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AEW Public Real Estate Securities Engagement and Stewardship Policy

Stewardship of our clients’ capital is fundamental to how AEW Capital Management operates. AEW is committed to a vision of property stewardship that includes identification and implementation or enhancement of sustainability measures to drive long-term value to our clients. In its role as an investment advisor, AEW acts as a fiduciary to its clients and we believe this includes the consideration of ESG risks and opportunities and the potential impact of ESG matters on returns.

Engagement

Engagement by AEW’s public equity real estate securities investment professionals (“we”) takes the form of meetings or discussions with management teams and boards of public real estate companies, as well as evaluation of the assets and business operations of the companies. Engaging in relevant ESG conversations is part of these discussions and we also may have dedicated sessions with the respective company’s sustainability teams to cover specific ESG questions, as they arise. We believe we can encourage industry-based ESG best practices and see this as critical in being a responsible steward of capital, fostering sustainable growth. Through active engagement, we believe we are acting as a responsible member of the investment community that positively influences decisions that will benefit the company’s bottom line. AEW prioritizes driving returns for our clients and AEW believes that the integration of applicable responsible investment practices into all aspects of real estate investment management supports this priority.

Framework of Engagement

While AEW follows its own active engagement process, our approach is framed by the following:

  • AEW is a signatory to the UN-supported Principles for Responsible Investing (PRI) https://www.unpri.org/
  • AEW encourages companies to participate in Industry ESG Benchmarks, such as GRESB https://gresb.com/

Engagement Process

  • We engage at least annually but generally more often with public real estate companies in our investable universe. The form of engagement includes in-person meetings, calls, written correspondence, or asset tours.
  • Engagement is performed by Portfolio Managers, Equity Analysts, and other professionals.
  • An ESG assessment is made for all companies and engagement includes discussions of ESG performance with company management and boards.
  • Proxy voting forms part of the engagement process and we frequently discuss voting rationale with companies.
  • A failure to engage with or improve value-material ESG performance will negatively affect how we value a stock as consistent with a failure to engage or improve performance on other performance factors that drive investment value.
  • While the primary engagement is directly with the company, we may collaborate with other institutional investors and stakeholders, where appropriate and permitted by applicable law.
  • AEW favors collaborative dialogue and constructive discussion.

Environmental, Social and Governance Engagement

Prominent, relevant topics during engagement on ESG generally include:

  • Energy and Carbon reduction improvements/targets
  • Wider environmental/stewardship progress in areas such as waste, water, and biodiversity
  • Capital structure and allocation
  • Board and company structure
  • Management remuneration and incentives
  • Achievements in areas such as representation, community engagement, and diversity
  • Future goals to which the company aspires

We measure and monitor progress at the company and integrate the results of engagement into a proprietary ESG risk score which ultimately impacts how we value a stock. We believe that embedding ESG into engagement can improve financial performance and reduce reputational risk, thereby protecting shareholder returns at the company.