At Equity Commonwealth, we believe that sustainability, social responsibility and strong corporate governance
are key contributors to our success. Our approach to Environmental, Social and Governance (ESG) matters is
all-inclusive, addressing our effect on the environment, our social impact and our relationships with all of
our stakeholders, including our shareholders, tenants, employees and vendors.
The Company’s ESG program actively manages environmental impacts and climate-related risks and opportunities.
Our environmental and climate strategic planning and initiatives, combined with our targeted capital
investments, are aimed at reducing carbon emissions, mitigating risks and potentially realizing
climate-related opportunities that benefit our stakeholders.
Equity Commonwealth's ESG focus includes:
- maintaining high corporate governance standards that are aligned with the interests of our stakeholders
- implementing a diversity, equity and inclusion initiative
- emphasizing diversity of all types as an important part of our culture
- efficiently managing energy costs
- independent auditing of greenhouse gas (GHG) emissions
- assessing present and future climate-risk to business and properties
- creating high levels of stakeholder satisfaction
- actively engaging in our communities
- employee-driven sustainability working group that collaborates on ways to be more socially and
environmentally conscious
Social Responsibility
We believe in a shared commitment to diversity, ethics, integrity and community engagement, which commitment
serves as the foundation of our corporate purpose.
We have fostered a culture at Equity Commonwealth based on a meritocracy where integrity, diversity of
opinion, working passionately and collaboration are fundamental. We believe that diversity of all types
brings varying perspectives, encouraging differing viewpoints in order to effectively manage risk and create
value.
We have continued to focus our efforts in the areas of diversity, equity and inclusion (DE&I), as well as
employee health and well-being. Our President and CEO David Helfand signed the CEO Action for Diversity &
Inclusion Pledge as a signal that we will put DE&I into action by creating a culture of involvement, respect
and connection, where all employees’ voices are heard. Our goal is to create and sustain an inclusive
environment where diversity thrives and employees want to work. Our vision of diversity includes race,
gender, age, sexual orientation, physical ability and ethnicity, among others, and celebrating diversity is
one of our core values.
The Company acknowledges that improving DE&I in our business will require a long-term, sustained effort.
Toward that end, we launched an online weekly microlearning platform focused on diversity, inclusion and
leadership development, surveyed vendors regarding the diversity of their team members and enhanced our
parental leave policy to provide paid time off for primary and secondary caregivers. We also conducted
stakeholder engagement surveys for both our employees and our portfolio tenants.
In our October 2022 employee survey, we had a 91% overall response rate, with 85% of the participants
reporting they are “very happy” to be working at EQC. Additionally, 85% praised EQC’s open and honest
two-way communication and 80% of the participants indicated that their perspective and opinions are heard
and valued. Overall, the survey provided meaningful feedback and an opportunity to discuss and address
employee concerns. These surveys form an important part of our ongoing focus on engagement and overall
employee experience.
Our commitment to community brings active engagement, both as individuals and in our corporate capacity. We
are involved with local
organizations and community outreach programs, including the Greater Chicago Food
Depository and other Chicago-based, grass-roots organizations.
We seek to maintain the highest standards of integrity and ethics. We have implemented a set of rules that
governs our conduct and can be found in our Code
of Business Conduct and Ethics, which covers our employees and trustees and applies to
the Company's relationships with its vendors. This Code remains a cornerstone in fostering a respectful and
ethical work experience at the Company, setting forth our anti-bribery policy, our standards with respect to
compliance with the United States Foreign Corrupt Practices Act and similar governance-related matters.
Environmental Impact
In collaboration with our outside vendors Conservice ESG (formerly GOBY) and Schneider Electric USA, we
monitor and manage EQC’s environmental impact through an environmental management system (EMS). The EMS
tracks energy emissions and water usage, leveraging a framework similar to that of a Plan, Do, Check and Act
model and in alignment with the International Organization for Standardization (ISO) 14001 EMS.
Verification under this EMS includes data intake, extraction, staging, configuration, reporting and quality
assurance. In addition to the calculation of specific GHG emissions, the EMS makes usage metrics available
at multiple granularities, from the portfolio to the individual meter level.
EQC then uses the collected and visualized data in an effort to create a transparent approach in identifying
top and bottom-achieving performance indicators, as part of our efforts to implement improvements and track
results back into the EMS.
In May 2023, Equity Commonwealth obtained an Independent Assurance Statement for Scope 2 GHG emissions,
based on assertions and environmental data regarding indirect emissions from purchased electricity and water usage for
CY2022. This assurance audit was performed to a limited level of assurance and materiality based on the verifier’s professional judgment, using the independent third party’s verification
procedure and ISAE 3000. A copy of the Independent Assurance Statement is included in the Appendix below.
Property Sustainability
At Equity Commonwealth, we are focused on operating our properties efficiently from both an economic and
environmental perspective, including by:
- managing energy procurement costs with the cost-effective purchase of utilities in deregulated markets
- tracking energy consumption and benchmarking properties in order to evaluate performance trends in an
effort to enhance efficiency
- utilizing efficient LED lighting at properties
- performing HVAC retro-commissioning studies
- upgrading VAV boxes to direct digital control
- upgrading building automation systems
- conducting annual cybersecurity risk assessments
- enhancing our portfolio lease forms by incorporating additional energy conservation, energy consumption
data sharing and sustainability-related clauses
Of the four properties in our portfolio as of September 30, 2023 two have been certified with the EPA's
Energy Star label, and two have also achieved LEED certification from the US Green Building Council.
Equity Commonwealth has achieved LEED certification status from the US Green Building Council for the
following properties:
Equity Commonwealth has achieved Energy Star certification from the EPA for the following properties:
Vendor Sustainability
We engage CBRE, Inc. to provide property management services for our properties and require its team to
comply with our Code of Business Conduct
and Ethics. In addition, CBRE, Inc. emphasizes its own integrated program of
environmental and social responsibility, which is documented in its Corporate Responsibility Report that is
available on its website.
Memberships
In 2020, Equity Commonwealth became a GRESB member and has participated in the 2020, 2021 and 2022 GRESB Real
Estate Assessment. GRESB is also aligned with many of the standards set forth in the Task Force on
Climate-Related Financial Disclosures (TCFD).
Equity Commonwealth has been a member of the U.S. Green Building Council since 2020.
In 2021, Equity Commonwealth's President and CEO David Helfand signed the CEO Action for Diversity &
Inclusion Pledge.
COVID-19
We continue to closely monitor the COVID-19 pandemic and its impact on our business. Our priority is the
health and safety of our employees, tenants and building staff. We monitor federal, state and local
government requirements and guidance for operating workplaces. Our building protocols focus on enhancing
building safety to lower the risk of viral transmission of COVID-19, including:
- indoor air quality improvements such as MERV-13 filters and additional outdoor air ventilation, where
practical
- increased availability of sanitizer stations near common area touchpoints
- face coverings over nose and mouth when in building common areas, where required by local law
- encouraging social distancing in common areas and elevators, where required by law
- offering tenants additional enhanced cleaning options for their tenant premises
- following enhanced cleaning and communications protocols when notified of COVID-19 incidents in common
areas or tenant premises
- applying applicable CDC, ASHRAE, and WHO recommendations, where practical
Climate-Related Disclosures
Since we took over responsibility for EQC in 2014 with a new Board and internalized management team, we have
become a fundamentally different company with a smaller portfolio of four higher-quality assets, a strong
balance sheet with significant capacity and a track record of consistent execution. Through September 30,
2022, we completed $7.6 billion of dispositions, including the sale of 164 properties totaling 44 million
square feet. As a result of these sales, we exited 116 cities, 28 states and Australia and three land
parcels, and dramatically reduced our carbon footprint and the risk that climate change will adversely
affect our business.*
*For purposes of this climate-related analysis and disclosure, all property
calculations are based on the portfolio we took over in May 2014, including properties classified as
discontinued operations as of March 31, 2014 and excluding two land parcels previously classified as
properties.
The following summarizes our assessment of climate-related risk, in line with recommendations made by TCFD
and GRESB, with respect to our remaining portfolio assets and corporate headquarters. In sum, we believe our
remaining portfolio is well-positioned to adapt to climate-related changes that may occur for the following
reasons:
- Approximately 97% of our previously owned physical assets converted to cash or cash equivalents
- Properties primarily located in non-coastal areas
- One-half of our portfolio properties possess LEED certification
- Potential to upgrade properties and achieve greater energy efficiency and resilience
- Increasing energy and climate-related costs passed through to diversified tenant base
Our current state of readiness has us well prepared to navigate future challenges with the potential to seize
opportunities and integrate climate change within our strategic planning. Such strategic planning, combined
with our strong corporate governance, will provide us the opportunity to implement initiatives to reduce
carbon emissions, mitigate risks and potentially realize climate-related opportunities that benefit our
stakeholders.
Governance
Our commitment to the principles of ESG starts at the top. Our Board oversees our ESG program and initiatives, our
management team regularly reports to our Board on that program and our executive officers are evaluated and
compensated, in part, on the Company’s efforts with respect to ESG initiatives.
Our Board and committees, in consultation with management, actively oversee and manage the Company’s risk,
including periodically reviewing our policies and procedures with respect to risk assessment and risk management.
Specifically, our Board oversees climate-related risks and opportunities, aided by management-led discussions and
presentations. Our Board administers this oversight function directly, with support from its three standing
committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee,
each of which addresses risks specific to its respective areas of oversight (https://ir.eqcre.com/committees-charters-1/default.aspx).
Each committee reports its findings to the full Board.
In 2019, we formed an ESG team to focus on ESG risks and initiatives. This team is co-managed by our Senior Vice
President of Engineering, Construction and Operations and our Senior Vice President – Legal. The team
comprises and leverages a variety of subject matter experts within the Company (e.g., human resources, IT, leasing,
legal, asset management and finance) as well as a variety of third-party consultants. The ESG team co-managers
report directly to our CEO and General Counsel, who oversee the ESG team and our sustainability activities and
performance. Our CEO and General Counsel regularly update our Board on sustainability initiatives.
Climate Strategy and Portfolio Resiliency
Since we took over responsibility for EQC in 2014, we reduced the risk of climate change adversely affecting
our business by selling 164 of our 168 assets. The remaining risks that could disrupt business continuity
and profitability include potential physical risks from extreme weather as well as business and market risks
that may arise during the nation’s transition to a low-carbon economy. Our climate-resiliency efforts
are focused on the physical and transition risks to our portfolio properties and corporate headquarters.
Multiple Scenarios Regarding Potential Impact of Climate‐Related Risks and Opportunities
Our four remaining portfolio properties and our corporate headquarters are likely to experience
moderate-to-enhanced effects of climate change. Our corporate headquarters at Two North Riverside Plaza in
Chicago, IL, comprises approximately 14,525 rentable square feet leased within an approximately 536,739
square foot office building. The primary climate risk affecting these properties is anticipated to be rising
temperatures and increased storm intensity, which could result in summer drought-like conditions and
flooding during winter and spring. Properties in proximity to forested areas (Bridgepoint Square in Austin,
TX and Seventeenth Street Plaza in Denver, CO) face increased risk of wildfire damage and/or resulting
diminution of air quality and increased air pollution. Properties in proximity to bodies of water (Herald
Square in Washington, D.C. and Two North Riverside in Chicago, IL) could experience flood damage from rising
sea levels and storm surge, although none of our properties are located within special flood zone hazards
nor require flood hazard insurance through the National Flood Insurance Program. Our urban buildings
(Capitol Tower in Austin, TX, Seventeenth Street Plaza and Herald Square) may experience urban heat island
effect, exacerbating already increasing temperatures; our corporate headquarters in Chicago is not likely
subject to this same risk because of Lake Michigan’s cooling effects.
From a financial perspective, electricity usage and associated costs are likely to increase at our portfolio
properties with rising temperatures in the future. However, these rising regional temperatures may also
result in cost savings during winter months and potentially reduced snow and ice management expenses, where
applicable. At Herald Square, we purchase electricity via a locked-rate energy supply contract. The balance
of our portfolio properties is under regulated electric utility contracts, where price increases must be
approved by Public Utility Commissions (PUCs), who are tasked with ensuring safe, reliable and affordable
utility services. Utility costs are generally passed through to our tenants pursuant to their leases.
We assess transition and physical climate risks, as well as climate opportunities, by examining the impact,
probability and timeframe of when a risk could potentially commence (short-term [1-2 years], medium-term
[3-15 years] and long-term [16-40 years]):
- Policy & Legal
- Recently proposed rules and regulations adopted by the U.S. Securities and Exchange Commission
may require us to incur additional compliance costs and may expose us to enforcement actions,
fines, penalties and/or litigation with respect to compliance and reporting matters (short-term
risk)
- Mandatory or voluntary compliance with other evolving climate/emissions reporting standards
(medium-term risk)
- Regulations that increase the cost of utilities (medium-term risk)
- State and city-level legislation that limits built-environment emissions, resulting in fines
and/or alternative energy procurement costs (medium-term risk)
- Technology
- We anticipate that climate-related technological innovations will continue over time,
potentially requiring investment in new technologies to reduce GHG emissions (medium-term risk)
- Market
- Reduced demand for office space (short-term risk)
- Increased restrictions and initiatives related to commuting and carbon footprint (medium-term
risk)
- Increased cost of raw materials and utilities (medium-term risk)
- Increased tenant demand for green, efficient buildings (medium-term risk)
- Increased expense of construction materials (short-term risk)
- Reputation
- Stakeholder perceived inadequacy of our climate and ESG efforts, affecting our share value,
competitiveness and tenant willingness to lease space from us (medium-term risk)
- Negative investor perception of our existing portfolio properties (medium-term risk)
- Acute
- Extreme heat: linked to droughts and increased water demand and can cause disruptions to
building infrastructure, tenant dissatisfaction, increased costs of operation and decreased
efficiency (medium-term risk)
- Wildfires: linked to droughts and can threaten forest-adjacent areas as well as cause diminution
of air quality and increased air pollution (short-term risk)
- Tropical storms and tornados: potential for property damage (wind and hail) and/or power
outages. Insurance costs may increase and become difficult to obtain (short-term risk)
- Extreme precipitation: linked to surface water and sewage flooding (short-term risk)
- Chronic:
- Increasing average temperatures: increase costs of energy and water during cooling periods
balanced against potentially reduced costs during heating periods and reduced snow/ice
management costs (medium-term risk)
- Sea level rise: risk of inundation and devaluation due to proximate increasing water levels. May
require investment in flood-resistant infrastructure (long-term risk)
- Urban heat island effect: linked to exacerbated heat spikes in dense impervious surface areas
that increase cooling costs and health hazards (medium-term risk)
- Resource Efficiency
- Upgrade properties with capital investment to potentially reduce operating expenses and carbon
footprint (medium-term opportunity)
- Energy Source
- Evaluate the cost effectiveness of low-carbon energy sources to incorporate renewable energy
where available and appropriate (medium-term opportunity)
- Products and Services
- Engage with our tenants, investors and other stakeholders to understand sustainability and
climate-change perspectives (short-term opportunity)
- Technology
- Review technology developments that produce greater operating efficiencies to offset rising
energy and technology infrastructure costs (medium-term opportunity)
- Resilience
- Seek and assess potential partnerships with sustainability-minded service providers to increase
climate resilience up and down the supply and service chains (long-term opportunity)
- Market to sustainability-oriented and climate-focused tenants across our office building
portfolio who are aligned with the implementation of ESG-related initiatives (long-term
opportunity)
Risk Management
We periodically identify, analyze, prioritize, treat and monitor climate-related risk, including as part of
our annual portfolio risk review where we assess physical risks and their potential impacts. Each year, in
collaboration with our insurance broker, we review our portfolio to ensure our underwriting information and
risk mitigation practices are accurately identified, estimating potential total losses for each policy
period. This process identifies appropriate changes to the insurance program due to potential catastrophic
natural disasters such as floods, hurricanes and earthquakes. It also allows for the confirmation that
adequate coverage is placed at each portfolio building compared to potential losses.
Our Board and committees, in consultation with management, actively oversee and manage the Company’s
risk, including periodically reviewing our policies and procedures with respect to risk assessment and risk
management. Specifically, our Board oversees climate-related risks and opportunities, aided by
management-led discussions and presentations. Our Board administers this oversight function directly, with
support from its three standing committees: the Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee, each of which addresses risks specific to its respective
areas of oversight (https://ir.eqcre.com/committees-charters-1/default.aspx).
Each committee reports its findings to the full Board.
In 2019, we formed an ESG team to focus on ESG risks and initiatives. This team is co-managed by our Senior
Vice President of Engineering, Construction and Operations and our Senior Vice President – Legal. The
team comprises and leverages a variety of subject matter experts within the Company (e.g., human resources,
IT, leasing, legal, asset management and finance) as well as a variety of third-party consultants. The ESG
team co-managers report directly to our CEO and General Counsel, who oversee the ESG team and our
sustainability activities and performance. Our CEO and General Counsel regularly update our Board on
sustainability initiatives.
Appendix
CY2022 Independent Assurance Statement