“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 across our triple-bottom-line. Hersha’s Board of Trustees has established multiple trustee-chaired committees, 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

8

Size of Board at Hersha,
6 Independent Board Trustees

Yes

Dedicated Risk & Environmental, Social, & Governance (ESG) Board Subcommittee

5

Board Meetings
Held in 2021

50%

Female and Minority Board Trustees

Yes

Separate Chair
and CEO

Yes

Independent
Lead Trustee

Yes

Proxy
Access

Yes

Code of Conduct for Trustees and Executive Officers

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FOR MORE INFORMATION on Hersha’s governance practices, including the Risk & ESG Subcommittee charter, please see our Governance documents on our Hersha website.

BOARD ROLE IN RISK & ESG OVERSIGHT

We believe having robust board oversight around risks and opportunities is paramount to running a successful business. In 2021, we updated our governance structure to include a dedicated Risk and ESG board subcommittee housed under the Audit Committee and chaired by a sitting board member. This choice was made in an effort to ensure quality board oversight of climate-related risks and opportunities, including a formal schedule for the consideration of environmental, health and safety, and social matters. The Risk & ESG Subcommittee is also responsible for oversight of key diversity initiatives.

RISK & ESG SUBCOMMITTEE PROCESS

Sustainable investments have now reached $4 trillion. Actions and ambitions towards decarbonization have also increased. This is just the beginning – the tectonic shift towards sustainable investing is still accelerating… Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?  

– Larry Fink, CEO of BlackRock, 2022 Letter to CEOs

OUR RESILIENCY STRATEGY

Climate preparedness and resiliency efforts are supported by all aspects of the business – from the Board to executives and senior management in asset management, acquisitions, capital planning, operations, accounting, and risk management. Our resiliency strategy includes the ongoing consideration of potential climate risks and opportunities, the identification of mitigation strategies, and the ongoing monitoring and assessment of our progress.

CLIMATE RISKS

We are working to mitigate inherent sustainability and climate risks that may impact our business and the built environment at large. 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 surges, 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, technological advances, and fundamental shifts in market demand.

FLOOD RISK NOAA SCORE

1.6 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. an 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)

25% 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, singular events are less likely to have an overwhelming effect on the performance of our overall portfolio.

Our property-level resiliency efforts are largely dependent on the property’s unique circumstances – geography, building age, operating status, and other geopolitical factors. We continually monitor and implement practical, cost-effective resiliency measures and strategies while taking environmental impact into account.

Mitigation Tactics

CLIMATE OPPORTUNITIES

While climate change presents risks to our operations and the world at large, we see increased stakeholder emphasis on sustainability as an exceptional opportunity for the development and progression of our sustainable hospitality efforts. Our business continues 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.

Our Approach

CLOSING

Thank you for reading Hersha’s 2021 EarthView Sustainability Report. By integrating sustainability into our business strategy, EarthView has created immense value for our company, communities, and our planet. As we strive to meet our science-based targets and sustainability goals, we know there are still ample opportunities for our stakeholders and the environment to benefit through a comprehensive approach to sustainable hospitality. The climate crisis requires us to “stay nimble” as we navigate complex problems and devise innovative solutions. This is what we do best at Hersha. We are proud of EarthView’s leadership role in our industry and look forward to sharing more as we work to make our world a more sustainable, connected, and resilient place.