Against a backdrop of inflation and growing inequality, the real estate sector has a key role to play in terms of social impact and territorial relations: access to affordable housing, development of social housing, refurbishment of community infrastructure or care centres, etc. The environmental dimension is also central, both in terms of contributing to the climate transition – mitigation as well as adaptation – and in terms of access to efficiency and sobriety synonymous with affordable energy.
The environmental dimension is also central, both in terms of contributing to the climate transition – mitigation as well as adaptation – and in terms of providing access to the efficiency and sobriety that are synonymous with affordable energy.
Ksapa was commissioned to develop a tool for ESG analysis, impact measurement and portfolio consolidation and monitoring developed ad hoc for this first socially-oriented property fund, taking into account several elements:
- Combining ESG performance and social impact
- Ensuring that the grid meets regulatory expectations as an SFDR Article 9 fund
- Design a grid applicable to the entire investment cycle: acquisition due diligence, target setting, annual assessment and monitoring of the improvement plan
- Propose metrics that can be easily consolidated with data available for all European Union countries, compatible with a varied investment policy targeting different types of assets via different holding methods (direct ownership of buildings or equity stakes in different property investment funds).
This fund, which is intended for investment in Europe, aims to invest in several types of property assets: residential (including managed senior or student residences), healthcare, education and professional (offices, logistics, retail), etc. The deliverables must therefore be adaptable.
The challenge of this project was to develop a tool and grids that were sufficiently precise for the funds’ ambitions and flexible enough for the diversity of assets and geographies envisaged.
1 – An initial phase of reflection enabled us to ask ourselves some essential question: How to translate the fund’s intention as expressed in the investment prospectus and the ESG risks identified into an architecture that allows ESG performance to be analysed and impact indicators to be consolidated, for example:
- How can accessible housing (geographically and financially) be defined and promoted?
- How can we define, formalise and measure how to promote access to services that meet basic human needs?
- How can the impact of a property asset on E, S and G issues be articulated
- What are the E, S and G risks specific to each type of investment?
- How can these approaches be applied to directly managed assets and to the selection of other indirect investment vehicles?
Once these questions have been properly validated by the client, the consolidation objectives to be applied to the grids can be aligned. From the outset, Ksapa has ensured that this phase of reflection and development is carried out taking into account references in the sector for impact funds and best practice in the property sector – particularly with regard to due diligence procedures (Impact Investing Market Map, Minimum Safeguards, etc.).
2 – The identification of the KPIs to be monitored at fund level has made it possible to operationalise the ambition and give objectives to the management teams. The indicators and KPIs were developed taking into account the intentionality and additionality of the fund, bearing in mind the need to be able to consolidate collectable and qualitative data and to use public data.
3 – The parameterisation phase for the deliverables (criteria, weighting, categories and sub-categories), including in particular the selection of regulations to be aligned with, enabled the structuring of the tool to be launched.
4 – The three initial phases enabled the development of a tool that could be adapted according to the type of holding and the type of asset, with cross-cutting questions and others specific to the profile of the asset or the stake held. The intermediate phases were tested on real assets to ensure that the tool was operational.
5 – Once the grid had been developed, operational documents were drafted to raise awareness of how to use the grid among the people required to fill it in, and to help managers understand how it had been constructed with a view to making it their own. A webinar was also recorded to provide a visual methodology.
RESULTS & NEXT STEPS
The discussions held upstream helped to inform the drafting of the fund’s first report. By using the grid and raising awareness through operational tools, the management teams now have a reference tool for the fund, which can be used at all stages of the investment process.