TRISTAN CAPITAL PARTNERS
TRISTAN INCOME PLUS STRATEGY TWO SCSP SICAV-RAIF – JUNE 2024
Environmental characteristics promoted
Tristan Income Plus Strategy SCSP SICAV-RAIF (“the Partnership”) promotes environmental and social characteristics by making loans which facilitate the improvement of real estate assets and business plans against measurable and pre-determined ESG criteria.
The Manager assesses ESG criteria through its ESG Scorecard.
Investment strategy
The Partnership will focus on whole loans to core plus and value-add assets, seeking to build a defensive, diversified private real estate debt portfolio.
The ESG Scorecard will be applied to all potential investments to assess. At completion of the loan, the ESG characteristics of both the asset itself (including measurements and certifications), as well as the borrower’s business plan during the term of the loan, will be assessed. Following funding, borrowers will report data on specific criteria noted in the ESG Scorecard including on the performance of their business plan (itself including performance versus ESG targets such as certifications, capex spent to date, etc.).
As part of the investment process, and in line with the ESG Scorecard, the Manager considers governance factors relating to borrowers during the due diligence phase, as further detailed below. Furthermore, the Partnership will undertake know-your customer (“KYC”) and anti-money laundering (“AML”) due diligence checks on all borrowers, and will request that they sign up to Tristan’s Anti-Fraud and Bribery policies, to prevent lending to borrowers that fall short of the Manager’s criteria on excluded sectors or standards of good governance.
Proportion of investments
The Partnership is committed to promoting the environmental and social characteristics described above using the Partnership’s proprietary ESG Scorecard. All new investments of the Partnership will be assessed against the ESG Scorecard at or prior to funding, and all existing investments will be assessed against that Scorecard on an ongoing basis. Any prospective investment that does not achieve a predetermined minimum rating under the ESG Scorecard according to the methodology set out will not be eligible to be recommended to the Manager’s Investment Committee.
Therefore, a minimum proportion of 80% of the Partnership’s investments will promote environmental and/or social characteristics. The Partnership does not commit to make sustainable investments or EU Taxonomy-aligned investments.
Monitoring of environmental characteristics
The Partnership uses a proprietary ESG Scorecard which helps the Manager to allocate capital in alignment with predetermined ESG criteria and to measure the Partnership’s progress over time in a quantitative way. The ESG Scorecard has been developed, and will be maintained by, the Manager to assess prospective investments and to monitor existing investments against sustainability indicators relevant to that investment.
The Partnership will focus on whole loans to core plus and value-add assets, seeking to build a defensive, diversified private real estate debt portfolio.
The ESG Scorecard will be applied to all potential investments to assess. At completion of the loan, the ESG characteristics of both the asset itself (including measurements and certifications), as well as the borrower’s business plan during the term of the loan, will be assessed. Following funding, borrowers will report data on specific criteria noted in the ESG Scorecard including on the performance of their business plan (itself including performance versus ESG targets such as certifications, capex spent to date, etc.).
As part of the investment process, and in line with the ESG Scorecard, the Manager considers governance factors relating to borrowers during the due diligence phase, as further detailed below. Furthermore, the Partnership will undertake know-your customer (“KYC”) and anti-money laundering (“AML”) due diligence checks on all borrowers, and will request that they sign up to Tristan’s Anti-Fraud and Bribery policies, to prevent lending to borrowers that fall short of the Manager’s criteria on excluded sectors or standards of good governance.
In addition, the Partnership ensures that it is not exposed to sectors or companies that operate in a way which would be contrary to the Partnership’s overall promotion of environmental and/or social characteristics. As such, the Partnership will not knowingly be exposed to investment in real estate assets that with a majority of tenants (over 50%) engaged in:
The Partnership will focus on whole loans (expected target up to 75% LTV across the portfolio) of €50 million to €150 million, and it is anticipated that this will result in average investments of €25 million to €50 million diversified across sectors and geographies.
The Partnership is committed to promoting the environmental and social characteristics described above using the Partnership’s proprietary ESG Scorecard. All new investments of the Partnership will be assessed against the ESG Scorecard at or prior to funding, and all existing investments will be assessed against that Scorecard on an ongoing basis. Any prospective investment that does not achieve a predetermined minimum rating under the ESG Scorecard according to the methodology set out will not be eligible to be recommended to the Manager’s Investment Committee. Therefore, a minimum proportion of 80% of the Partnership’s investments will promote environmental and/or social characteristics. The Partnership does not commit to make sustainable investments or EU Taxonomy-aligned investments.
Sustainability indicators
The Partnership uses a proprietary ESG Scorecard which helps the Manager to allocate capital in alignment with predetermined ESG criteria and to measure the Partnership’s progress over time in a quantitative way. The ESG Scorecard has been developed, and will be maintained by, the Manager to assess prospective investments and to monitor existing investments against sustainability indicators relevant to that investment, which may include:
Principal adverse impacts
In addition to the sustainability indicators, The Manager is responsible for identifying principal adverse impacts on sustainability factors for the Partnership, which are considered throughout the acquisition, development and ownership of the Partnership’s assets. The principal adverse impact indicators considered are:
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Partnership. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Partnership, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Partnership’s attainment of the promoted environmental social characteristics.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Partnership’s approach to the promotion of environmental characteristics as described above in section d) Investment strategy.
Environmental characteristics promoted
Curzon Capital Partners 5 Long-Life LP and Curzon Capital Partners 5 Long-Life SCSp (together, “the Fund”) promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
Investment strategy
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
This is pursued through a variety of means including ESG due diligence on all potential assets and on an ongoing basis, which are aligned with the environmental characteristics promoted and the sustainability indicators used to measure those characteristics. All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
Proportion of investments
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging.
Monitoring of environmental characteristics
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters.
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Methodologies and data
The Fund uses a proprietary Environmental Management System (EMS) to identify, manage, monitor and control pertinent sustainability indicators. The EMS is informed by an appropriate range of industry standards and sources to ensure alignment with best practice. The Portfolio Manager also works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Fund’s attainment of the promoted environmental social characteristics.
Engagement
Engagement with local property managers, operating partners and tenants is integral to the ongoing ESG monitoring of the properties. The engagement supports the collection of data required for the sustainability indicators to measure the attainment of the environmental characteristics promoted. There is no standalone engagement policy, rather the engagement is part of other policies and processes such as the asset management activities, used to support the investment strategy set out above.
The Fund promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
The Fund focuses on the creation of a diversified portfolio of mid-market European real estate assets with defensive institutional qualities and high economic potential. The Fund looks to generate significant value creation and capital appreciation using moderate leverage, while limiting downside risk with defensible cash yields. The Fund expects to provide regular distributions to investors from current income and pursue asset sales opportunistically to maximise returns. The full investment strategy of the Fund is set out in Section 2 (Executive Summary) of the Fund’s private placement memorandum.
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Fund’s approach to the promotion of environmental characteristics as described above, including where the Portfolio Manager assesses that there is scope to make improvements to those characteristics through the application of bespoke ESG criteria. In establishing the ESG criteria for the potential investment, the Portfolio Manager factors in property characteristics including location, industry, applicable regulatory regimes and the asset’s specific business plan. For example, a property that allows for comprehensive ESG improvements may result in higher reduction targets. The ESG due diligence report will include an assessment on certifications and standards (for example, BREEAM and the EPC), providing an indicative rating based on the information available.
The ESG due diligence process may vary, given that the Fund’s investment strategy has a core-plus risk return profile, which can be broken out between portfolio acquisitions, platform aggregation and single asset strategies. It is important to highlight the adjusted approach in the limited cases where the Fund makes portfolio acquisitions that may include a limited number of non-strategic assets. Given the potential scale of these acquisitions, the Fund recognises that not all ESG due diligence can be performed in a timely manner as part of the acquisition period. Taking a prudent approach and ensuring that sustainability risks are mitigated, the Fund has adopted an approach where the due diligence for portfolio acquisitions will identify the non-strategic assets (potentially brown assets, for example) from strategic assets. The Fund will aim to ensure that ESG due diligence is performed on all strategic assets acquired independently and as part of portfolio acquisitions, and assets comprising 75% of the portfolio acquisitions (by gross asset value).
All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted. The sustainability indicators will be monitored on an ongoing basis for landlord-controlled properties and on a best-efforts basis for tenant-controlled properties.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
As part of the investment process, and in line with the ESG strategy, the Portfolio Manager also considers governance factors relating to the acquisition, development, ownership and management of property assets. The Fund invests both directly and indirectly in real estate. Where there are indirect investments made via holding vehicles or special purpose vehicles, the Portfolio Manager ensures that governance practices are assessed and considered to be good, as proportionate to the set up and operations of the investee companies. The Portfolio Manager also assess good governance where investments are made in investee companies via collective investment schemes, as the Portfolio Manager has control of the collective investment schemes and the policy on good governance that is applied by them.
The Fund also considers the local community and economy before, during and after the development.
The Fund’s approach to ESG is therefore carried out on a continuous basis from pre-investment stage through to investment disposal. Where relevant, the Portfolio Manager makes use of contractual mechanisms (where appropriate), requiring its tenants and partners to meet particular ESG targets and to report on these on an ongoing basis.
Additional information on how the Portfolio Manager integrates sustainability into its investment process to ensure that it is applied on a continuous basis, and in particular its approach to due diligence and ongoing monitoring of investments, can be found in the Fund’s ESG Policy (which is available from the Portfolio Manager on request).
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. The Fund does not commit to making sustainable investments.
For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging. Any assets held for liquidity and/or hedging purposes will not be held for the purposes of promoting the environmental characteristics of the Fund. For any other assets invested in, the Portfolio Manager’s exclusionary screening will be applied and certain elements of ESG due diligence will be carried out, including in relation to EPCs and flood risk, as minimum environmental and social safeguards.
Sustainability indicators
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters. As the GRESB scoring methodology evolves to capture the changing legislative framework, the Fund must continue to adapt and remain ambitious in striving for the highest rating achievable.
The Fund regularly measures its progress against all criteria set for each property in a quantitative way. The monitoring of the sustainability indicators is on an ongoing basis for landlord-controlled properties and for tenant-controlled properties. For tenant-controlled properties, where some data may not be as readily available or in control of the Portfolio Manager, the Portfolio Manager may, where required, supplement its own monitoring of the environmental characteristics promoted via the sustainability indicators utilising third-party data it considers is reliable.
Further sustainability-related criteria may be established, and will be reviewed by, the Portfolio Manager depending on the asset’s characteristics, level of direct control of the premises, location and other factors. The Portfolio Manager considers the nature of each asset when assessing prospective, or monitoring existing, investments, complying always with the core objective of protecting value and identifying opportunities to drive additional value for investors. The criteria applied to each asset will therefore vary, and, whilst all criteria set for each property are measured and monitored as sustainability indicators, there are no target metrics at a Fund level in respect of the environmental characteristics.
Principal adverse impacts
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Through a range of actions, such as on energy efficiency plans or net zero targets, the Manager intends to reduce or mitigate the impact of the principal adverse impact indictors, where required.
The monitoring and actions taken in relation to the principal adverse impact indicators is subject to data availability and data quality, which is likely to evolve over time.
The Fund works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis for landlord-controlled properties and, on a best-efforts basis, for tenant-controlled properties annually. The Fund also periodically gathers information on renewable energy capacity and presence of green building certification across its investments from local property managers and operating partners. The Fund aggregates and monitors the data using a third-party reputable environmental data management system, and gathers sustainability commentary from operating partners and property managers to understand the context of the data being reported.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards.
For the data collected, the Fund also instructs an independent assurance of energy, water and waste data, and GHG emissions on annual basis, using a third party provider. The assurance process includes desktop review, management and property level data verification and evidence gathering from various sources, including third parties. Data points are selected based mainly on the most material environmental impacts (e.g. highest energy consumption) and the number of data points tested is proportional to the reported consumption. Primary evidence is obtained to confirm the reported energy, water and waste consumption and to identify any discrepancies or errors in the data being assured. For GHG emissions, the assurer also reviews emissions factors and associated calculation methodology. The data providers are advised of any discrepancies or errors in the data being assured.
Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps. In addition, the Portfolio Manager expects that the proportion of investment where data is estimated will reduce over time.
The Portfolio Manager recognises that continual update will be required to ensure that the data collection and other methodologies remain in line with best practice. The Portfolio Manager will review the approach at least annually to ensure continued alignment with regulatory requirements, best practice and market expectations. The review will identify if any material changes to the approach are required. Where changes are deemed appropriate all affected stakeholders will be notified.
The data sourcing process is partly dependent on external parties sharing timely and accurate information and as there is less control of tenant-controlled properties (as opposed to landlord-controlled properties) there could be additional challenges of obtaining ESG-related data from such properties. Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps and monitor progress.
The independent assurance of energy, water and waste date, and GHG emissions, is based on a limited number of data points as the sampling method is used in the assurance process. Furthermore, positive outcome from the assurance evaluation is not guaranteed and some of the data reported, including data proxies and estimates, might not be assured.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations impact the Fund’s attainment of the promoted environmental characteristics.
Environmental characteristics promoted
The European Property Investors Special Opportunities 6 SCSp SICAV-SIF (“the Fund”) promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
Investment strategy
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
This is pursued through a variety of means including ESG due diligence on all potential assets and on an ongoing basis, which are aligned with the environmental characteristics promoted and the sustainability indicators used to measure those characteristics. All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
Proportion of investments
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging.
Monitoring of environmental characteristics
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters.
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Methodologies and data
The Fund uses a proprietary Environmental Management System (EMS) to identify, manage, monitor and control pertinent sustainability indicators. The EMS is informed by an appropriate range of industry standards and sources to ensure alignment with best practice. The Portfolio Manager also works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Fund’s attainment of the promoted environmental social characteristics.
Engagement
Engagement with local property managers, operating partners and tenants is integral to the ongoing ESG monitoring of the properties. The engagement supports the collection of data required for the sustainability indicators to measure the attainment of the environmental characteristics promoted. There is no standalone engagement policy, rather the engagement is part of other policies and processes such as the asset management activities, used to support the investment strategy set out above.
The Fund promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
The Fund focuses on the creation of a diversified portfolio of mid-market European real estate assets with defensive institutional qualities and high economic potential. The Fund looks to generate significant value creation and capital appreciation using moderate leverage, while limiting downside risk with defensible cash yields. The Fund expects to provide regular distributions to investors from current income and pursue asset sales opportunistically to maximise returns. The full investment strategy of the Fund is set out in Section 2 (Executive Summary) of the Fund’s private placement memorandum.
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Fund’s approach to the promotion of environmental characteristics as described above, including where the Portfolio Manager assesses that there is scope to make improvements to those characteristics through the application of bespoke ESG criteria. In establishing the ESG criteria for the potential investment, the Portfolio Manager factors in property characteristics including location, industry, applicable regulatory regimes and the asset’s specific business plan. For example, a property that allows for comprehensive ESG improvements may result in higher reduction targets. The ESG due diligence report will include an assessment on certifications and standards (for example, BREEAM and the EPC), providing an indicative rating based on the information available.
The ESG due diligence process may vary, given that the Fund’s investment strategy has a blend of opportunistic and value-add return profiles, which can be separated between Platform Acquisitions and single asset strategies. Platform Acquisitions refer to large scale acquisitions that would include buying non-strategic assets to obtain access to opportunities which support the Fund’s overall investment strategy. Given the large scale of these acquisitions, the Fund recognises that not all ESG due diligence can be performed in a timely manner as part of the acquisition process. Taking a prudent approach and ensuring that sustainability risks are mitigated, the Fund has adopted an approach where the due diligence for Platform Acquisitions will identify the non-strategic assets (potentially brown assets, for example) from strategic assets. The Fund will aim to ensure that ESG due diligence is performed on all strategic assets acquired independently and as part of Platform Acquisitions, and assets comprising 50% of the Platform Acquisitions (by gross asset value).
All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted. The sustainability indicators will be monitored on an ongoing basis for landlord-controlled properties and on a best-efforts basis for tenant-controlled properties.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
As part of the investment process, and in line with the ESG strategy, the Portfolio Manager also considers governance factors relating to the acquisition, development, ownership and management of property assets. The Fund invests both directly and indirectly in real estate. Where there are indirect investments made via holding vehicles or special purpose vehicles, the Portfolio Manager ensures that governance practices are assessed and considered to be good, as proportionate to the set up and operations of the investee companies. The Portfolio Manager also assess good governance where investments are made in investee companies via collective investment schemes, as the Portfolio Manager has control of the collective investment schemes and the policy on good governance that is applied by them.
The Fund also considers the local community and economy before, during and after the development.
The Fund’s approach to ESG is therefore carried out on a continuous basis from pre-investment stage through to investment disposal. Where relevant, the Portfolio Manager makes use of contractual mechanisms (where appropriate), requiring its tenants and partners to meet particular ESG targets and to report on these on an ongoing basis.
Additional information on how the Portfolio Manager integrates sustainability into its investment process to ensure that it is applied on a continuous basis, and in particular its approach to due diligence and ongoing monitoring of investments, can be found in the Fund’s ESG Policy (which is available from the Portfolio Manager on request).
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. The Fund does not commit to making sustainable investments.
For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging. Any assets held for liquidity and/or hedging purposes will not be held for the purposes of promoting the environmental characteristics of the Fund. For any other assets invested in, the Portfolio Manager’s exclusionary screening will be applied and certain elements of ESG due diligence will be carried out, including in relation to EPCs and flood risk, as minimum environmental and social safeguards.
Sustainability indicators
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters. As the GRESB scoring methodology evolves to capture the changing legislative framework, the Fund must continue to adapt and remain ambitious in striving for the highest rating achievable.
The Fund regularly measures its progress against all criteria set for each property in a quantitative way. The monitoring of the sustainability indicators is on an ongoing basis for landlord-controlled properties and for tenant-controlled properties. For tenant-controlled properties, where some data may not be as readily available or in control of the Portfolio Manager, the Portfolio Manager may, where required, supplement its own monitoring of the environmental characteristics promoted via the sustainability indicators utilising third-party data it considers is reliable.
Further sustainability-related criteria may be established, and will be reviewed by, the Portfolio Manager depending on the asset’s characteristics, level of direct control of the premises, location and other factors. The Portfolio Manager considers the nature of each asset when assessing prospective, or monitoring existing, investments, complying always with the core objective of protecting value and identifying opportunities to drive additional value for investors. The criteria applied to each asset will therefore vary, and, whilst all criteria set for each property are measured and monitored as sustainability indicators, there are no target metrics at a Fund level in respect of the environmental characteristics.
Principal adverse impacts
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Through a range of actions, such as on energy efficiency plans or net zero targets, the Manager intends to reduce or mitigate the impact of the principal adverse impact indictors, where required.
The monitoring and actions taken in relation to the principal adverse impact indicators is subject to data availability and data quality, which is likely to evolve over time.
The Fund works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis for landlord-controlled properties and, on a best-efforts basis, for tenant-controlled properties annually. The Fund also periodically gathers information on renewable energy capacity and presence of green building certification across its investments from local property managers and operating partners. The Fund aggregates and monitors the data using a third-party reputable environmental data management system, and gathers sustainability commentary from operating partners and property managers to understand the context of the data being reported.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards.
For the data collected, the Fund also instructs an independent assurance of energy, water and waste data, and GHG emissions on annual basis, using a third party provider. The assurance process includes desktop review, management and property level data verification and evidence gathering from various sources, including third parties. Data points are selected based mainly on the most material environmental impacts (e.g. highest energy consumption) and the number of data points tested is proportional to the reported consumption. Primary evidence is obtained to confirm the reported energy, water and waste consumption and to identify any discrepancies or errors in the data being assured. For GHG emissions, the assurer also reviews emissions factors and associated calculation methodology. The data providers are advised of any discrepancies or errors in the data being assured.
Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps. In addition, the Portfolio Manager expects that the proportion of investment where data is estimated will reduce over time.
The Portfolio Manager recognises that continual update will be required to ensure that the data collection and other methodologies remain in line with best practice. The Portfolio Manager will review the approach at least annually to ensure continued alignment with regulatory requirements, best practice and market expectations. The review will identify if any material changes to the approach are required. Where changes are deemed appropriate all affected stakeholders will be notified.
The data sourcing process is partly dependent on external parties sharing timely and accurate information and as there is less control of tenant-controlled properties (as opposed to landlord-controlled properties) there could be additional challenges of obtaining ESG-related data from such properties. Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps and monitor progress.
The independent assurance of energy, water and waste date, and GHG emissions, is based on a limited number of data points as the sampling method is used in the assurance process. Furthermore, positive outcome from the assurance evaluation is not guaranteed and some of the data reported, including data proxies and estimates, might not be assured.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations impact the Fund’s attainment of the promoted environmental characteristics.
TIPS 2 - SFDR
TRISTAN INCOME PLUS STRATEGY TWO SCSP SICAV-RAIF – JUNE 2024
Environmental characteristics promoted
Tristan Income Plus Strategy SCSP SICAV-RAIF (“the Partnership”) promotes environmental and social characteristics by making loans which facilitate the improvement of real estate assets and business plans against measurable and pre-determined ESG criteria.
The Manager assesses ESG criteria through its ESG Scorecard.
Investment strategy
The Partnership will focus on whole loans to core plus and value-add assets, seeking to build a defensive, diversified private real estate debt portfolio.
The ESG Scorecard will be applied to all potential investments to assess. At completion of the loan, the ESG characteristics of both the asset itself (including measurements and certifications), as well as the borrower’s business plan during the term of the loan, will be assessed. Following funding, borrowers will report data on specific criteria noted in the ESG Scorecard including on the performance of their business plan (itself including performance versus ESG targets such as certifications, capex spent to date, etc.).
As part of the investment process, and in line with the ESG Scorecard, the Manager considers governance factors relating to borrowers during the due diligence phase, as further detailed below. Furthermore, the Partnership will undertake know-your customer (“KYC”) and anti-money laundering (“AML”) due diligence checks on all borrowers, and will request that they sign up to Tristan’s Anti-Fraud and Bribery policies, to prevent lending to borrowers that fall short of the Manager’s criteria on excluded sectors or standards of good governance.
Proportion of investments
The Partnership is committed to promoting the environmental and social characteristics described above using the Partnership’s proprietary ESG Scorecard. All new investments of the Partnership will be assessed against the ESG Scorecard at or prior to funding, and all existing investments will be assessed against that Scorecard on an ongoing basis. Any prospective investment that does not achieve a predetermined minimum rating under the ESG Scorecard according to the methodology set out will not be eligible to be recommended to the Manager’s Investment Committee.
Therefore, a minimum proportion of 80% of the Partnership’s investments will promote environmental and/or social characteristics. The Partnership does not commit to make sustainable investments or EU Taxonomy-aligned investments.
Monitoring of environmental characteristics
The Partnership uses a proprietary ESG Scorecard which helps the Manager to allocate capital in alignment with predetermined ESG criteria and to measure the Partnership’s progress over time in a quantitative way. The ESG Scorecard has been developed, and will be maintained by, the Manager to assess prospective investments and to monitor existing investments against sustainability indicators relevant to that investment.
The Partnership will focus on whole loans to core plus and value-add assets, seeking to build a defensive, diversified private real estate debt portfolio.
The ESG Scorecard will be applied to all potential investments to assess. At completion of the loan, the ESG characteristics of both the asset itself (including measurements and certifications), as well as the borrower’s business plan during the term of the loan, will be assessed. Following funding, borrowers will report data on specific criteria noted in the ESG Scorecard including on the performance of their business plan (itself including performance versus ESG targets such as certifications, capex spent to date, etc.).
As part of the investment process, and in line with the ESG Scorecard, the Manager considers governance factors relating to borrowers during the due diligence phase, as further detailed below. Furthermore, the Partnership will undertake know-your customer (“KYC”) and anti-money laundering (“AML”) due diligence checks on all borrowers, and will request that they sign up to Tristan’s Anti-Fraud and Bribery policies, to prevent lending to borrowers that fall short of the Manager’s criteria on excluded sectors or standards of good governance.
In addition, the Partnership ensures that it is not exposed to sectors or companies that operate in a way which would be contrary to the Partnership’s overall promotion of environmental and/or social characteristics. As such, the Partnership will not knowingly be exposed to investment in real estate assets that with a majority of tenants (over 50%) engaged in:
The Partnership will focus on whole loans (expected target up to 75% LTV across the portfolio) of €50 million to €150 million, and it is anticipated that this will result in average investments of €25 million to €50 million diversified across sectors and geographies.
The Partnership is committed to promoting the environmental and social characteristics described above using the Partnership’s proprietary ESG Scorecard. All new investments of the Partnership will be assessed against the ESG Scorecard at or prior to funding, and all existing investments will be assessed against that Scorecard on an ongoing basis. Any prospective investment that does not achieve a predetermined minimum rating under the ESG Scorecard according to the methodology set out will not be eligible to be recommended to the Manager’s Investment Committee. Therefore, a minimum proportion of 80% of the Partnership’s investments will promote environmental and/or social characteristics. The Partnership does not commit to make sustainable investments or EU Taxonomy-aligned investments.
Sustainability indicators
The Partnership uses a proprietary ESG Scorecard which helps the Manager to allocate capital in alignment with predetermined ESG criteria and to measure the Partnership’s progress over time in a quantitative way. The ESG Scorecard has been developed, and will be maintained by, the Manager to assess prospective investments and to monitor existing investments against sustainability indicators relevant to that investment, which may include:
Principal adverse impacts
In addition to the sustainability indicators, The Manager is responsible for identifying principal adverse impacts on sustainability factors for the Partnership, which are considered throughout the acquisition, development and ownership of the Partnership’s assets. The principal adverse impact indicators considered are:
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Partnership. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Partnership, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Partnership’s attainment of the promoted environmental social characteristics.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Partnership’s approach to the promotion of environmental characteristics as described above in section d) Investment strategy.
CCP 5 - SFDR
Environmental characteristics promoted
Curzon Capital Partners 5 Long-Life LP and Curzon Capital Partners 5 Long-Life SCSp (together, “the Fund”) promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
Investment strategy
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
This is pursued through a variety of means including ESG due diligence on all potential assets and on an ongoing basis, which are aligned with the environmental characteristics promoted and the sustainability indicators used to measure those characteristics. All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
Proportion of investments
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging.
Monitoring of environmental characteristics
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters.
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Methodologies and data
The Fund uses a proprietary Environmental Management System (EMS) to identify, manage, monitor and control pertinent sustainability indicators. The EMS is informed by an appropriate range of industry standards and sources to ensure alignment with best practice. The Portfolio Manager also works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Fund’s attainment of the promoted environmental social characteristics.
Engagement
Engagement with local property managers, operating partners and tenants is integral to the ongoing ESG monitoring of the properties. The engagement supports the collection of data required for the sustainability indicators to measure the attainment of the environmental characteristics promoted. There is no standalone engagement policy, rather the engagement is part of other policies and processes such as the asset management activities, used to support the investment strategy set out above.
The Fund promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
The Fund focuses on the creation of a diversified portfolio of mid-market European real estate assets with defensive institutional qualities and high economic potential. The Fund looks to generate significant value creation and capital appreciation using moderate leverage, while limiting downside risk with defensible cash yields. The Fund expects to provide regular distributions to investors from current income and pursue asset sales opportunistically to maximise returns. The full investment strategy of the Fund is set out in Section 2 (Executive Summary) of the Fund’s private placement memorandum.
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Fund’s approach to the promotion of environmental characteristics as described above, including where the Portfolio Manager assesses that there is scope to make improvements to those characteristics through the application of bespoke ESG criteria. In establishing the ESG criteria for the potential investment, the Portfolio Manager factors in property characteristics including location, industry, applicable regulatory regimes and the asset’s specific business plan. For example, a property that allows for comprehensive ESG improvements may result in higher reduction targets. The ESG due diligence report will include an assessment on certifications and standards (for example, BREEAM and the EPC), providing an indicative rating based on the information available.
The ESG due diligence process may vary, given that the Fund’s investment strategy has a core-plus risk return profile, which can be broken out between portfolio acquisitions, platform aggregation and single asset strategies. It is important to highlight the adjusted approach in the limited cases where the Fund makes portfolio acquisitions that may include a limited number of non-strategic assets. Given the potential scale of these acquisitions, the Fund recognises that not all ESG due diligence can be performed in a timely manner as part of the acquisition period. Taking a prudent approach and ensuring that sustainability risks are mitigated, the Fund has adopted an approach where the due diligence for portfolio acquisitions will identify the non-strategic assets (potentially brown assets, for example) from strategic assets. The Fund will aim to ensure that ESG due diligence is performed on all strategic assets acquired independently and as part of portfolio acquisitions, and assets comprising 75% of the portfolio acquisitions (by gross asset value).
All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted. The sustainability indicators will be monitored on an ongoing basis for landlord-controlled properties and on a best-efforts basis for tenant-controlled properties.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
As part of the investment process, and in line with the ESG strategy, the Portfolio Manager also considers governance factors relating to the acquisition, development, ownership and management of property assets. The Fund invests both directly and indirectly in real estate. Where there are indirect investments made via holding vehicles or special purpose vehicles, the Portfolio Manager ensures that governance practices are assessed and considered to be good, as proportionate to the set up and operations of the investee companies. The Portfolio Manager also assess good governance where investments are made in investee companies via collective investment schemes, as the Portfolio Manager has control of the collective investment schemes and the policy on good governance that is applied by them.
The Fund also considers the local community and economy before, during and after the development.
The Fund’s approach to ESG is therefore carried out on a continuous basis from pre-investment stage through to investment disposal. Where relevant, the Portfolio Manager makes use of contractual mechanisms (where appropriate), requiring its tenants and partners to meet particular ESG targets and to report on these on an ongoing basis.
Additional information on how the Portfolio Manager integrates sustainability into its investment process to ensure that it is applied on a continuous basis, and in particular its approach to due diligence and ongoing monitoring of investments, can be found in the Fund’s ESG Policy (which is available from the Portfolio Manager on request).
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. The Fund does not commit to making sustainable investments.
For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging. Any assets held for liquidity and/or hedging purposes will not be held for the purposes of promoting the environmental characteristics of the Fund. For any other assets invested in, the Portfolio Manager’s exclusionary screening will be applied and certain elements of ESG due diligence will be carried out, including in relation to EPCs and flood risk, as minimum environmental and social safeguards.
Sustainability indicators
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters. As the GRESB scoring methodology evolves to capture the changing legislative framework, the Fund must continue to adapt and remain ambitious in striving for the highest rating achievable.
The Fund regularly measures its progress against all criteria set for each property in a quantitative way. The monitoring of the sustainability indicators is on an ongoing basis for landlord-controlled properties and for tenant-controlled properties. For tenant-controlled properties, where some data may not be as readily available or in control of the Portfolio Manager, the Portfolio Manager may, where required, supplement its own monitoring of the environmental characteristics promoted via the sustainability indicators utilising third-party data it considers is reliable.
Further sustainability-related criteria may be established, and will be reviewed by, the Portfolio Manager depending on the asset’s characteristics, level of direct control of the premises, location and other factors. The Portfolio Manager considers the nature of each asset when assessing prospective, or monitoring existing, investments, complying always with the core objective of protecting value and identifying opportunities to drive additional value for investors. The criteria applied to each asset will therefore vary, and, whilst all criteria set for each property are measured and monitored as sustainability indicators, there are no target metrics at a Fund level in respect of the environmental characteristics.
Principal adverse impacts
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Through a range of actions, such as on energy efficiency plans or net zero targets, the Manager intends to reduce or mitigate the impact of the principal adverse impact indictors, where required.
The monitoring and actions taken in relation to the principal adverse impact indicators is subject to data availability and data quality, which is likely to evolve over time.
The Fund works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis for landlord-controlled properties and, on a best-efforts basis, for tenant-controlled properties annually. The Fund also periodically gathers information on renewable energy capacity and presence of green building certification across its investments from local property managers and operating partners. The Fund aggregates and monitors the data using a third-party reputable environmental data management system, and gathers sustainability commentary from operating partners and property managers to understand the context of the data being reported.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards.
For the data collected, the Fund also instructs an independent assurance of energy, water and waste data, and GHG emissions on annual basis, using a third party provider. The assurance process includes desktop review, management and property level data verification and evidence gathering from various sources, including third parties. Data points are selected based mainly on the most material environmental impacts (e.g. highest energy consumption) and the number of data points tested is proportional to the reported consumption. Primary evidence is obtained to confirm the reported energy, water and waste consumption and to identify any discrepancies or errors in the data being assured. For GHG emissions, the assurer also reviews emissions factors and associated calculation methodology. The data providers are advised of any discrepancies or errors in the data being assured.
Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps. In addition, the Portfolio Manager expects that the proportion of investment where data is estimated will reduce over time.
The Portfolio Manager recognises that continual update will be required to ensure that the data collection and other methodologies remain in line with best practice. The Portfolio Manager will review the approach at least annually to ensure continued alignment with regulatory requirements, best practice and market expectations. The review will identify if any material changes to the approach are required. Where changes are deemed appropriate all affected stakeholders will be notified.
The data sourcing process is partly dependent on external parties sharing timely and accurate information and as there is less control of tenant-controlled properties (as opposed to landlord-controlled properties) there could be additional challenges of obtaining ESG-related data from such properties. Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps and monitor progress.
The independent assurance of energy, water and waste date, and GHG emissions, is based on a limited number of data points as the sampling method is used in the assurance process. Furthermore, positive outcome from the assurance evaluation is not guaranteed and some of the data reported, including data proxies and estimates, might not be assured.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations impact the Fund’s attainment of the promoted environmental characteristics.
EPISO 6 SIF
Environmental characteristics promoted
The European Property Investors Special Opportunities 6 SCSp SICAV-SIF (“the Fund”) promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
Investment strategy
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
This is pursued through a variety of means including ESG due diligence on all potential assets and on an ongoing basis, which are aligned with the environmental characteristics promoted and the sustainability indicators used to measure those characteristics. All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
Proportion of investments
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging.
Monitoring of environmental characteristics
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters.
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Methodologies and data
The Fund uses a proprietary Environmental Management System (EMS) to identify, manage, monitor and control pertinent sustainability indicators. The EMS is informed by an appropriate range of industry standards and sources to ensure alignment with best practice. The Portfolio Manager also works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Fund’s attainment of the promoted environmental social characteristics.
Engagement
Engagement with local property managers, operating partners and tenants is integral to the ongoing ESG monitoring of the properties. The engagement supports the collection of data required for the sustainability indicators to measure the attainment of the environmental characteristics promoted. There is no standalone engagement policy, rather the engagement is part of other policies and processes such as the asset management activities, used to support the investment strategy set out above.
The Fund promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
The Fund focuses on the creation of a diversified portfolio of mid-market European real estate assets with defensive institutional qualities and high economic potential. The Fund looks to generate significant value creation and capital appreciation using moderate leverage, while limiting downside risk with defensible cash yields. The Fund expects to provide regular distributions to investors from current income and pursue asset sales opportunistically to maximise returns. The full investment strategy of the Fund is set out in Section 2 (Executive Summary) of the Fund’s private placement memorandum.
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Fund’s approach to the promotion of environmental characteristics as described above, including where the Portfolio Manager assesses that there is scope to make improvements to those characteristics through the application of bespoke ESG criteria. In establishing the ESG criteria for the potential investment, the Portfolio Manager factors in property characteristics including location, industry, applicable regulatory regimes and the asset’s specific business plan. For example, a property that allows for comprehensive ESG improvements may result in higher reduction targets. The ESG due diligence report will include an assessment on certifications and standards (for example, BREEAM and the EPC), providing an indicative rating based on the information available.
The ESG due diligence process may vary, given that the Fund’s investment strategy has a blend of opportunistic and value-add return profiles, which can be separated between Platform Acquisitions and single asset strategies. Platform Acquisitions refer to large scale acquisitions that would include buying non-strategic assets to obtain access to opportunities which support the Fund’s overall investment strategy. Given the large scale of these acquisitions, the Fund recognises that not all ESG due diligence can be performed in a timely manner as part of the acquisition process. Taking a prudent approach and ensuring that sustainability risks are mitigated, the Fund has adopted an approach where the due diligence for Platform Acquisitions will identify the non-strategic assets (potentially brown assets, for example) from strategic assets. The Fund will aim to ensure that ESG due diligence is performed on all strategic assets acquired independently and as part of Platform Acquisitions, and assets comprising 50% of the Platform Acquisitions (by gross asset value).
All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted. The sustainability indicators will be monitored on an ongoing basis for landlord-controlled properties and on a best-efforts basis for tenant-controlled properties.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
As part of the investment process, and in line with the ESG strategy, the Portfolio Manager also considers governance factors relating to the acquisition, development, ownership and management of property assets. The Fund invests both directly and indirectly in real estate. Where there are indirect investments made via holding vehicles or special purpose vehicles, the Portfolio Manager ensures that governance practices are assessed and considered to be good, as proportionate to the set up and operations of the investee companies. The Portfolio Manager also assess good governance where investments are made in investee companies via collective investment schemes, as the Portfolio Manager has control of the collective investment schemes and the policy on good governance that is applied by them.
The Fund also considers the local community and economy before, during and after the development.
The Fund’s approach to ESG is therefore carried out on a continuous basis from pre-investment stage through to investment disposal. Where relevant, the Portfolio Manager makes use of contractual mechanisms (where appropriate), requiring its tenants and partners to meet particular ESG targets and to report on these on an ongoing basis.
Additional information on how the Portfolio Manager integrates sustainability into its investment process to ensure that it is applied on a continuous basis, and in particular its approach to due diligence and ongoing monitoring of investments, can be found in the Fund’s ESG Policy (which is available from the Portfolio Manager on request).
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. The Fund does not commit to making sustainable investments.
For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging. Any assets held for liquidity and/or hedging purposes will not be held for the purposes of promoting the environmental characteristics of the Fund. For any other assets invested in, the Portfolio Manager’s exclusionary screening will be applied and certain elements of ESG due diligence will be carried out, including in relation to EPCs and flood risk, as minimum environmental and social safeguards.
Sustainability indicators
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters. As the GRESB scoring methodology evolves to capture the changing legislative framework, the Fund must continue to adapt and remain ambitious in striving for the highest rating achievable.
The Fund regularly measures its progress against all criteria set for each property in a quantitative way. The monitoring of the sustainability indicators is on an ongoing basis for landlord-controlled properties and for tenant-controlled properties. For tenant-controlled properties, where some data may not be as readily available or in control of the Portfolio Manager, the Portfolio Manager may, where required, supplement its own monitoring of the environmental characteristics promoted via the sustainability indicators utilising third-party data it considers is reliable.
Further sustainability-related criteria may be established, and will be reviewed by, the Portfolio Manager depending on the asset’s characteristics, level of direct control of the premises, location and other factors. The Portfolio Manager considers the nature of each asset when assessing prospective, or monitoring existing, investments, complying always with the core objective of protecting value and identifying opportunities to drive additional value for investors. The criteria applied to each asset will therefore vary, and, whilst all criteria set for each property are measured and monitored as sustainability indicators, there are no target metrics at a Fund level in respect of the environmental characteristics.
Principal adverse impacts
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Through a range of actions, such as on energy efficiency plans or net zero targets, the Manager intends to reduce or mitigate the impact of the principal adverse impact indictors, where required.
The monitoring and actions taken in relation to the principal adverse impact indicators is subject to data availability and data quality, which is likely to evolve over time.
The Fund works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis for landlord-controlled properties and, on a best-efforts basis, for tenant-controlled properties annually. The Fund also periodically gathers information on renewable energy capacity and presence of green building certification across its investments from local property managers and operating partners. The Fund aggregates and monitors the data using a third-party reputable environmental data management system, and gathers sustainability commentary from operating partners and property managers to understand the context of the data being reported.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards.
For the data collected, the Fund also instructs an independent assurance of energy, water and waste data, and GHG emissions on annual basis, using a third party provider. The assurance process includes desktop review, management and property level data verification and evidence gathering from various sources, including third parties. Data points are selected based mainly on the most material environmental impacts (e.g. highest energy consumption) and the number of data points tested is proportional to the reported consumption. Primary evidence is obtained to confirm the reported energy, water and waste consumption and to identify any discrepancies or errors in the data being assured. For GHG emissions, the assurer also reviews emissions factors and associated calculation methodology. The data providers are advised of any discrepancies or errors in the data being assured.
Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps. In addition, the Portfolio Manager expects that the proportion of investment where data is estimated will reduce over time.
The Portfolio Manager recognises that continual update will be required to ensure that the data collection and other methodologies remain in line with best practice. The Portfolio Manager will review the approach at least annually to ensure continued alignment with regulatory requirements, best practice and market expectations. The review will identify if any material changes to the approach are required. Where changes are deemed appropriate all affected stakeholders will be notified.
The data sourcing process is partly dependent on external parties sharing timely and accurate information and as there is less control of tenant-controlled properties (as opposed to landlord-controlled properties) there could be additional challenges of obtaining ESG-related data from such properties. Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps and monitor progress.
The independent assurance of energy, water and waste date, and GHG emissions, is based on a limited number of data points as the sampling method is used in the assurance process. Furthermore, positive outcome from the assurance evaluation is not guaranteed and some of the data reported, including data proxies and estimates, might not be assured.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations impact the Fund’s attainment of the promoted environmental characteristics.
TRISTAN INCOME PLUS STRATEGY TWO SCSP SICAV-RAIF – JUNE 2024
Environmental characteristics promoted
Tristan Income Plus Strategy SCSP SICAV-RAIF (“the Partnership”) promotes environmental and social characteristics by making loans which facilitate the improvement of real estate assets and business plans against measurable and pre-determined ESG criteria.
The Manager assesses ESG criteria through its ESG Scorecard.
Investment strategy
The Partnership will focus on whole loans to core plus and value-add assets, seeking to build a defensive, diversified private real estate debt portfolio.
The ESG Scorecard will be applied to all potential investments to assess. At completion of the loan, the ESG characteristics of both the asset itself (including measurements and certifications), as well as the borrower’s business plan during the term of the loan, will be assessed. Following funding, borrowers will report data on specific criteria noted in the ESG Scorecard including on the performance of their business plan (itself including performance versus ESG targets such as certifications, capex spent to date, etc.).
As part of the investment process, and in line with the ESG Scorecard, the Manager considers governance factors relating to borrowers during the due diligence phase, as further detailed below. Furthermore, the Partnership will undertake know-your customer (“KYC”) and anti-money laundering (“AML”) due diligence checks on all borrowers, and will request that they sign up to Tristan’s Anti-Fraud and Bribery policies, to prevent lending to borrowers that fall short of the Manager’s criteria on excluded sectors or standards of good governance.
Proportion of investments
The Partnership is committed to promoting the environmental and social characteristics described above using the Partnership’s proprietary ESG Scorecard. All new investments of the Partnership will be assessed against the ESG Scorecard at or prior to funding, and all existing investments will be assessed against that Scorecard on an ongoing basis. Any prospective investment that does not achieve a predetermined minimum rating under the ESG Scorecard according to the methodology set out will not be eligible to be recommended to the Manager’s Investment Committee.
Therefore, a minimum proportion of 80% of the Partnership’s investments will promote environmental and/or social characteristics. The Partnership does not commit to make sustainable investments or EU Taxonomy-aligned investments.
Monitoring of environmental characteristics
The Partnership uses a proprietary ESG Scorecard which helps the Manager to allocate capital in alignment with predetermined ESG criteria and to measure the Partnership’s progress over time in a quantitative way. The ESG Scorecard has been developed, and will be maintained by, the Manager to assess prospective investments and to monitor existing investments against sustainability indicators relevant to that investment.
The Partnership will focus on whole loans to core plus and value-add assets, seeking to build a defensive, diversified private real estate debt portfolio.
The ESG Scorecard will be applied to all potential investments to assess. At completion of the loan, the ESG characteristics of both the asset itself (including measurements and certifications), as well as the borrower’s business plan during the term of the loan, will be assessed. Following funding, borrowers will report data on specific criteria noted in the ESG Scorecard including on the performance of their business plan (itself including performance versus ESG targets such as certifications, capex spent to date, etc.).
As part of the investment process, and in line with the ESG Scorecard, the Manager considers governance factors relating to borrowers during the due diligence phase, as further detailed below. Furthermore, the Partnership will undertake know-your customer (“KYC”) and anti-money laundering (“AML”) due diligence checks on all borrowers, and will request that they sign up to Tristan’s Anti-Fraud and Bribery policies, to prevent lending to borrowers that fall short of the Manager’s criteria on excluded sectors or standards of good governance.
In addition, the Partnership ensures that it is not exposed to sectors or companies that operate in a way which would be contrary to the Partnership’s overall promotion of environmental and/or social characteristics. As such, the Partnership will not knowingly be exposed to investment in real estate assets that with a majority of tenants (over 50%) engaged in:
The Partnership will focus on whole loans (expected target up to 75% LTV across the portfolio) of €50 million to €150 million, and it is anticipated that this will result in average investments of €25 million to €50 million diversified across sectors and geographies.
The Partnership is committed to promoting the environmental and social characteristics described above using the Partnership’s proprietary ESG Scorecard. All new investments of the Partnership will be assessed against the ESG Scorecard at or prior to funding, and all existing investments will be assessed against that Scorecard on an ongoing basis. Any prospective investment that does not achieve a predetermined minimum rating under the ESG Scorecard according to the methodology set out will not be eligible to be recommended to the Manager’s Investment Committee. Therefore, a minimum proportion of 80% of the Partnership’s investments will promote environmental and/or social characteristics. The Partnership does not commit to make sustainable investments or EU Taxonomy-aligned investments.
Sustainability indicators
The Partnership uses a proprietary ESG Scorecard which helps the Manager to allocate capital in alignment with predetermined ESG criteria and to measure the Partnership’s progress over time in a quantitative way. The ESG Scorecard has been developed, and will be maintained by, the Manager to assess prospective investments and to monitor existing investments against sustainability indicators relevant to that investment, which may include:
Principal adverse impacts
In addition to the sustainability indicators, The Manager is responsible for identifying principal adverse impacts on sustainability factors for the Partnership, which are considered throughout the acquisition, development and ownership of the Partnership’s assets. The principal adverse impact indicators considered are:
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Partnership. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Partnership, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Partnership’s attainment of the promoted environmental social characteristics.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Partnership’s approach to the promotion of environmental characteristics as described above in section d) Investment strategy.
Environmental characteristics promoted
Curzon Capital Partners 5 Long-Life LP and Curzon Capital Partners 5 Long-Life SCSp (together, “the Fund”) promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
Investment strategy
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
This is pursued through a variety of means including ESG due diligence on all potential assets and on an ongoing basis, which are aligned with the environmental characteristics promoted and the sustainability indicators used to measure those characteristics. All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
Proportion of investments
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging.
Monitoring of environmental characteristics
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters.
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Methodologies and data
The Fund uses a proprietary Environmental Management System (EMS) to identify, manage, monitor and control pertinent sustainability indicators. The EMS is informed by an appropriate range of industry standards and sources to ensure alignment with best practice. The Portfolio Manager also works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Fund’s attainment of the promoted environmental social characteristics.
Engagement
Engagement with local property managers, operating partners and tenants is integral to the ongoing ESG monitoring of the properties. The engagement supports the collection of data required for the sustainability indicators to measure the attainment of the environmental characteristics promoted. There is no standalone engagement policy, rather the engagement is part of other policies and processes such as the asset management activities, used to support the investment strategy set out above.
The Fund promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
The Fund focuses on the creation of a diversified portfolio of mid-market European real estate assets with defensive institutional qualities and high economic potential. The Fund looks to generate significant value creation and capital appreciation using moderate leverage, while limiting downside risk with defensible cash yields. The Fund expects to provide regular distributions to investors from current income and pursue asset sales opportunistically to maximise returns. The full investment strategy of the Fund is set out in Section 2 (Executive Summary) of the Fund’s private placement memorandum.
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Fund’s approach to the promotion of environmental characteristics as described above, including where the Portfolio Manager assesses that there is scope to make improvements to those characteristics through the application of bespoke ESG criteria. In establishing the ESG criteria for the potential investment, the Portfolio Manager factors in property characteristics including location, industry, applicable regulatory regimes and the asset’s specific business plan. For example, a property that allows for comprehensive ESG improvements may result in higher reduction targets. The ESG due diligence report will include an assessment on certifications and standards (for example, BREEAM and the EPC), providing an indicative rating based on the information available.
The ESG due diligence process may vary, given that the Fund’s investment strategy has a core-plus risk return profile, which can be broken out between portfolio acquisitions, platform aggregation and single asset strategies. It is important to highlight the adjusted approach in the limited cases where the Fund makes portfolio acquisitions that may include a limited number of non-strategic assets. Given the potential scale of these acquisitions, the Fund recognises that not all ESG due diligence can be performed in a timely manner as part of the acquisition period. Taking a prudent approach and ensuring that sustainability risks are mitigated, the Fund has adopted an approach where the due diligence for portfolio acquisitions will identify the non-strategic assets (potentially brown assets, for example) from strategic assets. The Fund will aim to ensure that ESG due diligence is performed on all strategic assets acquired independently and as part of portfolio acquisitions, and assets comprising 75% of the portfolio acquisitions (by gross asset value).
All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted. The sustainability indicators will be monitored on an ongoing basis for landlord-controlled properties and on a best-efforts basis for tenant-controlled properties.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
As part of the investment process, and in line with the ESG strategy, the Portfolio Manager also considers governance factors relating to the acquisition, development, ownership and management of property assets. The Fund invests both directly and indirectly in real estate. Where there are indirect investments made via holding vehicles or special purpose vehicles, the Portfolio Manager ensures that governance practices are assessed and considered to be good, as proportionate to the set up and operations of the investee companies. The Portfolio Manager also assess good governance where investments are made in investee companies via collective investment schemes, as the Portfolio Manager has control of the collective investment schemes and the policy on good governance that is applied by them.
The Fund also considers the local community and economy before, during and after the development.
The Fund’s approach to ESG is therefore carried out on a continuous basis from pre-investment stage through to investment disposal. Where relevant, the Portfolio Manager makes use of contractual mechanisms (where appropriate), requiring its tenants and partners to meet particular ESG targets and to report on these on an ongoing basis.
Additional information on how the Portfolio Manager integrates sustainability into its investment process to ensure that it is applied on a continuous basis, and in particular its approach to due diligence and ongoing monitoring of investments, can be found in the Fund’s ESG Policy (which is available from the Portfolio Manager on request).
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. The Fund does not commit to making sustainable investments.
For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging. Any assets held for liquidity and/or hedging purposes will not be held for the purposes of promoting the environmental characteristics of the Fund. For any other assets invested in, the Portfolio Manager’s exclusionary screening will be applied and certain elements of ESG due diligence will be carried out, including in relation to EPCs and flood risk, as minimum environmental and social safeguards.
Sustainability indicators
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters. As the GRESB scoring methodology evolves to capture the changing legislative framework, the Fund must continue to adapt and remain ambitious in striving for the highest rating achievable.
The Fund regularly measures its progress against all criteria set for each property in a quantitative way. The monitoring of the sustainability indicators is on an ongoing basis for landlord-controlled properties and for tenant-controlled properties. For tenant-controlled properties, where some data may not be as readily available or in control of the Portfolio Manager, the Portfolio Manager may, where required, supplement its own monitoring of the environmental characteristics promoted via the sustainability indicators utilising third-party data it considers is reliable.
Further sustainability-related criteria may be established, and will be reviewed by, the Portfolio Manager depending on the asset’s characteristics, level of direct control of the premises, location and other factors. The Portfolio Manager considers the nature of each asset when assessing prospective, or monitoring existing, investments, complying always with the core objective of protecting value and identifying opportunities to drive additional value for investors. The criteria applied to each asset will therefore vary, and, whilst all criteria set for each property are measured and monitored as sustainability indicators, there are no target metrics at a Fund level in respect of the environmental characteristics.
Principal adverse impacts
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Through a range of actions, such as on energy efficiency plans or net zero targets, the Manager intends to reduce or mitigate the impact of the principal adverse impact indictors, where required.
The monitoring and actions taken in relation to the principal adverse impact indicators is subject to data availability and data quality, which is likely to evolve over time.
The Fund works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis for landlord-controlled properties and, on a best-efforts basis, for tenant-controlled properties annually. The Fund also periodically gathers information on renewable energy capacity and presence of green building certification across its investments from local property managers and operating partners. The Fund aggregates and monitors the data using a third-party reputable environmental data management system, and gathers sustainability commentary from operating partners and property managers to understand the context of the data being reported.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards.
For the data collected, the Fund also instructs an independent assurance of energy, water and waste data, and GHG emissions on annual basis, using a third party provider. The assurance process includes desktop review, management and property level data verification and evidence gathering from various sources, including third parties. Data points are selected based mainly on the most material environmental impacts (e.g. highest energy consumption) and the number of data points tested is proportional to the reported consumption. Primary evidence is obtained to confirm the reported energy, water and waste consumption and to identify any discrepancies or errors in the data being assured. For GHG emissions, the assurer also reviews emissions factors and associated calculation methodology. The data providers are advised of any discrepancies or errors in the data being assured.
Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps. In addition, the Portfolio Manager expects that the proportion of investment where data is estimated will reduce over time.
The Portfolio Manager recognises that continual update will be required to ensure that the data collection and other methodologies remain in line with best practice. The Portfolio Manager will review the approach at least annually to ensure continued alignment with regulatory requirements, best practice and market expectations. The review will identify if any material changes to the approach are required. Where changes are deemed appropriate all affected stakeholders will be notified.
The data sourcing process is partly dependent on external parties sharing timely and accurate information and as there is less control of tenant-controlled properties (as opposed to landlord-controlled properties) there could be additional challenges of obtaining ESG-related data from such properties. Where data is not available for a sustainability indicator or principal adverse impact indicator the Fund will, where appropriate, use proxies and/or estimates to fill data gaps and monitor progress.
The independent assurance of energy, water and waste date, and GHG emissions, is based on a limited number of data points as the sampling method is used in the assurance process. Furthermore, positive outcome from the assurance evaluation is not guaranteed and some of the data reported, including data proxies and estimates, might not be assured.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations impact the Fund’s attainment of the promoted environmental characteristics.
Environmental characteristics promoted
The European Property Investors Special Opportunities 6 SCSp SICAV-SIF (“the Fund”) promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
Investment strategy
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
This is pursued through a variety of means including ESG due diligence on all potential assets and on an ongoing basis, which are aligned with the environmental characteristics promoted and the sustainability indicators used to measure those characteristics. All refurbishments and developments undertaken will follow Tristan’s Sustainable Charter and Checklist to promote sustainable building practices and support the identification of appropriate additional key performance indicators, in addition to sustainability indicators, to measure the progress and achievement of the environmental characteristics promoted.
In addition, in further promotion of environmental (and social) characteristics, the Fund adheres to the 10 Principles set out in the United Nations Global Compact and further excludes assets where the majority of tenants (over 50%) are involved in the following activities:
Proportion of investments
The Fund invests in real estate assets with a minimum proportion of at least 75% of which will promote the environmental characteristics as set out above in accordance with the binding elements of the investment strategy. For the remaining 25% of assets, the Fund may hold other assets that do not promote environmental or social characteristics or cash with well-rated institutions for liquidity purposes and use derivatives for the purposes of hedging.
Monitoring of environmental characteristics
For the environmental characteristics promoted the following sustainability indicators are used to measure their attainment:
The other main sustainability indicator, which takes into account of all the environmental characteristics promoted, is the annual GRESB assessment which the Fund will participate in with a view to targeting the highest rating possible, helping the Fund to validate its market leading position on ESG matters.
In addition to the sustainability indicators, the Portfolio Manager is responsible for identifying principal adverse impacts on sustainability factors for the Fund, which are considered throughout the acquisition, development and ownership of the Fund’s assets. The principal adverse impact indicators considered are:
Methodologies and data
The Fund uses a proprietary Environmental Management System (EMS) to identify, manage, monitor and control pertinent sustainability indicators. The EMS is informed by an appropriate range of industry standards and sources to ensure alignment with best practice. The Portfolio Manager also works in partnership with a specialist ESG consultancy to collect and collate available energy, water and waste performance data from local property managers and operating partners on a quarterly basis.
The Portfolio Manager regularly reviews its metrics and suitability of its processes in the context of environmental characteristics promoted by the Fund. The Portfolio Manager also continuously seeks to improve transparency, disclosure and data provision in relation to the Fund, using where relevant international benchmarking standards or other assurance tools.
The Portfolio Manager considers existing methodologies appropriate and does not consider that any limitations materially impact the Fund’s attainment of the promoted environmental social characteristics.
Engagement
Engagement with local property managers, operating partners and tenants is integral to the ongoing ESG monitoring of the properties. The engagement supports the collection of data required for the sustainability indicators to measure the attainment of the environmental characteristics promoted. There is no standalone engagement policy, rather the engagement is part of other policies and processes such as the asset management activities, used to support the investment strategy set out above.
The Fund promotes environmental characteristics by seeking to improve, where feasible, the environmental footprint of the real estate assets in which it invests, through measurable and property-specific criteria.
The Fund’s promotion of environmental characteristics is linked to the strategic components of objective and strategy setting, working in partnership, transforming assets, future-proofing investments and creating value, focusing on:
The Fund focuses on the creation of a diversified portfolio of mid-market European real estate assets with defensive institutional qualities and high economic potential. The Fund looks to generate significant value creation and capital appreciation using moderate leverage, while limiting downside risk with defensible cash yields. The Fund expects to provide regular distributions to investors from current income and pursue asset sales opportunistically to maximise returns. The full investment strategy of the Fund is set out in Section 2 (Executive Summary) of the Fund’s private placement memorandum.
Through this strategy, including identifying opportunities with potential for significant improvement, and monitoring and seeking to make incremental enhancements, the aim of the Fund’s ESG strategy is to improve the overall environmental footprint, including with regards to energy and carbon emissions, of the portfolio over time, as monitored by the sustainability indicators. The Fund will focus on using active asset management to reposition assets through re-leasing, recapitalisation, restructuring, redevelopment or refurbishment into core, stabilised assets.
When evaluating potential investments in the due diligence process (subject to the below with regards to Portfolio Acquisitions), the Portfolio Manager will seek to prioritise transactions consistent with the Fund’s approach to the promotion of environmental characteristics as described above, including where the Portfolio Manager assesses that there is scope to make improvements to those characteristics through the application of bespoke ESG criteria. In establishing the ESG criteria for the potential investment, the Portfolio Manager factors in property characteristics including location, industry, applicable regulatory regimes and the asset’s specific business plan. For example, a property that allows for comprehensive ESG improvements may result in higher reduction targets. The ESG due diligence report will include an assessment on certifications and standards (for example, BREEAM and the EPC), providing an indicative rating based on the information available.
The ESG due diligence process may vary, given that the Fund’s investment strategy has a blend of opportunistic and value-add return profiles, which can be separated between Platform Acquisitions and single asset strategies. Platform Acquisitions refer to large scale acquisitions that would include buying non-strategic assets to obtain access to opportunities which support the Fund’s overall investment strategy. Given the large scale of these acquisitions, the Fund recognises that not all ESG due diligence can be performed in a timely manner as part of the acquisition process. Taking a prudent approach and ensuring that sustainability risks are mitigated, the Fund has adopted an approach where the due diligence for Platform Acquisitions will identify the non-strategic assets (potentially brown assets, for example) from strategic assets. The Fund will aim to ensure that ESG due diligence is performed on all strategic assets acquired independently and as part of Platform Acquisitions, and assets comprising 50% of the Platform Acquisitions (by gross asset value).
All