Aviva Pension Schroder Global Cities Real Estate Pn (AP/EP/IE/XE/S6)

Sustainable, Responsible &/or ESG Policy:

Over 200 million people live in the top 30 global cities, as assessed by the investment manager’s Global Cities Index.2 Considering this, real estate companies that contribute to an urban environment that provides a good quality of life for residents while minimising costs to the planet and using resources efficiently are likely to positively affect the health and wellbeing of a significant portion of the world’s population. By investing in companies that are assessed as contributing to such urban environments, the Fund aims to help them continue to implement (and potentially expand) their sustainable activities. The Fund’s holdings in such companies may also allow the investment manager, through engagement with management teams, to encourage companies to enhance their sustainability credentials further (as assessed by the Scorecard).

A company is classified as contributing to an urban environment that provides a good quality of life for residents while minimising costs to the planet and using resources efficiently if it (i) achieves a score of at least 50% on both components of the Scorecard (and thereby achieves the threshold for GRESB’s Green Star designation); or (ii) the Panel determines that the company would achieve a score of at least 50% on each component if additional robust evidence was available within the Scorecard and included in the calculation of the score. The investment manager’s approach to assessing sustainability described below has been assessed by the investment manager’s Risk and Compliance functions, which are independent of the investment decision making process for the Fund, and they have deemed this approach to be a robust, evidence-based standard that is an absolute measure of environmental and/ or social sustainability.

Each proposed investment is assessed against a scorecard developed by GRESB – an organisation that specialises in providing real asset sustainability information to investors. Full details of the Scorecard can be found at https:// documents.gresb.com/generated_files/real_estate/2024/ real_estate/scoring_document/complete.html.

GRESB scores individual real estate companies based on the factors below, which are used to assess how the real estate assets in the company’s portfolio perform across a range of sustainability matters. GRESB collects data at the building (asset) level, which is then aggregated to the company or portfolio level, typically proportionally based on factors such as each building's square footage. Participating companies provide data to GRESB either automatically through their data management systems—integrated with building smart meters—or manually. GRESB may update the Scorecard periodically and the investment manager will update the summary below within a reasonable timeframe following any such updates.

Performance

• Energy – includes total energy consumption and renewable energy generated.
• GHG emissions - includes total GHG emissions.
• Water – includes water consumption and reuse or recycling of water.
• Waste – includes total waste generation.
• Tenant and community wellbeing – includes tenant engagement programmes; community engagement programmes; and tenant health and wellbeing measures.
• Building certification – includes green building certifications at the time of design, construction or renovation; current green building certifications; and current energy efficiency certifications.
• Sustainability risk management – includes performance of environment/social risk assessments; technical building assessments for energy/ water/ waste; and energy/ water/ waste efficiency measures implemented.
• Sustainability data – includes confirmation of whether data on GHG emissions, water and waste has been independently verified.
• Sustainability targets – includes long-term sustainability improvement targets and GHG reduction targets.

Management

• Leadership – includes public commitments to ESG leadership standards, ESG personnel and accountability.
• Policies – includes policies on specific ESG issues.
• Reporting – includes disclosures of ESG-related actions, performance, and incident monitoring.
• Risk management – includes ESG-specific risk management systems, policies and procedures.
• Stakeholder engagement – includes employee, supplier and contractor ESG-related initiatives and monitoring.

In exceptional cases where the investment manager deems that the Scorecard does not provide a fair reflection of a company’s sustainability, or where GRESB has not assessed a company, the investment manager can refer the company to Schroders’ Sustainable Investment Panel (the Panel), an independent panel of experts. The Panel reviews additional robust evidence provided by the investment manager to determine whether, if such evidence was available within the Scorecard, the company would achieve a score of at least 50% on both components. This could be relevant where the Scorecard does not capture a relevant area of contribution – such as where the investment manager believes that a smaller company has strong sustainability credentials, but it does not submit data to GRESB due to resource constraints and therefore is not scored.

There is also an exclusions list for the fund, which can be found here: https://api.schroders.com/document-store/Schroder%20Global%20Cites%20Real%20Estate%20-%20Sustainability%20Information%20Document.pdf

Process:

Summary

The Schroder Global Cities Strategy is a four-step data led investment process, which combines geo-spatial data science with a ‘quant-ESG’ process enabling the investment team to focus more of their time analysing sustainable companies with the best assets in the best locations.

1. Geo-spatial analysis uses asset location data to generate a ‘Global Cities Score’ for each company based on the environmental, transport, innovation and economic characteristics of their assets' locations.
2. ESG analysis with investment only possible above a threshold.
3. Fundamental analysis is conducted by the analysts to determine potential upside and assess risk.
4. Portfolio construction is based on the potential upside and fundamental risk, and a top-down regional allocation restriction. This ensures that the portfolio avoids taking macro positions and roughly matches the benchmark regional allocation.

Stage 1 – Geo-spatial analysis

Asset Database – Process Lynchpin

The Asset Database maps every asset of a company anywhere in the world. This provides the latitude and longitude of each asset. The team has visibility of all the assets owned by listed real asset companies. There are over 225,000 assets in the database.

The asset database allows the manager to identify which company owns assets in the strongest global cities.

The asset database in action can be seen in below illustrative charts and a video through link:  https://schroders.wistia.com/medias/xbec2bcmhx

Source: Schroders, for illustration purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

Global Cities Scores

Cities and assets are scored using four City scores (Environmental, Transport, Innovation, and Economic). Cities are defined by the Global Human Settlement Layer (GHSL). This means every asset is scored according to where it intersects with the four City Scores.

Two of the City Scores – Environmental and Transport - integrate environmental and social factors into the process in stage 1.

The City Scores and their data utilisation are listed below:

Source: Schroders, for illustration purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

The result is c. 300 companies in the Long-Term Index (LTI) with good global cities scores, from a starting point of c. 600 companies. Around half of the companies under coverage are excluded in stage 1 as shown below. This analysis is carried out for the cities in every country across our investment universe.

Source: Schroders, for illustration purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

Stage 2 – ESG analysis

Stage 2 focuses on positively screening for sustainable companies. Companies are classed as sustainable through meeting or exceeding the threshold for the ‘Green Star’ designation issued by GRESB1 (the Global Real Estate Sustainability Benchmark), which is achieved by scoring at least 50% on both the performance and management components of the GRESB scorecard. GRESB is widely considered to be the leading sustainability data provider for the real estate industry.

Source: Schroders, GRESB, 2025. For illustrative purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

In exceptional cases where the team believe that the Scorecard does not provide a fair reflection of a company’s sustainability, or where GRESB has not assessed a company, the team can refer the company to Schroders’ Sustainable Investment Panel (the Panel), an independent panel of experts. The Panel reviews additional robust evidence provided by the team to determine whether, if such evidence was available within the Scorecard, the company would achieve a score of at least 50% on both components. This could be relevant where the Scorecard does not capture a relevant area of contribution – such as where the team believes that a smaller company has strong sustainability credentials, but it does not submit data to GRESB due to resource constraints and therefore is not scored.

Stage 3 - Fundamental Analysis and Valuation

A price target is then calculated by a price target is then calculated by conducting due diligence on every company in the LTI. The proprietary valuation models are built using two distinct types of research, which are complimentary. First, the team will carry out ‘traditional’ research, visiting assets, meeting management and sustainability teams, analysing the balance sheet etc. Second, the team will then work with our data scientist to analyse companies further.

1 GRESB 2024, All intellectual property rights to this data belong exclusively to GRESB B.V. All rights reserved. GRESB B.V. has no liability to any person (including a natural person, corporate or unincorporated body) for any losses, damages, costs, expenses or other liabilities suffered as a result of any use of or reliance on any of the information which may be attributed to it.

The team has built a number of databases which create efficiencies when analysing stocks. For examples, we have extensive data sets which help to evaluate supply, demand, pricing, and rental dynamics alongside demographic and geo-spatial information. The investment process makes extensive use of the asset database. In the below example, which is one of the many dashboards that we have available, we can look at the Multi-Family companies that make it into our Long Term Index. Amongst many other factors, we have the supply growth in the cities where their assets are located and systematically analyse the sector to see which companies have assets in the most supply constrained locations.

Source: Schroders, for illustrative purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

Our data scientist also does ad-hoc geospatial analysis, below is an example of one of the dashboards for a deep dive into the Cold Storage sector.

Source: Schroders, for illustrative purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

The investment team values companies based on financial modelling. Below is the summary page from the Equinix model from 2023. This shows the Price Target (PT) output derived by a DCF.

Source: Schroders, for illustrative purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

The model inputs are based on company and asset meetings and an understanding of the demand drivers in the underlying portfolios. Companies will also be compared to their peers as shown below.

Source: Schroders, for illustrative purposes only. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

Valuation techniques vary between sectors and markets, with the price target indicating the absolute value of a security.

Stage 4 - Portfolio construction

Portfolio construction is based on:

1. Potential upside and fundamental risk, including liquidity.
2. A top-down regional allocation restriction ensuring the portfolio avoids taking macro bets and roughly matches the benchmark regional allocation

Source: Schroders 30 June 2024. Data subject to rounding. This does not represent any recommendation to invest in the above-mentioned regions. Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy.

Resources, Affiliations & Corporate Strategies:

Sustainability is fundamental to our investment principles at Schroders and we have an experienced and well-resourced Sustainable Investment team, who are embedded within our investment function. We are a global team, spread across four regional hubs in London, Paris, Singapore and New York, aiming to ensure that sustainability is embedded through our global investment teams and client functions.

The team is led by Andrew Howard, Global Head of Sustainable Investment. As team head, he oversees our approach to ESG integration, active ownership, our sustainability research and tools, and our reporting and product strategy.

Our central Sustainable Investment team sits alongside investment teams rather than operating in a silo, which facilitates regular dialogue with our analysts and portfolio managers.
It is organised into four pillars:

We outline their key responsibilities and areas of focus below.

1. Thematics
Comprising sustainability research, active ownership, and models and analytics, our thematics team help power investment decision making with proprietary insights and analysis, working with fund managers and analysts to make better informed investment decisions. Responsibilities include:

•  Providing sustainability – related research and technical support for stakeholders across the firm.
• Engaging companies to understand how prepared they are for a changing world and pushing them towards more sustainable practices where relevant to achieve better investment outcomes for our clients.
• Exercising voting rights in line with our Voting Policy and Principles.
• Maintaining and evolving of our suite of proprietary sustainability tools.
• Harnessing sustainability data effectively from both conventional and unconventional sources.

2. Advisory and Integration

Our Advisory and Integration team acts as a central contact point and consultant for a range of stakeholders across the business. This includes advising investment teams on ESG integration best practice; compliance, risk and legal teams on ESG regulation; and working with our regional experts across Asia Pacific, Europe and North America, as outlined under pillar four.

3. Impact

Our Impact team is responsible for scaling our impact product offering in line with best-practice impact principles. The team works closely with investment teams and is responsible for developing and implementing our impact management and measurement framework, including impact assessment and monitoring at transaction and portfolio level, product development, impact strategy and impact reporting.

4. Regional Expertise

Our Regional Experts based in Asia Pacific, Europe and North America have a deep understanding of local market characteristics and nuances, and are responsible for staying abreast of sustainability-related developments. Our experts work with clients and internal teams to navigate and support clients’ ESG aspirations and challenges, utilising Schroders’ proprietary tools and research to develop investment solutions that meet their needs. They also engage with regulators and industry bodies to shape and support the global sustainable finance agenda. Our regional experts are a critical extension of the central team in London as the firm continues to evolve its global sustainable investing strategy.

Governance of ESG Strategies and Policies

We have a number of governance structures in place for decision-making and oversight of our approach to sustainable investment. The Board of Schroders plc (the Board) has collective responsibility for the management, direction and performance of the Group, and is accountable for our overall business strategy. The Group Chief Executive is responsible for proposing the strategy for the Group and for its implementation, supported by the Group’s senior management team and a number of Committees, some of which are noted below.

The Group Sustainability and Impact (GSI) Committee provides advice to the Group Chief Executive on sustainability and impact matters. The Committee considers, reviews and recommends the overall global sustainability and impact strategy, including key initiatives, new commitments and policies for approval. The Global Head of Sustainable Investment and Global Head of Corporate Sustainability are members of the Committee and report to the Board.

The Sustainability Executive Committee (ExCo) develops and oversees the delivery of our Group-level sustainable investment management strategy. The ExCo also advises on the development of our sustainability and impact investment and product frameworks. The ExCo has senior representation from across the business including Investment, Client Group, Wealth Management, Schroders Capital and Corporate Sustainability.

The Group Regulatory Oversight Committee (GROC) oversees the progress of sustainability regulatory change programmes, as well as facilitating the monitoring of emergent sustainability regulations and ensuring we have appropriately determined the impact on our Group sustainability strategy and supporting operations. The GROC receives input on planned or potential sustainability-related regulation from our Public Policy and Compliance teams, which actively engage with relevant regulators, industry trade associations and other bodies in our key markets of the UK and EU. Once the business implications of new legal and regulatory requirements are defined, the relevant sustainability regulations programme workstreams deliver the necessary change to our business operations. The GROC oversees the progress of the programme, including monitoring and mitigating associated risks and issues. Where necessary, risks and key issues from the GROC can be escalated to the Group Risk Committee for resolution.

Certain Schroders entities, businesses and Investment teams also have their own committees which consider their sustainable investment activities. For example, the Private Assets Sustainability and Impact Steering Committee (PA S&I SteerCo) develops and oversees the implementation of the Private Assets Sustainability and Impact strategy. In addition, the Wealth Management Sustainable Investment Committee (WMSIC), a sub-committee of the Wealth Management Investment Committee (WMIC), has delegated responsibility for recommending Wealth Management's Sustainability models, as well as providing investment strategy and direction for client portfolios that are linked to the sustainable models.

Alongside our central Sustainable Investment team, sustainable investing is also overseen and delivered by dedicated teams and expert individuals embedded throughout the firm (including across Investment teams and Client Group functions).

Industry Involvement

We have a long-standing commitment to support and collaborate with several industry groups, organisations and initiatives to promote well-functioning financial markets.

Our key stakeholders include exchanges, regulators and international and regional trade associations. For example, Schroders is a member of trade bodies such as the Investment Association in the UK, the European Fund and Asset Management Association (EFAMA), the Asia Securities Industry and Financial Markets Association (ASIFMA) in Hong Kong and the Securities Industry and Financial Markets Association (SIFMA) in the US. Through this participation we share our insights to support the development of policy recommendations, share best practice and build coalitions of like-minded market participants to advocate for better functioning markets.

Our activity with policymakers aims to help them ensure that the measures they take support businesses and provide clear direction. By monitoring and influencing regulatory initiatives at their inception, we aim to support the development of a business environment which is conducive to Schroders’ clients’ best interests.

We aim to engage with the regulatory environments in which we are operating and raise awareness on sustainability matters. We believe well-designed regulation is an important cornerstone to promoting healthy markets and have asked publicly that policy makers support sustainable finance legislation and regulation and deliver on commitments, including around climate mitigation.

We consider this to be key in improving responsible investment standards across sectors, establishing a consistent dialogue with companies, and in promoting the ongoing development and recognition of sustainability and Environmental, Social and Governance (ESG) topics within the investment industry. A full list of organizations and initiatives of which Schroders is a member or signatory is available here: https://www.schroders.com/en/global/individual/corporate-transparency/working-with-policy-makers/memberships/