Target Healthcare REIT : Sustainability Report 2023

Welcome

Target Healthcare REIT plc Sustainability Report 2023

Inside this report

1

to our 2023 Sustainability Report

About this Sustainability Report

This report:

• Describes the Company's responsible investment approach, which incorporates its Environmental, Social & Governance (ESG) Charter;
• Presents key responsible investment objectives and performance, describes our targets for the future, and tracks progress towards these; and

To the extent possible, the description of progress against the ESG commitments of the Company on page 7, together with the ESG performance data throughout, are presented as at, or for the year to, 31 December 2022.

The ESG data section, and corresponding appendices, are written in accordance with the latest European Public Real Estate Association's (EPRA) sustainability Best Practices Recommendations (sBPR), which in turn are aligned principally with the Global Reporting Initiative (GRI) Standards.

This ESG report has been prepared on behalf of the Company by Target Fund Managers Limited. Any reference to 'we', 'us', 'the Company' and 'our' throughout the report refers to Target Healthcare REIT plc (THRL). Target Fund Managers Limited is referred to throughout as 'the Manager'.

All data as at 31 December 2022 unless otherwise stated.

Our Annual Report is available to view online at https://www.targethealthcarereit.co.uk/investors/

05

Targeting

Tomorrow

Our ESG Charter ensures that our social impact objective remains integral to our approach.

09

Responsible

Investment

We embed appropriate ESG considerations into our decision-making.

16

Responsible Partnerships

Engaging with stakeholders to drive value and safety around our buildings.

21

Responsible Business

We treat all stakeholders with respect and fairly.

Overview 02-04

Targeting Tomorrow 05-08

Responsible Investment 09-15

Responsible Partnerships 16-20

Responsible Business 21-25

Supporting Data 26-31

Responsible investment and 'ESG' - what it means to us

Target Healthcare REIT plc Sustainability Report 2023

3

Since launching in 2013, we have been unwavering in our approach

- responsible investment, with a clear purpose, to improve the UK's care home real estate whilst generating sustainable long-term total returns.

Assets

100

Beds

6,701*

Tenants

33

* A further 203 beds will be added to the portfolio on completion of the three development sites.

Dear stakeholder,

I am pleased to present our inaugural sustainability report which explains our approach to responsible investment and how this aligns with our Environment, Social & Governance ("ESG") Charter. We will publish this report annually and detail key areas of progress towards meeting our ESG commitments, as well as providing real estate data which will supplement that in our financial reporting.

We have integrated many ESG principles from day one and have a clear investment approach which provides demonstrable evidence - we are leaders in social impact and our real estate offers strong environmental ratings. The former stems from our fundamental objective to provide fit-for-purpose care homes with the highest quality facilities for residents and care providers. Our EPC ratings compare favourably to our peers in commercial real estate investment and have us well-positioned for important upcoming legislative change,

long anticipated and now more likely following the Skidmore Net Zero Review. Quality and sustainability have always been at the heart of what we do and why we do it.

Our ESG charter, "Targeting tomorrow" is articulated in this report and reflects this continuing commitment. We explain our approach and present evidence/metrics which demonstrate

our impact. Simply put, the quality of our real estate portfolio is unparalleled and is sustainable for the long-term.

Recently we have made some changes to our governance arrangements with the establishment of a separate ESG committee. This will ensure greater focus and impetus for the Board's oversight of ESG matters. This has already led to meaningful commitments being made.

• All assets to have an EPC rating of B or above by 2027;
• A minimum portfolio coverage of 10% to be BREEAM certified by December 2023;
• The Manager is assessing all assets' suitability for Solar PV, and will facilitate installation support as a priority where practical.

Our key opportunity and challenge in the coming years is to positively influence our tenants. We have

1. high proportion of single-let assets with predominantly tenant procured utilities controlling energy sourcing and usage. We are improving our coverage of data collection utilising our strong relationships, and will be using this to suggest alternative approaches - on procurement, self- generation, and usage efficiency - allowing us to progress to an ambitious and realistic net zero target ahead of our 2050 minimum goal.

You will hear from the Manager in this report as well, with an insightful Q&A on their recently updated "house standard" approach to evaluating ESG in investment opportunities. The Manager details some of its own ESG achievements, including its status as a Carbon Neutral company, on page 27.

I trust you find this report helpful and informative. We would be delighted to receive any feedback you may have.

Regards,

Alison Fyfe

March 2023

2022 highlights

We are proud that ESG has been integral to our approach since day one. We are recognised as the first social impact investment trust, and proud of our many achievements to date.

Target Healthcare REIT plc Sustainability Report 2023

4

EPC ratings1

93%A-B ratings

100%A-C ratings

Important measure of energy efficiency and legislative rating.

BREEAM assessments

An additional independent rating providing improvement suggestions. Commissioned assessments for ten homes considered to be a representative sample of the portfolio.

Excellent & Very Good ratings have been received for six of the seven homes for which ratings finalised to date.

Energy consumption data

Data volunteered by tenants for 47% of portfolio.

Provision in new leases to mandate data sharing.

Defining proxy for real estate quality and social impact.

National Comparative: 30%

1,188 new wet rooms created with our backing since launch in 2013.

We assess this against listed peers with care home real estate.

A further measure of our social impact in supporting the sector's transition to fit-for-purpose real estate.