Federal Realty Investment Trust : ESG Report 2023

Creating Lasting Impact.

Willow Lawn | Richmond, VA

2023 SUSTAINABILITY REPORT

03Introduction

06TCFD

12Decarbonization

22Resilience

27Communities

41Teams

52Governance

TABLE OF CONTENTS

58Appendix

Federal at a Glance	3

Founded in 1962, we are a recognized leader in the ownership, operation and redevelopment of high-qualityretail-based properties with a mission to deliver long-term sustainable growth through investing in communities where retail demand exceeds supply.

AWARDS & RECOGNITION

BOSTON

Regional Office

7 Properties

		CHICAGO		NEW YORK
			15 Properties
SILICON VALLEY		4 Properties		PHILADELPHIA
			2018-2027
Regional Office				Regional Office
8 Properties		WASHINGTON, DC	9 Properties
		Corporate Headquarters
SOUTHERN		Regional N. Virginia Office
	18	Maryland Properties
CALIFORNIA		18	N. Virginia Properties
Regional Office	PHOENIX	1 Washington, DC Property
13 Properties	2 Properties

MIAMI

4 Properties

102 PROPERTIES¹				~300 EMPLOYEES²	Years average
	Square Feet of	Acres of	Commercial	Residential
		53% Women		63% White	~9 tenure
26M Commercial Space	2K Land	3.3K Tenants	3.1K Units
			¹Figures are approximate as of 12/31/2023		47% Men		37% Diverse		²As of 12/31/2023
	Introduction	TCFD	Decarbonization	Resilience	Communities	Teams		Governance	Appendix

A Message from Our CEO

In an era where the echo of headlines often drowns out the substance of actions, Federal Realty stands steadfast in our commitment to real results and enduring legacy. For more than six decades, we have been a leader in the ownership, operation and redevelopment of high-quality retail- based properties. With this leadership comes a profound sense of responsibility-a drive to uphold the values and sustainability standards that have been the foundation of our success.

Sustainability is often equated with mere maintenance, yet at Federal, this perception falls short of our ambition. We are a company that strives for excellence beyond the status quo, engaging in strategic investment to not just sustain, but to significantly evolve and enhance our business for the better.

Our sustainability priorities include an emphasis on decarbonizing our portfolio, anchored by realistic emissions reduction targets and milestones, as well as a focus on strengthening the resilience of our assets by incorporating risk exposure into capital planning and investment decisions. In addition, community connection is at the heart of what we do. Through clear vision and thoughtful execution, we work to create gathering and retail spots that meet the diverse needs of our communities and drive continual growth.

4

56 YEARS OF CONSECUTIVE DIVIDEND INCREASES

Beyond our properties and communities, we invest in our people by offering ongoing opportunities for growth and development. Our culture of innovation, collaboration and respect is second to none, enabling our team members to reach their full potential and contribute meaningfully to our shared goals. Underpinning our ambition is an unwavering desire to do what is right. Through proper controls and oversight, we minimize risk, protect cash flow and provide our business the framework to thrive.

Indeed, our approach has stood the test of time. From high interest rate environments to the global financial crisis to the most recent pandemic, our strategy has consistently delivered results and has enabled us to increase the dividend paid to our common shareholders for 56 consecutive years, a REIT-industry record.

While we take great pride in our tremendous progress and achievements since our earliest days, our sights remain firmly set on our success ahead that will be made possible by the contributions of many. To that end, we are grateful for the continued support of our investors, tenants, employees, and community partners. Together, we are building a legacy that extends beyond the properties we develop and manage - we are creating places where economic growth and sustainability go hand in hand.

Thank you for being an integral part of our journey.

1973

OPEC imposes

oil embargo

on the US

$0.12*

	2004
	Inflation hits
1998	40-year low
of 1.1%
Asian & Russian
financial crisis

1980

Inflation in the US hits 14.8%

2020

COVID-19

Pandemic

$4.36*

2009

Financial

crisis

Don Wood

Chief Executive Officer

1967

2023

*Annualized dividends per share

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix

Our Five Key Priorities

We are a long-term owner of retail-based real estate, and our primary business objective is to grow the value of that real estate over time. That guiding business objective led us to establish 5 key sustainability priorities that are critical to our business success.

ADVANCE DECARBONIZATION		STRENGTHEN RESILIENCE	CONNECT COMMUNITIES
OBJECTIVE		OBJECTIVE		OBJECTIVE

EMPOWER TEAMS

OBJECTIVE

5

GOVERN RESPONSIBLY

OBJECTIVE

Manage potential financial exposure of transitioning real estate assets to a low carbon economy by decarbonizing our portfolio.

OUR ACTIONS

• Science-Basedtarget to reduce Scope 1 and 2 emissions by 46% by 2030 compared to a 2019 baseline
• 32% Scope 1 and 2 GHG emissions reduction through 2023
• Goal to achieve net-zero Scope 1 and 2 emissions by 2050
• 64% electric consumption in 2023 provided by zero-carbon sources
• 14.3 MW solar power generating capacity in solar arrays at 27 properties
• 5.3 million SF of LEED projects completed or in process

Minimize financial impact to our real estate assets from increased frequency and severity of weather events and depletion of natural resources.

OUR ACTIONS

• Climate change scenario analysis using RCP 8.5 identifies minimal near-term risk with little change expected over time
• Physical risk exposures incorporated into property-level capital planning and investment decisions
• 49% of properties have real-time water usage monitoring
• < $200K total damage in last 4 years from weather related events

Foster loyalty and connection to communities around our properties to drive long-term property and community success.

OUR ACTIONS

• 300+ community programs and events hosted at our properties in 2023
• 91% employees work at offices located at our properties and live in surrounding communities
• Significant philanthropic activity at our properties and supported by our people
• Local art featured and gathering places provided at our properties to foster community connection and honor the history of the property
• Combined investment with Primestor of > $400M in historically underrepresented communities

Attract, develop and retain the best talent with diverse perspectives to best position us to deliver strong long-term results.

OUR ACTIONS

• Multiple top workplace awards in 2023
• Pay equity analysis shows no pay anomalies based on race or gender for 3 consecutive years
• More than 6,000 hours of employee training provided in 2023
• Women comprise 53% of our workforce and 33% of our senior executives in 2023
• Diverse candidates accounted for 56% of all new hires and 33% of all promotions in 2023
• 87% retention rate in 2023

Implement and maintain a framework of controls to grow portfolio value while managing risk.

OUR ACTIONS

• Independent Non-Executive Chairman of the Board since 2003
• 57% board diversity by gender or race/ethnicity
• Annual election of all trustees with majority vote requirement and proxy access
• Prohibition on hedging and pledging stock with clawback and robust equity hold requirements
• MSCI ESG Rating: A

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix

6

We use the framework established by the Task Force on Climate-Related Financial Disclosures to assist in the identification and management of our climate-related risks and opportunities, to evaluate potential business impacts and to develop our overall sustainability strategies. We also use the guidelines outlined in the IFRS Sustainability Disclosure Standard S1 and S2 frameworks.

Darien Commons | Darien, CT

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix

Sustainability Governance

Governance related to our sustainability endeavors flows throughout every level of our organization starting with our Board of Trustees.

7

oversight

BOARD OF TRUSTEES

• Review and approve climate strategy and initiatives
• Ensure climate strategies incorporated into overall business strategy
• Ensure proper management of climate risks

		At least
Oversight		quarterly
		reporting

execution

EXECUTIVE MANAGEMENT

• Climate efforts sponsored by CEO
• EVP specifically responsible for strategy and management
• Dedicated VP and sustainability team
• Sustainability Council of most senior executives responsible for guiding implementation of climate initiatives

	Implementation
	of Sustainability
		Initiatives
PROPERTY	DEVELOPMENT
TEAMS	TEAMS
FINANCE	SUPPORT
TEAMS	TEAMS

Committees of the Board of Trustees

NOMINATING & CORPORATE GOVERNANCE COMMITTEE

• Oversight of climate risks and opportunities
• Monitor progress on climate goals
• Ensure trustees qualified to oversee climate risk

COMPENSATION & HUMAN CAPITAL MANAGEMENT COMMITTEE

• Oversight of human resource policies and practices
• Compensation of management tied to achieving climate goals

AUDIT COMMITTEE

• Oversight of financial reporting
• Enterprise wide risk management

For more specific information about governance of our sustainability program, please see our sustainability policy available on our website at www.federalrealty.com.

Assembly Row | Somerville, MA

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix

Climate Risks

Our business involves the ownership and operation of real estate assets, and as a result, our primary physical and transition risks and opportunities are reflective of the overall risks of the areas in which those assets are located.

Our financial exposure to the primary physical risks we assess is low to moderate in the near term with limited to no increase in those risk levels by 2050.

Physical Risks

We assess potential physical risk to our assets by running scenario analyses with

1. third-partytool using both RCP 8.5, a worst-case scenario model for future emissions, and RCP 4.5, an intermediate model for future emissions. We look at immediate to short-term risk (present through 2030) and long-term risk (out to 2050) for those acute and chronic risks that have the potential to be the most impactful to our portfolio. We run these analyses annually for our entire portfolio and for specific assets, as needed, in connection with making capital investment decisions. Physical risk summaries are provided to our property focused team members for use in future capital planning and in design and construction.

Our exposure to any one type of physical risk is mitigated by our fundamental business strategy of maintaining a portfolio with significant geographic diversity. That geographic diversity ensures that there will be no significant impact to our income stream from any one climate-related event or risk.

To best understand our potential financial exposure from physical risks, we aggregate the individual property physical risk assessments and weight the results by Property Operating Income (POI).

More information on how we manage the physical risks in our portfolio can be found in the Strengthen Resilience section of this report (pages 22-26).

Barracks Road | Charlottesville, VA

8

PORTFOLIO RISK IN 2030 AND 2050

VERY HIGH

RELATIVELY

HIGH

MODERATE

LOW

VERY LOW

DROUGHT	FIRE	HEAT	RIVER	SEA LEVEL	TROPICAL	WATER
		STRESS	FLOOD	RISE	CYCLONE	STRESS

2030 2050

POI WEIGHTED RISK LEVEL

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix

Transition Risks

Our risks related to the transition to a low carbon economy are also highly dependent on the jurisdictions where we do business. We continually monitor regulatory actions at the federal, state, and local levels in each jurisdiction where we own and operate our real estate to understand and evaluate these risks. Of those transition risks we have identified, we expect the impacts to be minimal as we intend to adequately address those risks in the normal course of operating our real estate. The potential impacts from transition risks are further mitigated because our real estate is generally located in communities that are holistically working to manage their own transition risks, which will lessen the ultimate financial impact to us over the short and long term.

There is no one single transition risk that would materially impact our business.

9

Plaza El Segundo | El Segundo, CA

TRANSITION RISK	TIME FRAME OF	POTENTIAL BUSINESS IMPACT	RISK MANAGEMENT STRATEGIES
ANTICIPATED IMPACT
Building Performance Standards		•	Increased capital costs to retrofit building systems	•	Proactive investment in energy and carbon efficiency upgrades
1-10+ years	•	Green lease language to facilitate energy efficiency upgrades and share in financial impacts with tenants
Sets caps on energy intensity or carbon	•	Potential fines for failure to comply with standards
emissions from properties		•	Continual monitoring of applicable laws and regulations
New/Enhanced Reporting Requirements	1-10 years	•	Increased cost of additional staffing to meet reporting requirements	•	Established and finetuned reporting infrastructure and appropriate controls
Additional disclosure obligations relating to	•	Potential fines for failure to comply with requirements	•	Third-party limited assurance of energy usage and GHG emissions metrics
energy usage/GHG emissions
Evolving Building/Construction Codes	1-10+ years	•	Increased material and construction costs make projects not financially viable	•	Continual monitoring of applicable building codes
Changes to permissible methods and	•	Engaged teams working on creative solutions
materials for future construction projects
Utility Prices		•	Increased electricity costs as grids work to meet increased demand, and	•	Smart utility purchasing to lock in favorable pricing
1-10+ years		implement renewable technologies
	•	Increased usage of power generated from renewable energy sources
Increased price/price volatility during transition		•	Increased natural gas cost resulting from lower available supply
Reputation		•	Less availability/higher cost of capital if not meeting investor expectations	•	Ongoing discussions with investors/tenants to understand expectations
1-10+ years	•	Active management of all sustainability initiatives
Damage to the good name and standing of the	•	Loss of tenant/revenues if not meeting tenant expectations
company for failure to address climate risks		•	Transparent reporting on sustainability initiatives

For more information on how we are addressing our GHG emissions, please visit the Advance Decarbonization chapter of this report (report pages 12-21).

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix

Climate Opportunities	10

Our focus on decarbonizing and improving resilience of our properties presents a number of opportunities for our business.

Market Based

Competitive advantage at properties located in markets where public and private sectors are collectively investing in infrastructure to improve resilience and manage GHG emissions

• Improved infrastructure enhances resiliency of individual assets
• Financial incentives available to invest capital needed to make resilience and decarbonization investments
• Lower future financial burdens on communities that focus on improvements over time

Improved Property Values

Increased demand for our properties based on sustainability characteristics

• Property of choice for tenants working to meet their own sustainability goals
• Ability to charge higher rents for sustainable assets
• Less downtime and lower repair costs from climate-related weather events because of resilience improvements at both the asset and the community levels
• Greater demand for assets with sustainability certifications

Reputation

Improved access to capital and employee satisfaction from being a leader in addressing climate change

• Potential new sources of capital from sustainability focused investors

• Improved ability to recruit and retain talent as a result of commitment to sustainability initiatives

Wildwood Shopping Center | Bethesda, MD

Lower Costs

Decrease in costs for operating our assets and our company as a result of investment in resiliency and decarbonization

• Cost savings from lower energy and water usage
• Lower costs of insurance for properties with mitigated climate risk and lower history of loss frequency and severity
• Lower cost of capital as a result of being able to participate in green financing structure

Introduction	TCFD	Decarbonization	Resilience	Communities	Teams	Governance	Appendix