Our Governance & Resiliency
We believe strong governance is the unwavering north star for a successful business. Integrity, transparency, and a deep commitment to ethical business practices are the governing pillars that never fail to guide us in the right direction. Furthermore, we believe being proactive in identifying and assessing risk, as well as actively building our resiliency, is integral to our continued long-term growth.
“OWN IT”
Our governance practices embody one of our Hersha values “Own It”. We are committed to conducting governance with accountability, honesty, and responsibility to our stakeholders . Strong corporate governance is fundamental to our continued high performance. Hersha’s Board of Directors has established multiple committees in which the directors lead, including the audit committee, compensation committee, and nominating & corporate governance committee to ensure accountability.
Hersha’s portfolio consists of a diversity of locations, travel segments, and hotel brands. Hersha’s structure not only mitigates risk, but affords Hersha operational efficiencies by benchmarking similar hotels and sharing best practices to improve profitability.
Board of Trustees and Governance Information
at Hersha
Held in 2020
Independent Directors
50%
Female and Minority Board Members
Yes
Separate Chair
and CEO
Yes
Independent
Lead Director
Yes
Proxy
Access
Yes
Code of Conduct for Directors and Executive Officers
FOR MORE INFORMATION
on Hersha’s governance practices, please download our Governance documents on our Hersha website.
BOARD ROLE IN RISK OVERSIGHT
We believe having robust board oversight around risk is paramount to running a successful business. In response, our Board has a dedicated Risk Subcommittee, housed under the Audit Committee. The Risk Subcommittee has oversight of climate-related risks as part of its overall responsibility for reviewing Hersha’s enterprise risk strategy, risk identification and management, and compliance around environmental and social issues.
I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives. It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response.
– Larry Fink, CEO of BlackRock, 2021 Letter to CEOs
OUR RESILIENCY STRATEGY
Climate preparedness and resiliency efforts are supported by all aspects of the business – from the Board, to executives, to senior management in asset management, acquisitions, capital planning, and risk management. Our resiliency strategy includes the ongoing evaluation of potential climate risks, the identification of mitigation strategies, and the ongoing monitoring and assessment of our progress.
CLIMATE RISKS
We recognize there are inherent sustainability and climate risks that may impact our business. Key risks most pertinent to us include both physical and transition risks:
- Physical risks are those that arise from the physical effects of climate change, especially those associated with increasing intensity and frequency of extreme weather events – including hurricanes, storm surge, and wildfires – degradation of ecosystems, and changing climate patterns that lead to sea level rise, heat stress, and water stress.
- Transition risks consist of rising stakeholder and shareholder concern around sustainability, increasing prevalence of climate-related policy and regulation, and technological advances and fundamental shifts in market demand.
These will be updated as needed in subsequent annual sustainability reports.
FLOOD RISK NOAA SCORE
1.3 average portfolio risk,
vs. 2.8 average risk for US Lodging REITS*
(1-10, 1=low risk)
FLOOD RISK NOAA SCORE
2.1% of properties by count at high risk
(as defined by NOAA), vs. on average 3% of US Lodging REITs’ properties are at high risk
*Hersha NOAA Hazard Score is collated from data by the National Oceanic Atmospheric Administration (NOAA), and peer risk score calculated from the Morgan Stanley report “Rising Flood Risk: How Much and at What Cost?” (3/2019). The NOAA Hazard Score takes into account flood risk as defined by FEMA, the Federal Emergency Management Agency.
PORTFOLIO IN FEMA SPECIAL FLOOD ZONE AREAS
(Special Flood Hazard Areas have a 1% chance of flooding every year)
17% of our portfolio by count
PORTFOLIO IN FEMA SPECIAL FLOOD ZONE AREAS
The Federal Emergency Management Agency (FEMA) designs flood maps based on historical flooding since the 1970s in order to determine the likelihood of future flooding in designated areas.Resiliency Measures
We employ portfolio-wide resiliency measures, including carrying all risk property insurance for every property. This includes insurance for natural catastrophes including wind, flood, and fire events. Furthermore, because our hotels are geographically diverse, any singular event will not have an overwhelming effect on the performance of our overall portfolio.
From a property-specific perspective, our resiliency efforts are largely dependent on the property’s unique circumstances – geography, building age, whether the building is under renovation or currently operating etc. At the property-level, we continually monitor and implement practical, cost-effective resiliency measures and strategies.
CLIMATE OPPORTUNITY
We also continue to explore climate-related opportunities, including reductions in operating expenses due to improvements in resource efficiency and added resiliency measures, minimization of business interruption during climate shocks, improved reputation, and potential competitive advantages from stakeholder preferences towards sustainability.
CLOSING
Thank you for reading Hersha’s 2020 EarthView Sustainability Report. By making sustainability core to our business strategy, EarthView has been able to create a positive impact on our company, communities, and our planet. We are proud of EarthView’s leadership role in our industry and recognize that there will continue to be new frontiers of opportunity in sustainable hospitality to explore. We look forward to continued sharing of our contributions in making our world a more sustainable, connected, and resilient place.