Picton Property Income Limited Sustainability Report 2021

Sustainable thinking, collaborative action.

Picton Property Income Limited Sustainability Report 2021

PictonProperty Income Limited Sustainability Report 2021

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Introduction

Approach

Environmental Focus

Sustainable Buildings

Our Employees

Stakeholder Engagement

Appendix

Introduction Welcome

Welcome to our 2021 Sustainability Report

Introduction Welcome Picton at a Glance 2021 Highlights Leadership Letters

1

2 3 4 7

The Challenges Impacting Business

Our Approach Summary

10

Our Approach to Sustainability

11

Governance 

14 16

Our Sustainability in Action Environmental Focus Summary 

Our purpose Through our occupier focused, opportunity led approach, we aim to be one of the consistently best performing diversified UK REITs. To us this means being a responsible owner of commercial real estate, helping our occupiers succeed and being valued by all our stakeholders.

18 19 22 23 24 25 26 27 28

Climate Change Mitigation and Adaptation

Biodiversity

Water Consumption  Materials and Waste 

Sustainable Buildings Summary

Health and Safety

Integrating Wellbeing Sustainable Buildings Our Employees Summary

We are committed to integrating sustainability within all our business activities and in a way that makes a positive contribution to society, whilst minimising any negative impact on people, local communities and the environment.

31

Employee Engagement Training and Development

32 34

Stakeholder Engagement  Summary  Occupier Sustainability and Satisfaction  Supplier and Contractor Responsibility 

35 36 38 39 42 44 46 57 58

Community and Social Value

Appendix EPRA Commentary EPRA Disclosures EPRA Performance

Visit our website for more information on our sustainable thinking www.picton.co.uk/Sustainability

Glossary

Contacts and Resources

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Appendix

Introduction Picton at a glance Occupier focused, opportunity led.

Industrial weighting 53% South East

40% 13%

Rest of UK

£528m Net assets (2020: £509m) (2019: £499m) £682m Portfolio valuation

4.8% EPRA net initial yield (2020: 4.8%) (2019: 4.9%) 8.8% EPRA vacancy rate (2020: 11.5%) (2019: 10.3%) 3.7p EPRA earnings per share

We are an award winning Real Estate Investment Trust (‘REIT’) investing in UK commercial property. Our diversified property portfolio consists of 46 assets with over 80% invested in the industrial and office sectors. We acquire, create and manage buildings for around 350 commercial occupiers across a wide range of businesses. By applying insight, agility and a personalised service, we provide attractive, well-located spaces to help our occupiers’ businesses succeed and in turn enhance value for our shareholders. We have a long-term track record and have outperformed the MSCI UK Quarterly Property Index producing upper quartile returns over one, three, five and ten years and since inception.

Office weighting 36% South East

16% 11%

Rest of UK

(2020: £665m) (2019: £685m)

9%

City and West End

£34m Profit for the year (2020: £23m) (2019: £31m) 46 Number of assets

(2020: 3.7p) (2019: 4.3p)

Retail and Leisure weighting 11% Retail Warehouse

91% Occupancy (2020: 89%) (2019: 90%)

7% 3% 1%

High Street Rest of UK

(2020: 47) (2019: 49)

Leisure

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Approach

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Our Employees

Stakeholder Engagement

Appendix

Introduction 2021 Highlights Sustainable thinking, collaborative action. This year we have further developed our sustainability priorities. We will continue to fully integrate sustainability into our corporate strategy and ensure our priorities align with global and national expectations. During the course of next year, we intend to define our net zero carbon pathway and targets in line with the Better Buildings Partnership framework.

Howwe performed in 2021 Our approach to sustainability – Improved our GRESB score and achieved two Green stars – Maintained Gold award under EPRA Sustainability Best Practice Recommendations – Joined the Better Buildings Partnership

Sustainable buildings

Working with our stakeholders

– Improved 20 portfolio EPC ratings – Carried out further ESG audits at three office properties – Developed sustainability guidance for refurbishment projects – Established a new Health and Safety Committee 75% Increase in the number of green leases Focusing on our employees – Carried out a further employee engagement survey – Moved offices to provide best in class amenities space for the team – Undertook sustainability training

– Engaged with and supported 90 occupiers to help navigate the pandemic – Contributed to the development of the Better Buildings Partnership Responsible Property Management Toolkit and ESG Training Course for Real Estate Professionals – Provided Covid-19 compliant guidance for office reoccupation – Developed our occupier engagement programme to improve occupier satisfaction – Carried out occupier satisfaction survey £15,000 Offered to local charities through our fifteenth anniversary initiative £14,000 Further charitable donations

Environmental focus – Embarked on development of net zero carbon pathway – Continued to build on our approach to biodiversity with biodiversity surveys undertaken at a number of properties -57% Reduction in Scope 1 and 2 emissions since 2016, exceeding our five-year target

Read more on page 12

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Approach

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Stakeholder Engagement

Appendix

Introduction Leadership Letters Chair’s Statement

Sustainability is not just about making our buildings more energy efficient but also covers our whole approach to business and howwe interact with all our stakeholders. LenaWilson CBE Chair

Welcome to our Sustainability Report 2021. In the short time that I have been at Picton I have been impressed with the team’s commitment to sustainability and responsible business. I believe that for such a small teamwe have made great strides in this area and have ambitious plans for the future. Sustainability is not just about making our buildings more energy efficient but also covers our whole approach to business and how we interact with all our stakeholders. The last year has demonstrated how important it is to be fully engaged with all of our stakeholders. We have provided assistance to over 90 of our occupiers, helping them to navigate through the impacts of the pandemic.

All of our team have been working remotely for over a year and I know that they have valued the regular virtual meetings that have been held throughout the pandemic. We have communicated regularly with shareholders and Michael has maintained his usual schedule of meetings with investors, albeit virtually. Unfortunately the last Annual General Meeting had to be held as a closed event, but I very much hope that for this year we will be able to welcome shareholders to it again. In October we celebrated our fifteenth anniversary and given the challenging times that we are in, I found it very encouraging that the occasion was marked by funding worthwhile local community projects in areas where our buildings are located.

This year we will be embarking on our journey to become net zero carbon. This is an ambitious commitment but one that I and the whole leadership team are fully behind. The issue of addressing climate change is at the top of the global agenda and I believe that we must all increase our efforts to combat its impact. I would like to thank the whole team and our advisers for all their hard work over the last year, ensuring that we support all of our stakeholders.

LenaWilson CBE Chair

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Our Employees

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Appendix

Introduction Leadership Letters continued Chief Executive’s Statement

The environmental impact of our buildings is a key focus.

Michael Morris Chief Executive

Welcome to our third annual Sustainability Report. This Report sets out our activities and achievements over the last year, while looking ahead at our future targets and commitments. We have developed and refined our approach to sustainability since the inception of the business back in 2005. We started reporting to EPRA initially, and then to GRESB. We have reported our greenhouse gas emissions voluntarily in our Annual Report since 2014. In 2016 we set a number of five-year targets including reducing our Scope 1 and 2 emissions by -20%. I am pleased to report that this was met after only three years, and that after five years the reduction was -57%, although the pandemic has impacted this final outcome. We have discussed our other targets later in the Report.

The environmental impact of our buildings is a key focus. We have managed our EPC ratings over a number of years, and I am pleased that there has been a continual improvement in ratings each year. When we are carrying out refurbishments, we have always sought to implement energy efficiency measures where possible, and the impact of these, both on our EPC ratings and on our GHG emissions, has been positive. One of our three corporate strategic pillars is Acting Responsibly. This includes working closely with our stakeholders. This year, this has been very much at the fore, in helping all our stakeholders navigate through the Covid-19 pandemic successfully. We have maintained our occupier focused approach for many years and have built up good relationships with our occupiers. These relationships have been vital in helping us reach solutions with occupiers and to be able to provide assistance whilst helping us to mitigate impacts.

Key highlights £5m Portfolio investment -57% Reduction in Scope 1 and 2 emissions since 2016 85% Employee satisfaction score

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Introduction Leadership Letters continued

Our employees have been working remotely for over a year. It is very encouraging that we have all continued to work effectively throughout the whole year. At the start of the first lockdown, we introduced daily virtual teammeetings as a means of maintaining contact and sharing information and ideas. These have continued throughout the last year and the feedback I have received is that they have been very helpful. We have always tried to provide our shareholders with clear and transparent communications and regular reports. This year we have given additional trading updates to keep our shareholders informed on rent collection and other relevant issues on a timely basis.

This year I am pleased to announce we have joined the Better Buildings Partnership, a collaboration of the UK’s leading commercial property owners. Although we are a small team, we have been able to provide input to two of the current BBP initiatives, and these are discussed later in the Report. Our priority for the coming year is to set our pathway to net zero carbon. This is a key project that will involve collaboration from the whole team alongside external partners and advisers. There will be implications of this commitment across the business and we need to ensure that it is managed in a way that benefits all of our stakeholders. I would like to thank our Responsibility Committee for all their efforts over the past year in developing our sustainable thinking, approach and credentials.

This year we have joined the Better Buildings Partnership, a collaboration of the UK’s leading commercial property owners.

Michael Morris Chief Executive

Michael Morris Chief Executive

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Introduction The challenges impacting business Sustainability trends

The sustainability landscape continues to evolve bringing with it key challenges and opportunities for the business. This year could be seen as the tipping point for considering social injustices and inequalities and embedding climate risk into corporate strategy.

The impacts of the Covid-19 pandemic on economies, public health and society at large are far reaching and yet to be fully realised. In the UK, at the height of the first national lockdown, GDP growth fell to record lows and unemployment levels began to rise. The UK Government responded with an extensive support package, including the furlough and self-employed income support schemes, stamp duty and business rates holidays and reduced VAT. As our understanding of the virus grew and society adapted to social distancing and remote working, subsequent lockdowns were not as severe on the economy. With the UK leading the way with a vaccination programme, our recovery looks set to be fuller and faster than many anticipated. Economic recovery for all

Analysis of the shape of recovery has taken the form of letters; typically, a V symbolising a sharp decline and quick recovery, U for a slower recovery, W for double dip recession, which was thankfully avoided, and a K, whereby the recovery takes two separate directions, some prosper, and others continue on a downward trend. Those who became unable to earn or access Government support during the pandemic have been disproportionately adversely affected and will take longer to recover. At this crucial time, it is vital that we strive to combat inequality and improve the prospects of those worst hit by the pandemic. There is increasing recognition amongst Government and business leaders that economic growth is not the only way to measure success. It is becoming harder to ignore the effects of poverty, societal injustice, climate change, catastrophic weather events, forest fires and rising sea levels. As we navigate our way out of the pandemic, we need to do so with solutions that meet the needs of local communities and protect the environment.

Read more on our response to supporting local communities on pages 39–40

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Appendix

Introduction The challenges impacting business continued

Climate change – the path to net zero carbon

Environmental impact and solutions

-78% Sixth Carbon Budget recommendation of reduction in UK net emissions from 1990 to 2035

In line with the Paris Agreement, in 2020 the UK became the first major economy to pass a net zero law, upholding its commitment to end contribution to global warming by 2050. This year, the UK will host COP26, the United Nations Climate Summit, bringing world leaders together to decide on the next actions to tackle climate change and deliver net zero carbon. greenhouse gases from 1990 to 2035. Real estate accounts for a significant proportion of total global energy use, therefore the industry has a key role to play in limiting emissions and the fight against climate change. Tackling this issue has been placed at the forefront of real estate company agendas. With the help of frameworks and guidance The Climate Change Committee recently produced the sixth Carbon Budget, which recommends a -78% reduction in UK net emissions of provided by the Task Force on Climate Related Financial Disclosures (TCFD), there is a renewed focus on improving and increasing the reporting of climate related financial information. With the ability to measure comes the ability to manage and mitigate climate related risks, using science based targets and reporting frameworks.

Increasing biodiversity, creating habitats and rewilding are areas where many property owners are able to make a contribution. It does not have to involve vast swathes of land. Small changes, including rooftop beehives and bug hotels, grass verges that remain un- mowed and planted with wildflowers all help to make a positive impact. Rural land management and natural capital services involve regenerative agriculture, sustainable farming, agroforestry, rewilding, and habitat creation on a much broader scale. Ultimately, the efforts made to address issues within both our urban and rural environments are critical and essential.

Real estate industry stakeholders are now expected to have better awareness of the impact their activities have on the natural environment, communities, and climate. The threats to our environment are vast, from plastic pollution, intensive farming, deforestation, soil erosion and global warming. The market for natural capital services which protect and enhance the environment is growing. Some are Government sponsored initiatives, for example, the Woodland Carbon Code (WCC), a scheme whereby the amount of carbon sequestered through new woodland is calculated and can be traded at auction as units of carbon. This allows owners of woodland to gain an additional income stream and purchasers of units to offset their carbon emissions.

Some real estate companies have already published their net zero carbon commitments and pathways. Momentum is clearly building within the industry towards more climate action. The benefits are not only to the environment; reducing emissions creates employment opportunities, reduces fuel and energy bills and has a positive impact on public health. We are moving towards a property investment market that attaches a premium price to energy efficient buildings and leaves inefficient assets with high capital expenditure requirements to comply, stranded.

Read more on our environmental focus on pages 19–24

Read more on our response to climate change on pages 19–21

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Sustainable Buildings

Our Employees

Stakeholder Engagement

Appendix

Introduction The challenges impacting business continued

Diversity and inclusion

Health and wellness

There is a lack of diversity within the sector and the real estate industry has a role to play in combating unconscious bias and discrimination against underrepresented groups. Women are also underrepresented, particularly at Board level. A culture of presenteeism does not favour those, more often women, trying to balance work and family life. The pandemic exacerbated this issue for many women, who frequently bear the brunt of childcare, home schooling and household administration alongside employment.

Powerful images and widespread media coverage of the Black Lives Matter movement in summer 2020 forced society to wake up to prejudice and recognise privilege. The law demands equal opportunities during the recruitment process; however, the issue begins far earlier than this. Unconscious bias affects children from early years education through to career choices and opportunities. There are many factors which impact the journey to a successful career. This is of course a problem seen much wider than in the real estate industry, but there are things we can do to make a positive impact. Acknowledging that the issue exists, educating employees, tracking implicit bias, creating flexible working practices, widening the pool of information sources and advisers and offering inclusive work experience programmes are all conducive to creating a company culture that values diversity. There is increasing recognition that with diversity comes many advantages, a greater number of perspectives, increased innovation, creativity, and problem-solving ability. Inroads have been made, but there is a way to go.

Provisions for increasing employee wellness has been high on corporate agendas in recent years. The focus on this increased during the Covid-19 pandemic, specifically with heightened emphasis on air quality, ventilation, and outdoor space. Making a building Covid-safe varies from sector to sector, for retailers and the creation of one-way systems, social distance floor markings and screening, allows shoppers to be safer. Office workers will return to desks that are spaced further apart, with improved air conditioning and ventilation. Avoidance of crowded public transport has led to greater numbers travelling further on foot or by bicycle, increasing the need for cycle storage and shower facilities at work. Frameworks and accreditations designed to assess a building’s wellness profile are gaining traction. Areas covered include air quality, light, sounds and noise, temperature control and provisions for physical and mental health. Buildings which score highly against these criteria will be better placed to meet the needs of increasingly health-conscious occupiers and be more desirable to investors.

Read more on our response to health and wellness on pages 26–27

Read more on our diversity and inclusion policy on page 32

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Appendix

Approach Summary Determining our sustainability priorities We have re-evaluated the sustainability issues important to us and our stakeholders and fully integrated sustainability into our corporate strategy. This year we have developed our sustainability framework to effectively track andmeasure our sustainability performance across our portfolio.

Our material issues 1/

2021 highlights – Developed sustainability framework aligned to Sustainable Development Goals (SDGs) – Joined Better Buildings Partnership – Achieved EPRA Gold for 2020 Sustainability Report – Awarded two Green star GRESB status Looking ahead We are working to further identify and target key impact areas across the portfolio, contributing to better management of the overall environmental performance with a view to publishing our path to net zero carbon. We will be focusing on setting new clear environmental targets in line with a net zero carbon pathway as part of our sustainability targets to effectively measure our portfolio performance over the short, medium and long-term.

Sustainability governance, management and advocacy We aim to have in place high standards of sustainability governance and management, and will undertake initiatives to promote greater environmental responsibility. This also includes a focus on business practices, which are activities which concern the way the business is run, including business ethics, compliance and tax principles.

Read more on page 11–17

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Approach Our approach to sustainability

Integrating sustainability within our corporate strategy We believe that sustainability must be fully embedded into all of our activities. A responsible and ethical approach to business is essential for the benefit of all our stakeholders and understanding the long-term impact of our decisions will help us to manage risk and continue to generate value.

Portfolio

Operational Excellence 1 Maintaining an efficient

Acting

1

3

1

1

3

3

2

2

2

Performance 1 Creating and owning a portfolio which provides income and capital growth 2 Growing occupancy and income profile 3 Enhancing asset quality, providing space that exceeds occupier expectations Sustainable buildings See pages 25–30 4 Outperforming the MSCI UK Quarterly Property Index

Responsibly 1 Ensuring wemaintain our company values, positive working culture and alignment of the team Our employees See pages 31–34 2 Working closely with our occupiers, shareholders and other stakeholders Stakeholder engagement

operating platform, utilising technology as appropriate 2 Having an agile and flexible business model, adaptable tomarket trends 3 Delivering earnings growth 4 Having an appropriate capital structure for the market cycle 5 Growing to deliver economies of scale

Read more on page 13

See pages 35–40 3

Ensuring sustainability is integrated within our business model and howwe and our occupiers operate Environmental focus See pages 18–24

Sustainability governance

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Approach Our approach to sustainability continued

2/ Our environment – Embarked on development of net zero carbon pathway – Undertaken biodiversity surveys at several sites and introduced a range of initiatives as a result – Reduced landlord purchased water consumption by -47% – Reduced waste disposal by -53% 3/ – Reassessed 23 EPCs, improving 20 over the year, increasing the average rating to a C, or an improvement of 37 points, from last year – Created new Health and Safety Committee to bring renewed focus and reassurance to our occupiers, visitors and employees – Provided Covid-19 compliant guidance for office reoccupation – Developed refurbishment guidance Ensuring our buildings exceed expectations checklist for use by our contractors and suppliers in future projects to ensure these meet our sustainability standards – Increased number of green leases across portfolio by 75%

4/ Focusing on our employees – Carried out employee survey – Held socially distanced team meeting offsite – Moved office and upgraded workplace amenities – Established regular virtual team meetings during lockdowns 5/ Workingwith our stakeholders – Developed occupier engagement programme – Carried out occupier satisfaction survey – Continued roll out of our Supplier Code of Conduct – Held fifteenth anniversary local community initiative with £15,000 funding award – Made further charitable donations of £14,000

Our journey so far We have now completed the initial stage of our sustainability journey with the key five-year targets that were set in 2016 nowmet, including: – -20% reduction in Scope 1 and 2 carbon emissions – we exceeded this target, achieving an overall -57% reduction – Reduction of water consumption by -5% by 2021 – we have achieved a reduction of -9% – Reduction of waste to landfill by -10% by 2021 – our reduction is -98% – To eliminate any F or G rated EPCs by 2021 – we have only one F rated EPC left in the portfolio We are now planning the next stage of more ambitious targets and objectives in line with our commitment Over the course of the year we have continued to make significant progress across our core areas of focus including: 1/ to sustainability best practice. Progress over the year Our approach to sustainability – Joined Better Buildings Partnership and contributed to various initiatives which will benefit both occupiers and employees – Reviewed sustainability priorities and developed action plan – Awarded two Green star GRESB status – Maintained EPRA Gold award for Sustainability reporting

Looking ahead The next key stage will be to develop our pathway to net zero carbon, which we intend to publish within this financial year. We aim to develop this in accordance with the framework set by the Better Buildings Partnership, to be consistent with best practice within the industry. As part of the pathway we will determine the most appropriate targets to measure ourselves against as we progress. We have recognised that there are risks arising from climate change that could have an impact on our assets within the portfolio. We intend to develop our thinking around this so that we are able to report fully in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures. Although developing our pathway to net zero carbon is a key objective for the coming year we intend to make further progress against all of the other material issues that we have identified. We have set a number of targets already for these, which are set out within the Report, and these will be developed further as we progress against them.

Read more on pages 19–24

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Approach Our approach to sustainability continued Our sustainability framework 1 2 3

1

3

2

Environmental focus Tackling environmental issues like climate change, biodiversity, waste and resource use requires global, national and local action. We have a role to play in addressing these challenges, and will keep working to minimise our impact.

Sustainable buildings We will provide safe, sustainable and relevant spaces that meet our occupiers’ needs and add value to their operations. We will also exceed health and safety expectations to incorporate the wellbeing of occupiers and visitors, and to certify and verify our high standards.

-57% emissions reductions

100% assess asset health and safety

7 assetswith biodiversity improvements

100% refurbishments fittedwithwellbeing considerations

Following our materiality assessment last year when we identified 12 key material issues, we have further developed our sustainability framework in line with our corporate strategy and core areas of focus. We also identified the relevant Sustainable Development Goals (SDGs) to ensure our sustainability priorities align with global and national expectations and where we can make the greatest contributions. We will continue to review these priorities to make sure they are fit for purpose and that we measure our progress appropriately.

-38% like-for-likewater consumption reduction

Climate change mitigationand adaptation

Health and safety

Biodiversity

Integrating wellbeing

92% EPCratings A-D

Water consumption

-53% decrease in like-for-like wastedisposal

Sustainable buildings

Materials andwaste

Sustainability governance and advocacy

Occupier satisfaction

88% occupier retention

See how each pillar is fully aligned to our corporate strategy on page 11

Supplier andcontractor responsibility

Employees and skills

Our strategic priorities In order to deliver on our purpose, we have in place three distinct strategic pillars: Portfolio Performance, Operational Excellence and Acting Responsibly.

100% COCroll out to principal suppliers

1

1

3

3

Communityand social value

85% employee satisfaction score

2

2

Stakeholder engagement We are committed tomaking a positive contribution to society and the environment

Our employees We are proud of our strong and open company culture and the values we share with our team. Tomaintain this culture, we will stay focused on the needs of our employees, value the contributions made by the whole team, and nurture a positive working environment.

£29,000 charitable donations

while minimising any negative impact. To achieve this, we will keep engaging with our occupiers, shareholders, suppliers and wider community. We will also ensure our Board acts to promote the long-term success of the business for the benefit of all our stakeholders.

1

3

Portfolio Performance

2

1

3

Operational Excellence

2

1

3

Acting Responsibly

2

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Approach Our approach to sustainability continued

Governance

Composition of the Board

Role

Leadership The Board of Picton has responsibility for the long-term success of the business, providing leadership and direction with due regard and consideration to all of our stakeholders. The Board comprises the Chair, two Executive Directors and three independent Non-Executive Directors. They have a range of skills and experience that are complementary and relevant to the business. The biographies of each of the Directors are set out on pages 66 and 67 of the Annual Report. The Board has full responsibility for the direction and control of the business, and sets and implements strategy within a framework of internal controls and risk management. The Board has established four Committees with agreed terms of reference to have oversight of and responsibility for particular business functions. These are:

The Directors act as they consider most likely to promote the success of the business for the benefit of all our shareholders. In doing so, the Directors have regard for the likely long-term consequences of their decisions, maintaining the need to act fairly between all stakeholders. The Board seeks to engage with all of its stakeholders, whether directly or delegated through management.

Number

%

Non-Executive Chair Executive Directors Independent Non- Executive Directors

1

17%

2 33%

3 50%

More details on how the Board engages with stakeholders on pages 62–63 of the Annual Report 2021

Diversity

Number

%

Male

4 67% 2 33%

The Governance section of the Annual Report sets out more information on the role and structure of the Board and its activities over the year. Data In line with a best practice approach to risk management of privacy and data governance, we have established measures to protect the privacy and security of data and ensure compliance. We have adopted corporate policies and operating procedures governing how we collect, use, retain and protect our data.

Female

– Audit and Risk – Remuneration – Nomination – Property Valuation

Tenure

Number

%

0 to 3 years 3 to 6 years

4 67% 2 33%

The Committees meet on a regular basis and more details on their activities are included in the Annual Report.

Please refer to our Privacy Policy on our website

More details on the Committees in the Governance section of the Annual Report 2021

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Voluntary reporting Approach Our approach to sustainability continued

We recognise that it is important to be transparent on sustainability issues, so that our stakeholders canmake informed decisions. We continue to report to EPRA and GRESB.

GRESB

EPRA

To increase our transparency, we started reporting to GRESB in 2017. We used our first year to benchmark where we were in the market and to establish the appropriate strategy for improvement. Over the last three years, we have put several initiatives in place to improve our score, including data collection, policy documentation and data accuracy. For 2020, GRESB introduced a new scoring methodology, making comparison with previous years more difficult. We improved our score in 2020, achieving a score of 65 and two Green star status, seeing an increase of four points overall, ahead of 2019 and surpassing our peer group average. The GRESB tables in the Appendix show how we have improved year-on-year and compared to our peer group. In 2021 we aim as a minimum to maintain our two Green star status and have identified areas where we can improve our score in the future.

The European Public Real Estate Association (‘EPRA’), is a non-profit association representing Europe’s publicly listed property companies. Through responding to EPRA, we are promoting sustainability within our property life cycle, while also identifying opportunities for further improvements relating to sustainability regulations and initiatives. We continue to expand the scope of our reporting and have improved our score year-on-year. 2019 saw us achieve a Gold award for the first time, in line with our ESG actions, targets and strategy and we maintained this award in 2020.

Read more on pages 42–56

Read more on pages 42–56

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Approach Our sustainability approach in action

Sustainable thinking, collaborative action. Working with our occupiers to progress sustainability priorities at 401 Grafton Gate, Milton Keynes.

– Sharing information on suspected Covid-19 cases and protocols in place – Future sustainability initiatives such as electric car charging points and other occupier facilities – Service charge proposals The audio visual facilities installed in the reception area provide us with the ability to promote sustainability, engage with our occupiers and display information for occupiers including; – News, promotions and sustainability initiatives – Environmental and energy information i.e. waste and recycling performance, electricity consumption, solar panel conversion performance, biodiversity initiatives – Charity events and local fundraising community initiatives Energymonitoring Energy consumption is monitored constantly. Information taken from electricity meters throughout the building is measured every 30 minutes and compares consumption against a building baseline and industry standards. This information is shared with occupiers and forms the basis for discussion on measures to reduce consumption and cost. Through adjusting various control levels, hours of operation and encouraging occupiers to change some of their practices it was possible to reduce overall consumption by -37% during 2020.

Improving facilities for our occupiers During 2019 and 2020 we carried out a substantial refurbishment of the communal areas of the building including the reception, lift lobbies and toilets. As well as improving the appearance and amenities, we included many sustainability focused initiatives such as: – Energy efficient LED lighting introduced in all areas – More amenity space created, including brighter and more open entrances – New touch-free taps installed in toilets, improving hygiene and energy efficiency – New low water use toilets installed – Improved ventilation installed in the atrium – Reception facilities improved, including a new digital display to present information on sustainability initiatives

Occupier engagement To overcome communication challenges presented by the Covid-19 pandemic our managing agents hosted fortnightly virtual meetings with occupiers throughout 2020 and early 2021. These helped create a sense of community amongst occupiers, managing agents and ourselves and became an important forum for sharing the latest information. A range of topics were covered including: – Reoccupation guides and building risk assessments – Measures taken to keep occupiers safe and well – Occupier plans for operating in the building and controlling employee numbers on site – Social distancing measures, cleaning and hygiene practices, reducing touch points and extra signage – Taking advantage of reduced occupancy to undertake essential maintenance and improvements

Generating energy on site Solar panels were installed on the roof of the building in 2016. They currently produce around 35,000 kWh resulting in an annual saving of approximately £5,000. This is around 20% above initial projections with much higher than forecast generation particularly during the summer months. Future proposals We are currently investigating the feasibility of creating new cycle and shower facilities in place of the current refuse storage building located in the car park which can be easily relocated. There is much interest from occupiers in electric car usage and as part of our overall car charging point strategy we are looking at the installation of several chargers on site.

PictonProperty Income Limited Sustainability Report 2021

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Approach

Introduction

Environmental Focus

Sustainable Buildings

Our Employees

Stakeholder Engagement

Appendix

Approach Our sustainability approach in action continued Sustainable thinking, collaborative action. Working with the Better Buildings Partnership to launch a comprehensive practical guide to best practice in responsible property management.

-14% Reduction in service charge costs

Our Head of Occupier Services was invited to join the Occupier Engagement Working Party and contribute towards the creation of a new Responsible Property Management Toolkit for asset, property and facility managers. This group was tasked with considering and drafting guidance notes on topics such as occupier engagement, assessing occupier requirements, building user guides and service charge requirements. With experience in dealing with service charges and a former role as a member of the RICS Service Charge Working Party, our Head of Occupier Services contributed to writing the service charge guidance note covering best practice service charge procedures and how to take sustainability matters into account when dealing with all aspects of service charges. We have 31 service charges in our portfolio with a total annual budget of around £6.1 million. We are very aware that our occupiers expect us to manage their payments prudently and ensure services are delivered properly in order to fully support their businesses and employees. The pandemic has increased the focus on value for money and we are pleased that through careful management we were able to reduce service charge costs in 2020 by up to -14% at some locations without impacting on service standards or building operations. This was achieved in part through our commitment to undertake a selection of ESG audits across several of our properties. The audits identified a range of cost saving measures mainly related to changes in the operation of mechanical

and electrical plants. The payback period was almost immediate and we estimate initial annual savings of around £60,000. Further ESG audits will be undertaken in 2021, focusing on buildings where we believe the most impact can be made. We believe service charges are an important driver of sustainability focused improvements, working in collaboration with our occupiers. For example, we are looking to improve the accuracy of electricity metering at some locations including Queens House, Glasgow, which will enable occupiers to better understand how they can improve energy efficiency. We have seen growing interest in the installation of electric car charging facilities. We have been discussing how to use service charges to support this with occupiers at several sites including Tower Wharf, Bristol, Colchester Business Park, Colchester and Atlas House, Marlow. Our growing biodiversity programme has also been a topic of much occupier interest and the roll out of beehives, bug hotels, bird boxes and other measures has been well received at locations such as Queens House, Glasgow, Colchester Business Park, Pembroke Court, Chatham and Parkbury Industrial Estate, Radlett.

PictonProperty Income Limited Sustainability Report 2021

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Environmental Focus

Introduction

Approach

Sustainable Buildings

Our Employees

Stakeholder Engagement

Appendix

Environmental Focus Summary Our environment Climate change is one of themost significant issues to be addressed globally and requires urgent action. It is recognised that commercial buildings are a key source of emissions and that as a responsible landlord wemust seek to reduce the environmental impact of our buildings. We continually assess the environmental performance of our portfolio and seek to implement improvements wherewe can.

Our material issues 1/ Climate changemitigation and adaptation Reducing impact of buildings through design, energy efficiency and occupier engagement, and taking into consideration embodied carbon. Climate adaptation is about ensuring that the business is able to adapt to the physical and transitional impact of climate change.

2021 highlights

3/ Water consumption Focus on water management and efficiency.

– Embarked on development of net zero carbon pathway and the Task Force on Climate-related Financial Disclosures (TCFD) reporting framework – Undertaken biodiversity surveys with initiatives introduced across several sites – Reduced landlord purchased water consumption by -47% – Reduced waste disposal by -53% Looking ahead During the course of the coming year we intend to develop and publish our pathway to net zero carbon, in line with the Better Buildings Partnership framework. We will also develop our reporting in line with TCFD. We will carry out further biodiversity surveys at a number of assets in the coming year, and introduce further initiatives where appropriate. We will focus on improving data collection and introducingwater preservationmeasures.

Read more on page 23

4/ Materials andwaste

Read more on pages 19–21

Focus on materials used, sustainable procurement and waste and recycling.

2/ Biodiversity

Read more on page 24

Focus on land use and ecology, which include adding environmental value, for example with landscapes, green roofs and sustainable drainage systems. Biodiversity also contributes to wellbeing.

Read more on pages 22–23

PictonProperty Income Limited Sustainability Report 2021

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Environmental Focus

Introduction

Approach

Sustainable Buildings

Our Employees

Stakeholder Engagement

Appendix

Environmental Focus Our environment Climate changemitigation and adaptation As set out in our previous 2020 Sustainability Report, we recognise that climate change adaptation is a growing focus, and will be a key consideration as we embark on our TCFD reporting scope over the coming year. With regard to our portfolio, we continue

real impact of energy efficiency projects undertaken over the past two years. This year we reduced our energy intensities by -25% in absolute terms and -28% on a like-for-like basis. As set out previously, the reduced activity over the year will have contributed to these figures and we hope to see a sustained reduction in future, as a result of the efficiency measures we have implemented. Occupier obtained energy data is included in the building coverage as we work towards our aim of obtaining 100% coverage of our portfolio. It, however, has been excluded from intensity, renewable and estimated metrics due to it being a measure that we have little control over. We aim to have automatic meter reads across the whole portfolio to increase reliability of data and reporting accuracy.

In respect of our absolute carbon emissions, over the year we have reduced our Scope 1 and Scope 2 emissions by -31% and -36% respectively. The reduction in business activities as a result of the pandemic has been a clear factor behind this. We continue to focus on improving data collection and reducing emissions. For a full breakdown of each emission source and our progress please see the Appendix on pages 46–56 where we have set out our performance tables in line with EPRA reporting guidelines. Energy In absolute terms, there has been a -29% reduction in electricity consumption. There has been a -28% reduction in like-for-like electricity consumption. For landlord-controlled supplies, in absolute terms, there has been a -32% reduction in fuel use and a -28% decrease in like- for-like fuel use. Reductions can be predominantly attributed to site closures following the Covid-19 pandemic. We hope that next year, as operations return to normal, data will demonstrate the

As part of our five-year plan to meet our energy reduction targets, we have undertaken a programme of occupier engagement, including audits and workshops. The focus has primarily been on office locations, but we will also be working with other occupier controlled sites to help reduce their operating costs and the impacts on our Scope 3 emissions.

to ensure our buildings are resilient to changes in the environment and availability of resources. Resilience is one of the principal items in our new refurbishment guidance. We have a diverse portfolio of buildings across varying sectors and geographies, which are both landlord and occupier controlled. In order to improve data collection and reporting we continue to utilise a single energy supplier for landlord controlled areas across the portfolio and use automatic meter readings wherever possible, We are carrying out a gap analysis to establish any locations without automatic meter readings with the aim of delivering complete coverage of landlord data collection. For our occupied spaces, where we do not control energy, we continue to liaise closely with our occupiers to obtain data. Clearly, the past year has proved challenging with respect to data collection, but we will use this opportunity to further engage with our occupiers which we hope will benefit data collection going forwards.

Read more in tables 4 and 5

-28% Reduction in like-for-like electricity consumption -25% Reduction in absolute energy intensities

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