INFRASTRUCTURE SECTOR HOME BUILDERS Sustainability Accounting Standard Sustainable Industry Classification System® (SICS®) IF-HB Prepared by the Sustainability Accounting Standards Board October 2018 INDUSTRY STANDARD | VERSION 2018-10 © 2018 The SASB Foundation. All Rights Reserved. sasb.org HOME BUILDERS Sustainability Accounting Standard About SASB The SASB Foundation was founded in 2011 as a not-for-profit, independent standards-setting organization. The SASB Foundation’s mission is to establish and maintain industry-specific standards that assist companies in disclosing financially material, decision-useful sustainability information to investors. The SASB Foundation operates in a governance structure similar to the structure adopted by other internationally recognized bodies that set standards for disclosure to investors, including the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). This structure includes a board of directors (“the Foundation Board”) and a standards-setting board (“the Standards Board” or "the SASB"). The Standards Board develops, issues, and maintains the SASB standards. The Foundation Board oversees the strategy, finances and operations of the entire organization, and appoints the members of the Standards Board. The Foundation Board is not involved in setting standards, but is responsible for overseeing the Standards Board’s compliance with the organization’s due process requirements. As set out in the SASB Rules of Procedure, the SASB’s standards-setting activities are transparent and follow careful due process, including extensive consultation with companies, investors, and relevant experts. The SASB Foundation is funded by a range of sources, including contributions from philanthropies, companies, and individuals, as well as through the sale and licensing of publications, educational materials, and other products. The SASB Foundation receives no government financing and is not affiliated with any governmental body, the FASB, the IASB, or any other financial accounting standards-setting body. SUSTAINABILITY ACCOUNTING STANDARDS BOARD 1045 Sansome Street, Suite 450 San Francisco, CA 94111 415.830.9220 info@sasb.org sasb.org The information, text, and graphics in this publication (the “Content”) are owned by The SASB Foundation. All rights reserved. The Content may be used only for non-commercial, informational, or scholarly use, provided that all copyright and other proprietary notices related to the Content are kept intact, and that no modifications are made to the Content. The Content may not be otherwise disseminated, distributed, republished, reproduced, or modified without the prior written permission of The SASB Foundation. To request permission, please contact us at info@sasb.org. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 2 Table of Contents Introduction....................................................................................................................................................................4 Purpose of SASB Standards.........................................................................................................................................4 Overview of SASB Standards.......................................................................................................................................4 Use of the Standards...................................................................................................................................................5 Industry Description.....................................................................................................................................................5 Sustainability Disclosure Topics & Accounting Metrics...............................................................................................6 Land Use & Ecological Impacts.....................................................................................................................................8 Workforce Health & Safety........................................................................................................................................12 Design for Resource Efficiency...................................................................................................................................14 Community Impacts of New Developments...............................................................................................................18 Climate Change Adaptation......................................................................................................................................22 SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 3 INTRODUCTION Purpose of SASB Standards The SASB’s use of the term “sustainability” refers to corporate activities that maintain or enhance the ability of the company to create value over the long term. Sustainability accounting reflects the governance and management of a company’s environmental and social impacts arising from production of goods and services, as well as its governance and management of the environmental and social capitals necessary to create long-term value. The SASB also refers to sustainability as “ESG” (environmental, social, and governance), though traditional corporate governance issues such as board composition are not included within the scope of the SASB’s standards-setting activities. SASB standards are designed to identify a minimum set of sustainability issues most likely to impact the operating performance or financial condition of the typical company in an industry, regardless of location. SASB standards are designed to enable communications on corporate performance on industry-level sustainability issues in a cost-effective and decision-useful manner using existing disclosure and reporting mechanisms. Businesses can use the SASB standards to better identify, manage, and communicate to investors sustainability information that is financially material. Use of the standards can benefit businesses by improving transparency, risk management, and performance. SASB standards can help investors by encouraging reporting that is comparable, consistent, and financially material, thereby enabling investors to make better investment and voting decisions. Overview of SASB Standards The SASB has developed a set of 77 industry-specific sustainability accounting standards (“SASB standards” or “industry standards”), categorized pursuant to SASB’s Sustainable Industry Classification System® (SICS®). Each SASB standard describes the industry that is the subject of the standard, including any assumptions about the predominant business model and industry segments that are included. SASB standards include: 1. Disclosure topics – A minimum set of industry-specific disclosure topics reasonably likely to constitute material information, and a brief description of how management or mismanagement of each topic may affect value creation. 2. Accounting metrics – A set of quantitative and/or qualitative accounting metrics intended to measure performance on each topic. 3. Technical protocols – Each accounting metric is accompanied by a technical protocol that provides guidance on definitions, scope, implementation, compilation, and presentation, all of which are intended to constitute suitable criteria for third-party assurance. 4. Activity metrics – A set of metrics that quantify the scale of a company’s business and are intended for use in conjunction with accounting metrics to normalize data and facilitate comparison. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 4 Furthermore, the SASB Standards Application Guidance establishes guidance applicable to the use of all industry standards and is considered part of the standards. Unless otherwise specified in the technical protocols contained in the industry standards, the guidance in the SASB Standards Application Guidance applies to the definitions, scope, implementation, compilation, and presentation of the metrics in the industry standards. The SASB Conceptual Framework sets out the basic concepts, principles, definitions, and objectives that guide the Standards Board in its approach to setting standards for sustainability accounting. The SASB Rules of Procedure is focused on the governance processes and practices for standards setting. Use of the Standards SASB standards are intended for use in communications to investors regarding sustainability issues that are likely to impact corporate ability to create value over the long term. Use of SASB standards is voluntary. A company determines which standard(s) is relevant to the company, which disclosure topics are financially material to its business, and which associated metrics to report, taking relevant legal requirements into account1. In general, a company would use the SASB standard specific to its primary industry as identified in SICS® . However, companies with substantial business in multiple SICS® industries can consider reporting on these additional SASB industry standards. It is up to a company to determine the means by which it reports SASB information to investors. One benefit of using SASB standards may be achieving regulatory compliance in some markets. Other investor communications using SASB information could be sustainability reports, integrated reports, websites, or annual reports to shareholders. There is no guarantee that SASB standards address all financially material sustainability risks or opportunities unique to a company’s business model. Industry Description The Home Builders industry is comprised of companies that develop new homes and residential communities. Development efforts generally include the acquisition of land, site preparation, the construction of homes, and home sales. The majority of industry activity is focused on the development and sale of single-family homes, which are typically part of company-designed residential communities. A smaller segment is centered on townhomes, condominiums, multi- family housing, and mixed-use development. Many companies in the industry offer financing services to individual homebuyers. The industry is fragmented, as there is a large number of developers of all sizes, which vary in company structure and geographic focus. Listed companies tend to be significantly larger, and more integrated than the numerous privately held home builders. 1 Legal Note: SASB standards are not intended to, and indeed cannot, replace any legal or regulatory requirements that may be applicable to a reporting entity’s operations. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 5 SUSTAINABILITY DISCLOSURE TOPICS & ACCOUNTING METRICS Table 1. Sustainability Disclosure Topics & Accounting Metrics UNIT OF TOPIC ACCOUNTING METRIC CATEGORY CODE MEASURE Number of (1) lots and (2) homes delivered on Quantitative Number IF-HB-160a.1 redevelopment sites Number of (1) lots and (2) homes delivered in regions with High or Extremely High Baseline Quantitative Number IF-HB-160a.2 Water Stress Land Use & Ecological Total amount of monetary losses as a result of Reporting Impacts legal proceedings associated with Quantitative IF-HB-160a.3 currency environmental regulations2 Discussion of process to integrate environmental considerations into site Discussion and n/a IF-HB-160a.4 selection, site design, and site development Analysis and construction (1) Total recordable incident rate (TRIR) and (2) Workforce fatality rate for (a) direct employees and (b) Quantitative Rate IF-HB-320a.1 Health & Safety contract employees (1) Number of homes that obtained a certified Number, Index Quantitative IF-HB-410a.1 HERS® Index Score and (2) average score score Percentage of installed water fixtures certified Quantitative Percentage (%) IF-HB-410a.2 to WaterSense® specifications Design for Number of homes delivered certified to a Resource third-party multi-attribute green building Quantitative Number IF-HB-410a.3 Efficiency standard Description of risks and opportunities related to incorporating resource efficiency into home Discussion and n/a IF-HB-410a.4 design, and how benefits are communicated Analysis to customers Description of how proximity and access to Discussion and infrastructure, services, and economic centers n/a IF-HB-410b.1 Analysis affect site selection and development decisions Community Impacts of New Number of (1) lots and (2) homes delivered on Quantitative Number IF-HB-410b.2 Developments infill sites (1) Number of homes delivered in compact Quantitative Number IF-HB-410b.3 developments and (2) average density Climate Change Number of lots located in 100-year flood Quantitative Number IF-HB-420a.1 Adaptation zones 2 Note to IF-HB-160a.3 – The entity shall briefly describe the nature, context, and any corrective actions taken as a result of the monetary losses. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 6 UNIT OF TOPIC ACCOUNTING METRIC CATEGORY CODE MEASURE Description of climate change risk exposure Discussion and analysis, degree of systematic portfolio n/a IF-HB-420a.2 Analysis exposure, and strategies for mitigating risks Table 2. Activity Metrics UNIT OF ACTIVITY METRIC CATEGORY CODE MEASURE Number of controlled lots3 Quantitative Number IF-HB-000.A Number of homes delivered4 Quantitative Number IF-HB-000.B Number of active selling communities5 Quantitative Number IF-HB-000.C 3 Note to IF-HB-000.A – The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts as of the last day of the reporting period. 4 Note to IF-HB-000.B – The scope of homes shall include single-family dwelling units whether detached, attached, or part of multi- family residential buildings. 5 Note to IF-HB-000.C – The scope of active selling communities includes those communities or developments open for sales with at least five homes or lots remaining to sell as of the last day of the reporting period. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 7 Land Use & Ecological Impacts Topic Summary Home builders face challenges directly related to the ecological impacts of development activities. Developments often take place on previously undeveloped land, and companies must manage the ecosystem disruption of construction activities as well as the regulations and permitting processes that accompany “greenfield” land development. Regardless of the siting decisions companies make, industry development activities generally carry risks related to land and water contamination, mismanagement of waste, and excessive strain on water resources during the construction and use phases. Violation of environmental regulations can result in costly fines and delays that decrease financial returns while potentially harming reputations. Companies with repeated violations or track records of prior activities with excessive ecological impacts may find it difficult to receive approval from local communities for new developments, thereby decreasing future revenue and market share. Companies that concentrate development efforts in water-stressed regions may see further challenges to permitting approvals, and also face risks related to land or home depreciation due to water shortage concerns. Environmental quality control procedures, “smart growth” strategies (including a focus on redevelopment sites), and conservation strategies may help ensure compliance with environmental laws, and therefore mitigate financial risks, while improving future growth opportunities. Accounting Metrics IF-HB-160a.1. Number of (1) lots and (2) homes delivered on redevelopment sites 1 The entity shall (1) disclose the number of controlled lots that are located on redevelopment sites. 1.1 The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts. 1.2 The scope of redevelopment sites shall include brownfield and greyfield sites, and shall include sites that meet national, state, or local designations for such terms. In the absence of national, state, or local definitions, the following definitions shall be used: 1.2.1 Redevelopment sites are defined as sites that were previously developed, including the replacement, remodeling, or reuse of existing structures to accommodate new development. 1.2.2 Brownfield sites are defined, consistent with U.S. Environmental Protection Agency (EPA), as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” 1.2.3 Greyfield sites are defined, consistent with the National Association of Home Builders’ (NAHB) Green Home Building Guidelines as, “any site previously developed with at least 50% of the surface area covered with impervious material.” SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 8 1.3 The scope of redevelopment sites excludes undeveloped infill sites but includes infill sites to the extent that such sites meet the above definitions of redevelopment, brownfield, or greyfield sites. 2 The entity shall disclose (2) the number of homes delivered that were constructed on redevelopment sites. 2.1 The scope of homes shall include single-family dwelling units, whether detached, attached, or part of multi- family residential buildings. IF-HB-160a.2. Number of (1) lots and (2) homes delivered in regions with High or Extremely High Baseline Water Stress 1 The entity shall (1) disclose the number of controlled lots located in regions with High or Extremely High Baseline Water Stress. 1.1 The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts. 1.2 The entity shall identify controlled lots in locations with High (40–80%) or Extremely High (>80%) Baseline Water Stress with the World Resources Institute’s (WRI) Water Risk Atlas tool, Aqueduct. 2 The entity shall disclose (2) the number of homes delivered in regions with High or Extremely High Baseline Water Stress. 2.1 The scope of homes shall include single-family dwelling units whether detached, attached, or part of multi- family residential buildings. IF-HB-160a.3. Total amount of monetary losses as a result of legal proceedings associated with environmental regulations 1 The entity shall disclose the total amount of monetary losses it incurred during the reporting period as a result of legal proceedings associated with environmental regulations, such as those related to: enforcement of laws and regulations on ground- and surface-water contamination; hazardous waste transport, containment, or disposal; air emissions; and public disclosure of contamination events. 2 The legal proceedings shall include any adjudicative proceeding in which the entity was involved, whether before a court, a regulator, an arbitrator, or otherwise. 3 The losses shall include all monetary liabilities to the opposing party or to others (whether as the result of settlement or verdict after trial or otherwise), including fines and other monetary liabilities incurred during the reporting period as a result of civil actions (e.g., civil judgments or settlements), regulatory proceedings (e.g., penalties, disgorgement, or restitution), and criminal actions (e.g., criminal judgment, penalties, or restitution) brought by any entity (e.g., governmental, business, or individual). SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 9 4 The scope of monetary losses shall exclude legal and other fees and expenses incurred by the entity in its defense. 5 The scope of disclosure shall include, but is not limited to, relevant enforcements related to activities adjudicated by regulators with an enforcement mandate broader than the home builders industry, such as the: 5.1 EU Directive 2008/98/EC on waste (Waste Framework Directive) 5.2 U.S. Clean Water Act 5.3 U.S. Resource Conservation and Recovery Act (RCRA) Note to IF-HB-160a.3 1 The entity shall briefly describe the nature (e.g., judgment or order issued after trial, settlement, guilty plea, deferred prosecution agreement, non-prosecution agreement) and context (e.g., permitting violation) of all monetary losses as a result of legal proceedings. 2 The entity shall describe any corrective actions it has implemented as a result of the legal proceedings. This may include, but is not limited to, specific changes in operations, processes, products, business partners, training, or technology. IF-HB-160a.4. Discussion of process to integrate environmental considerations into site selection, site design, and site development and construction 1 The entity shall provide a discussion of its process used to integrate environmental considerations into site selection, design, and development and construction. 1.1 Environmental considerations include, but are not limited to, ecological impacts, biodiversity impacts, emissions to air, discharges to water, slope disturbance, soil disturbance and erosion, storm water management, waste management, natural resource consumption, and hazardous chemical usage. 2 The entity shall describe its approach to the following aspects of site selection: 2.1 The process used to assess the level of ecological sensitivity of sites under consideration for acquisition or development, and how such assessments are incorporated into acquisition and development decisions 2.2 The use of site classifications (e.g., greenfield, greyfield, brownfield, and/or infill sites) in decision-making processes 3 The entity shall describe its approach to the following aspects of site design: 3.1 The process used to design sites in order to minimize ecological impacts, including management of slope disturbance, soil disturbance and erosion, storm water, waste, and wildlife habitat impacts SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 10 4 The entity shall describe its approach to the following aspects of site development and construction: 4.1 The process used to minimize ecological impacts during construction, including management of construction and demolition waste, runoff, soil disturbance and erosion, and hazardous materials 5 The entity shall describe its approach to assessing risks associated with environmental considerations and related internal policies, practices, and procedures for managing those risks. 6 The entity shall describe its use of codes, guidelines, and standards that address site selection, design, and development and construction, where applicable. 6.1 Relevant codes, guidelines, and standards may include, but are not limited to: 6.1.1 2012 ICC 700 National Green Building Standard, “Incentives for Development and Lot Design” 6.1.2 U.S. National Association of Home Builders (NAHB) Model Green Home Building Guidelines, Section 1, “Lot Design, Preparation, and Development” 6.1.3 U.S. Green Building Council’s (USGBC) LEED® BD+C: Homes, v4, “Construction activity pollution prevention” and “Site selection” SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 11 Workforce Health & Safety Topic Summary Home construction requires a significant amount of manual labor from company employees and subcontractors. Site excavation and home construction activities are physically demanding, exposing workers to risks from falls and heavy machinery, and resulting in relatively high injury and fatality rates. Worker injuries and fatalities have internal and external costs that can significantly impact the results of their operations and their social license to operate. Impacts include fines, penalties, workers' compensation costs, regulatory compliance costs from more stringent oversight, higher insurance premiums, and project delays and downtime. To avoid such costs, companies can foster a culture of safety by developing proactive safety management plans, training employees and contractors, and conducting regular audits. Accounting Metrics IF-HB-320a.1. (1) Total recordable incident rate (TRIR) and (2) fatality rate for (a) direct employees and (b) contract employees 1 The entity shall disclose its total recordable incident rate (TRIR) for work-related injuries and illnesses. 1.1 An injury or illness is considered a recordable incident if it results in any of the following: death, days away from work, restricted work or transfer to another job, medical treatment beyond first aid, or loss of consciousness. Additionally, a significant injury or illness diagnosed by a physician or other licensed health care professional is considered a recordable incident, even if it does not result in death, days away from work, restricted work or job transfer, medical treatment beyond first aid, or loss of consciousness. This definition is derived from U.S. 29 CFR 1904.7. 1.2 The U.S. Occupational Safety and Health Administration (OSHA) provides additional resources for determining if injuries or illnesses are considered recordable incidents in its guidance for OSHA Forms 300, 300A, and 301. 2 The entity shall disclose its fatality rate for work-related fatalities. 3 Rates shall be calculated as: (statistic count × 200,000) / hours worked 3.1 The U.S. Bureau of Labor Statistics (BLS) provides additional guidance for the calculation of rates in, “How to Compute a Firm’s Incidence Rate for Safety Management” and “Incidence Rate Calculator and Comparison Tool.” 4 The scope of disclosure includes work-related incidents only. 4.1 OSHA guidance for Forms 300, 300A, and 301 provides guidance on determining whether an incident is work-related, as well as definitions for exemptions for incidents that occur in the work environment but are not work-related. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 12 5 The entity shall disclose the rates by each of the following employee categories: 5.1 Direct employees, defined as those employees on the entity’s payroll, whether they are full-time, part-time, executive, labor, salary, hourly, or seasonal employees. 5.2 Contract employees, defined as those who are not on the entity’s payroll, but who are supervised by the entity on a day-to-day basis, including independent contractors and those employed by third parties (e.g., temp agencies and labor brokers). 6 The scope of disclosure includes all employees regardless of employee location. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 13 Design for Resource Efficiency Topic Summary Residential buildings, when occupied, consume significant amounts of energy and water. Companies in the Home Builders industry can improve the resource efficiency of homes over their lifecycle through sustainable design practices and choice of materials. Energy-saving products and techniques such as designing homes for efficient heating and cooling can help to reduce dependence on energy, whether it comes from the electric grid or onsite fuel combustion. These measures, which are intended to improve the resource efficiency of homes, can decrease the costs of home ownership through lower utility bills. Water saving features such as low-flow faucets alleviate strain on local communities, while likely also lowering costs. Homebuyer awareness of the importance of the energy and water efficiency creates a potential for companies to increase demand in their target market, thereby increasing revenue and/or margins. Effectively applying resource efficiency design principles in a cost-effective manner may serve as a competitive advantage, especially when companies are successful in systematically educating customers on the long-term benefits of these homes. Accounting Metrics IF-HB-410a.1. (1) Number of homes that obtained a certified HERS® Index Score and (2) average score 1 The entity shall disclose (1) the number of homes that obtained a certified Home Energy Rating System (HERS®) Index Score, or an equivalent standardized home energy rating in non-U.S. markets, during the reporting period. 1.1 The scope of homes shall include single-family dwelling units, whether detached, attached, or part of multi- family residential buildings. 2 The entity shall (2) disclose the simple average score of all homes that obtained a certified HERS® Index Score. 2.1 The simple average shall be calculated as the sum of all scores associated with homes that obtained a certified HERS® Index Score during the reporting period divided by the number of homes that obtained a certified HERS® Index Score during the reporting period. 3 The scope of disclosure includes all homes that are or were controlled by the entity, regardless of the stage of construction and the stage within the sales cycle. 4 The entity may disclose the number of homes delivered that are certified to ENERGY STAR® for Homes or equivalent certification programs. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 14 IF-HB-410a.2. Percentage of installed water fixtures certified to WaterSense® specifications 1 The entity shall disclose the percentage of installed water fixtures certified to the U.S. Environmental Protection Agency (EPA) WaterSense® specifications. 1.1 A water fixture is defined as a device used for the distribution of water or a device that consumes water. 1.2 The percentage shall be calculated as the number of water fixtures installed during the reporting period that were certified to the U.S. EPA WaterSense® specifications divided by the total number of water fixtures installed. 1.3 The scope of water fixtures includes those that are within an eligible WaterSense® product category. Examples of product categories include bathroom sink faucets and accessories, showerheads, toilets, urinals, irrigation controllers, and pre-rinse spray valves. 2 The scope of disclosure includes all water fixtures installed in homes that are or were controlled by the entity, regardless of the stage of construction, the stage within the sales cycle, or the entity that performed such installations. IF-HB-410a.3. Number of homes delivered certified to a third-party multi-attribute green building standard 1 The entity shall disclose the number of homes delivered that were certified to a third-party multi-attribute green building standard designed for homes. 1.1 The scope of third-party multi-attribute green building standards is limited to standards or certifications that are explicitly designed for homes and, at a minimum, that address the following aspects of new home design and construction: 1.1.1 Energy efficiency; 1.1.2 Water conservation; 1.1.3 Material and resource efficiency; 1.1.4 Indoor environmental quality; and 1.1.5 Owner education. 1.2 Examples of third-party multi-attribute green building standards include: 1.2.1 Environments For Living Certified Green®; SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 15 1.2.2 ICC 700 National Green Building Standard; and 1.2.3 LEED® for Homes. 2 The entity shall disclose the third-party multi-attribute green building standard(s) to which its homes are certified. 3 The scope of disclosure includes all homes delivered during the reporting period. 4 The entity may discuss other green building or sustainability standards or guidelines that it implements in its home design and construction processes that are not third-party verified. IF-HB-410a.4. Description of risks and opportunities related to incorporating resource efficiency into home design, and how benefits are communicated to customers 1 The entity shall describe the risks and/or opportunities associated with its approach to integrating environmental considerations into home design, including, where relevant: 1.1 Risks of failing to achieve adequate returns on investments made in technology, and market demand to improve the sustainability performance of homes or earn sustainability certifications 1.2 Risks to market demand associated with the entity’s failure to evolve its design approach at the same pace as its peers, resulting in the production of underperforming homes in terms of energy efficiency, water efficiency, and indoor environmental quality 1.3 Risks associated with the ability to cost-effectively build homes that meet evolving building codes 1.4 Opportunities to achieve sales price premiums, capture target market demand, and establish competitive advantages by producing homes with market-leading energy efficiency and water efficiency 2 The entity shall discuss its strategy to measure and communicate energy efficiency and water efficiency performance improvements to homes, including: 2.1 Measurement of homeowner benefits related to energy and water efficiency, including performance audits, certifications, standards, guidelines, and use of projected energy and water costs and savings relative to a baseline 2.2 Communication of the benefits of resource efficiency to prospective home buyers, including the benefits of resource efficiency performance and certifications, projected energy and water costs and savings, and the integration of resource efficiency into sales and marketing SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 16 3 The entity may provide an analysis of such price increases relative to the cost of improvements in, and third-party certifications of, energy efficiency, water efficiency, and indoor environmental quality. Analysis may additionally include target return rates compared to realized return rates of improvements. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 17 Community Impacts of New Developments Topic Summary Community and urban planning gives home builders the opportunity to thoughtfully design new residential developments in a way that benefits their customers as well as the pre-existing surrounding community. New home development can bring economic growth and workforce opportunities while moderating cost-of-living increases, and can provide communities with safe and vibrant neighborhoods. Companies may strive to improve communities’ environmental and social impacts by providing access to public transportation and/or not overburdening existing transportation or utilities infrastructure, providing access to green spaces, developing mixed-use spaces, and creating more walkable communities. These strategies can help increase the overall demand for and selling prices of homes as well as reduce the risks related to permitting and community or stakeholder opposition related to current or future developments. When companies use development strategies that inadequately integrate their new communities into the pre-existing surrounding communities, they risk insufficient sales prices, excessive costs related to infrastructure needs and assessments, and risk being permitting approvals, delays, and/or community support for future developments. Accounting Metrics IF-HB-410b.1. Description of how proximity and access to infrastructure, services, and economic centers affect site selection and development decisions 1 The entity shall describe its approach to integrating considerations of proximity and access to existing public infrastructure into its site selection and development decisions. 1.1 Relevant disclosures include, but are not limited to: 1.1.1 Whether the entity prioritizes development proximate to roads, public transportation, or alternative forms of transportation 1.1.2 How the entity assesses the adequacy of existing infrastructure, including roads, public transportation, electricity grids, and water and wastewater networks 1.1.3 How the entity factors regional infrastructure expansion plans into its decision-making process 2 The entity shall describe its approach to integrating considerations of proximity and access to services and economic centers into its site selection and development decisions. 2.1 Access to services and economic centers includes the physical distance, available modes of transportation, and cost and ease of transportation to commercial, business, health, and educational centers and facilities. 2.2 Relevant disclosures include, but are not limited to: SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 18 2.2.1 How the entity uses mixed-use development, if applicable, to meet customer demands 2.2.2 Whether the entity uses proximity tools, including, but not limited to, Walk Score® in assessing proximity and ease of access to services and economic centers 3 The entity shall describe the following, where relevant: 3.1 How its approach may vary by market in the integration of such considerations (including geographical market or target market demographics) 3.2 The development lifecycle stage at which considerations are integrated 3.3 Risks and opportunities associated with the integration of such considerations 4 The entity shall describe its use of codes, guidelines, and standards to incorporate best practices for site selection and development to optimize transportation effectiveness and access to services and economic centers. 4.1 Relevant codes, guidelines, and standards may include, but are not limited to: 4.1.1 2012 ICC 700 National Green Building Standard, “Incentives for Development and Lot Design” 4.1.2 National Association of Home Builders (NAHB) Model Green Home Building Guidelines 4.1.3 U.S. Green Building Council’s LEED® BD+C: Homes, v4, “Site selection” IF-HB-410b.2. Number of (1) lots and (2) homes delivered on infill sites 1 The entity shall disclose (1) the number of controlled lots that are located on infill sites. 1.1 Infill sites are defined as sites that meet national, state, or local designations for the term. 1.1.1 In the absence of national, state, or local definitions, infill sites are defined, consistent with the U.S. National Association of Home Builder (NAHB) Green Home Building Guidelines, as vacant or underutilized lots of land, served by existing physical installations such as roads, power lines, sewer and water, and other infrastructure. 1.2 The scope of infill sites includes redevelopment, brownfield, or greyfield sites, only if the sites additionally meet the above definition for infill sites. 1.3 The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts. 2 The entity shall disclose (2) the number of homes delivered that were constructed on infill sites. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 19 2.1 The scope of homes shall include single-family dwelling units, whether detached, attached, or part of multi- family residential buildings. IF-HB-410b.3. (1) Number of homes delivered in compact developments and (2) average density 1 The entity shall disclose (1) the number of homes delivered that are located in compact developments. 1.1 A compact development is defined, consistent with the U.S. National Association of Home Builders in “An Introduction to Compact Development,” as a cluster development, mixed-use development, and/or traditional neighborhood development. 1.1.1 A cluster development is defined as a development that “produces very attractive and marketable communities and makes it easier for developers to preserve environmentally sensitive lands such as wetlands and forests by allowing lots to be grouped on certain portions of a site, rather than spread uniformly across a site, so that other areas of the site may remain undisturbed as open space.” 1.1.2 A mixed-use development is defined as a development that “can produce diverse and convenient communities that can have the added benefit of reducing traffic. By integrating different uses such as residences, offices and shopping, many daily vehicle trips can be eliminated or reduced in length.” 1.1.3 A traditional neighborhood development is defined as a development that has “mix[ed] uses and housing types to create a form more like the towns of the past than the automobile-dominated suburbs…These communities are built for walking, and ideally allow residents to walk to shops, schools, places of worship, parks and eventually transit stops.” 1.2 The scope of homes shall include single-family dwelling units, whether detached, attached, or part of multi- family residential buildings. 2 The entity shall disclose (2) the average density of compact developments using the net neighborhood residential dwelling density. 2.1 The average density shall be calculated as the total number of residential units in all compact developments divided by the net residential site area of all compact developments. 2.1.1 The net neighborhood residential site area is defined as the total land area devoted to residential facilities, consistent with “Density Measures: A Review and Analysis” (Ernest R. Alexander, Journal of Architectural and Planning Research, Vol. 10, No. 3, Autumn 1993) and “Measuring Density: Working Definitions for Residential Density and Building Intensity” (Ann Forsyth, Design Center for American Urban Landscape, No. 8, July 2003). SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 20 2.1.2 The scope of residential units includes all planned, under-construction, or completed residential units in the compact development, regardless of the stage of completion or ownership. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 21 Climate Change Adaptation Topic Summary The impacts of climate change, including extreme weather events and changing climate patterns, may impact the markets companies select to develop homes and residential communities. Companies with business models that incorporate ongoing assessments of climate change risks, and adapt to such risks, are likely to more effectively grow company value over the long term, partially through reductions in risk. More specifically, strategies focused on home development activities in floodplains and coastal regions that are exposed to extreme weather events, such as flooding, have increased needs for their business models to adapt to climate change, especially considering long-term challenges like flood insurance rates, the financial stability of government-subsidized flood insurance programs, permitting approvals, and financing stipulations. Rising climate risks and the increasing cost of occupying properties in volatile regions may translate into reduced long-term demand, land value depreciation, and concerns over understated long-term costs of home ownership. Additionally, companies that build developments in water-stressed regions risk losing land value and may face problems with permitting approvals. The active assessment of climate change risks and a holistic view of long-term homebuyer demand may enable companies to successfully adapt to such risks. Accounting Metrics IF-HB-420a.1. Number of lots located in 100-year flood zones 1 The entity shall disclose the number of controlled lots that are located in 100-year flood zones. 1.1 100-year flood zones are defined as land areas subject to a one-percent or greater chance of flooding in any given year. Such areas may also be referred to as being subject to the one-percent annual chance flood, the one-percent annual exceedance probability flood, or the 100-year flood. 1.1.1 Examples of 100-year flood zones may include, but are not limited to, coastal flood plains, flood plains along major rivers, and areas subject to flooding from ponding in low-lying areas. 1.2 For controlled lots located in the U.S., 100-year flood zones shall include those land areas designated by the U.S. Federal Emergency Management Agency (FEMA) as special flood hazard areas (SFHA). 1.2.1 SFHAs are defined as land area in the flood plain subject to a one-percent or greater chance of flooding in any given year. The area may be designated in the applicable flood insurance rate map, as per the U.S. National Flood Insurance Program, as Zones A, AO, AH, A1-30, AE, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE, and V. This definition is derived from U.S. 44 CFR 59.1. 1.3 The scope of controlled lots includes all lots owned or contractually available for ownership through option contracts or other equivalent types of contracts. SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 22 2 The scope of disclosure shall include all of the entity’s controlled lots that are located in 100-year flood zones, regardless of the country of their location. 3 The entity may disclose its risks, opportunities, and potential impacts resulting from reclassifications of 100-year flood zones, including the risk of expansion of such areas into lots controlled by the entity or its active selling communities. IF-HB-420a.2. Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks 1 The entity shall describe the significant risks and opportunities that are presented to its business by climate change scenarios. 1.1 The entity shall identify each significant risk and opportunity. 1.1.1 Risks and opportunities may include, but are not limited to, availability of water, extreme weather events, evolving regulation and legislation, home permitting processes, timelines and approvals, and impacts to local economies and infrastructure. 1.2 The entity shall discuss the timeline over which such risks and opportunities are expected to manifest. 1.3 The entity shall disclose the climate change scenarios used to determine the risks and opportunities presented by climate change, where scenarios may include, but are not limited to, the New Policies Scenario, Sustainable Development Scenario, and Current Policies Scenario, as established by the International Energy Agency in its annual World Energy Outlook. 2 The entity shall describe its efforts to assess and monitor the impacts of climate change and related strategies to alleviate and/or adapt to any risks and/or utilize any opportunities, where: 2.1 Alleviation strategies may include, but are not limited to: site selection and the incorporation of climate or weather models into such analysis; site selection as it pertains to water scarcity; the strategy and timing of lot acquisitions, permitting, construction, and sales; the use of sales and purchase agreement clauses addressing risks to the entity; and insurance. 2.2 Adaptation strategies may include, but are not limited to: lot design; home design for physical resiliency; contingency plans; and maximizing energy and water efficiency of homes. 3 The entity shall discuss its strategies related to the use of physical measures to manage climate change risk (e.g., floodplain avoidance or home design for physical resiliency) and/or financial mechanisms to manage these risks (e.g., the use of insurance or option contracts on lots). SUSTAINABILITY ACCOUNTING STANDARD | HOME BUILDERS | 23 SUSTAINABILITY ACCOUNTING STANDARDS BOARD 1045 Sansome Street, Suite 450 San Francisco, CA 94111 415.830.9220 info@sasb.org sasb.org