announced another first – the first major sustainability-linked loan (SLL) to be secured in the housebuilding sector.

With over 400 staff receiving training in 2021, we have taken significant steps towards building awareness and a culture of sustainability across the business.

In December major high street banks Lloyds, NatWest, HSBC UK and Santander UK agreed to the refinancing of Hill’s £220m syndicated loan linked to sustainability criteria.

Reporting and Assurance The Governance Focus Group has overseen the production of this, our first Hill ESG Report, establishing its programme for production; its format, scope and contents; and the arrangements for its verification and assurance.

Not only will this loan support our five-year plan to double the size of the business to £1.2bn turnover by 2025, it will enable us to benefit from a lower interest cost as our green credentials increase in the future. The loan is based on four sustainability linked criteria: y Biodiversity net gain.

Future proofing Rebecca Law, Trainee of the Year 2021, has joined the Sustainability Leadership Group (SLG), an important part of our sustainability governance structure.

y Reducing operational carbon in the homes we create. y Reducing scope 1 and 2 carbon emissions in our business operations. y The company’s overall sustainability rating as measured by the NextGeneration sustainability benchmarking of the UK’s top homebuilders.

ESG Report 2021

5. Governance Performance Cont.

Towards the end of 2021 we reviewed our Materiality Matrix that helps to form the basis of our wider ESG strategy and, ultimately, creates more value for Hill, our customers and our community. We review, on an annual basis, how to best use our resources and where, and how, to best focus on improving our sustainability impacts in our sector. Our review of our Materiality Matrix helps us to get ahead and better plan our ESG and sustainability strategies; focus our resources more effectively; anticipate and respond to emerging issues; and communicate effectively with our stakeholders. This matrix provides an opportunity to systematically, methodologically and robustly understand which topics have an impact on our ability to create, or threaten, social and environmental value for our customers, stakeholders and society as a whole.

Our Materiality Matrix, opposite, employs the following principles. Within the area of the graph is a bespoke set of topics, defined by our business, that we are seeking to prioritise. The topics closest to the top-right corner of the graph are those which our organisation will focus on predominantly in 2022, defining our ESG strategy and deployment of resources. The horizontal and vertical axes are the two criteria against which each topic was assessed, and they define how close to the top-right corner they appear. These axes relate to the topics’ importance to internal stakeholders/the business and importance to external stakeholders or society. This matrix was considered and approved by the board in early 2022 and will form the basis of our operational plan for sustainability/ESG in the year ahead.

Rather than relying on existing processes or internalised assumptions, it offers us the ability to view ESG strategy through the eyes of our stakeholders in order to better integrate it into our organisation’s core business strategy.

Material IMPORTANCE TO EXTERNAL STAKEHOLDERS/SOCIETY

Materiality

Close to being material

Unlikely to be material

Knight's Park, Eddington Construction continues at Knight's Park – a new urban extension to Cambridge where sustainable homes and communities demonstrate what is material to our internal and external stakeholders.

Not material

Materiality Matrix Identifying the sustainability issues that most concern our internal and external stakeholders.

y Responsible procurement (sustainable procurement policy) y Social value commitment: community belonging and connectivity

y Approaches to ecology and biodiversity y Energy use and carbon emissions of our business operations y Lifetime operational carbon emissions of the homes that we build y Social value commitment – education to employment y Foundation 200 and SoloHaus homeless initiative

y Water used in our operations

y Life cycle costing and analysis y Air quality in the places where we build y Working with our supply chain to reduce energy use and carbon emissions y Approach to embodied carbon; whole life carbon; and circular economy

y Physical waste created by our operations y Social value commitment: business support and mentoring y Measuring and monitoring our ESG performance y Public disclosure of ESG performance information

y Social value commitment: safe and healthy lives y Diversity and inclusion y Influencing sustainable behaviours in home occupiers

y Post occupancy evaluation y Applying the principles of Building for a Healthy Life

y Sustainability Linked Loan (SLL) KPIs y Employee understanding and awareness y Volunteering and charities

y Supporting sustainable transport methods Not material

Unlikely to be material

Close to being material

Material

IMPORTANCE TO INTERNAL STAKEHOLDERS/BUSINESS

ESG Report 2021

5. Governance Performance Cont.

Staff Sustainability Survey At the beginning of 2022 we asked our staff to give us feedback on their perception of our sustainability performance in 2021. This was our second staff sustainability survey, following on from a similar exercise just over 12 months earlier. The response rate was 59% – while that's up from 51% in 2020, we know we still have work to do to engage with staff generally and to embed sustainability/ ESG as part of our culture. Our objective is that staff will increasingly come to see that this impacts every job role at Hill and they all have a part to play in our future sustainability/ ESG performance. One of the benefits of the survey is the opportunity it gives us to explain some of the jargon or commonly used terminology around sustainability. It also gives us the opportunity to learn how to improve our internal communications and messaging with staff. Many of our external stakeholders refer to Environmental, Social and Governance (ESG) when talking about sustainability matters. So, it makes sense for us to make sure that our approach aligns with their take on the subject, and that they in turn can easily recognise that we acknowledge what is important to them. In the survey we explained our approaches to the three ESG pillars and then asked respondents to rate our performance. This is what we found, with the previous year’s responses shown in brackets.

Our approaches to environmental sustainability scored an average of 6.75 (6.6) out of 10.0. Environmental sustainability is about: reducing carbon dioxide and greenhouse gas emissions from the homes we create and in our general business activities; adapting to, and mitigating, the effects of climate change; enhancing natural habitats; reducing physical waste; reducing water use; reducing transport fleet emissions; and reducing our supply chain impacts. For social sustainability the average was 7.44 (7.44) out of 10.0. Our social sustainability performance includes attention to: the social value we create and the impacts we make in the places and communities where we work; our approach to our own staff through training, careers, diversity and inclusion, wellbeing and health and safety. Externally we focus on matters such as Considerate Constructors, community engagement, design and placemaking, local employment and training and tackling homelessness. Our governance of sustainability scored an average of 7.16 (6.98) out of 10.0. Our sustainability governance performance includes: our corporate vision; strategic approach; our targets and positive commitments; our sustainability leadership; our reporting and assurance of our sustainability performance; and our approach to research and innovation. Overall the scoring was positive. It showed a marginal improvement on the 2020 survey but we recognise that there is much more for us to aim for, and achieve, going forward.

Our ESG performance in 2021 as measured by our staff sustainability survey.

Average score out of 10

8 7.44 7

6.6

7.44 6.98

6.75

7.16

5 2020

2021

Environmental Sustainability

2020

2021

Social Sustainability

There was a very high recognition that our stakeholders attach importance to sustainability. Our stakeholders are many and varied. They include: our staff; the customers who buy our homes; registered social landlords; banks and government agencies, such as Homes England, who fund and commission new developments; planning and local authorities; and potential clients. The results ranged between 66% (62%) and 90% (92%), depending on the stakeholder, and it was encouraging that 83% (82%) of staff responded that they attached importance to sustainability. Next, we asked whether staff thought felt that they had a part to play, through their own role in the company, in our sustainability performance. This scored an average of 7.2 (7.32) out of 10.0, mirroring the positive score in 2020.

2020

2021

Governance Sustainability

Another positive was that, an average of 7.7 (7.88) out of 10.0 respondents would welcome training or further guidance to help them play their part in their specific job role. The survey gave us valuable feedback to shape out strategy to drive our sustainability performance forward. The key areas that we need to progress are: y General and frequent feedback on our sustainability activities and initiatives around ESG. y Continued roll-out of an entry-level training module for all staff levels/roles. y Further development of job role-specific training/guidance to help everyone play their part in helping Hill to excel in the area of sustainability. The 2021 sustainability survey informed our Materiality Matrix review.

ESG Report 2021

6. Summary of Key Performance Indicators

In 2021 we introduced a new data collection system (Impact Reporting) which enabled us to collect information on a wide range of environmental and social key performance indicators. In some cases, this has allowed us to measure performance in 2021 and set targets for 2022.