ESG and Property - Property investments in the Sparinvest Group are the responsibility of the daughter company, Sparinvest Property Investors. Generally, Sparinvest Property Investors is committed to implementing responsible investment principles in the investment and portfolio management process while upholding our fiduciary duty to our investors. Sparinvest Property Investors manages indirect real estate investments. Indirect real estate investment has fundamental attributes that affect the ability to include ESG factors in the investment process. Specifically:
- Managing funds-of-funds involves no direct control of the ultimate asset invested in.
- Investment in a real estate fund is typically entered into for a defined period of time.
Subject to the above limitations, the fund screening and selection process consists of an asset and property manager quality assessment where Sparinvest Property Investors' policy regarding how to deal with ESG risks in the property portfolio and ESG in the Investment Process is fully integrated. Consequently, since 2005 Sparinvest Property Investors has systematically required the fund investment managers under due diligence to state:
- That the investment manager is aware of the UN Global Compact Principles
- That there have been no deliberate and repeated violations of the principles of UN Global Compact in the property management/development
- That the investment manager has not been involved in any critical violation of national laws with no attempt to remedy the violation.
- That the investment manager will not invest in properties which are principally used for manufacturing, trading, storing or other kinds of servicing of weapons violating the international arms treaties.
The statements are mandatory for Sparinvest Property Investors to consider investment in a fund. In addition, Sparinvest Property Investors exercise active ownership, giving priority to securing impact and influence from the effort:
- Sparinvest Property Investors always seeks board representation in the funds invested in, or alternatively seeks alliances with other investors with board representation.
- Sparinvest Property Investors has identified certain governance issues as a key-focus area and, in particular, the issue of guarding the limited partners' rights.
- Sparinvest Property Investors actively monitors the portfolio and annually requests the fund managers to report any perceived violations of international norms as defined by UN Global Compact
- Sparinvest Property Investors seeks the highest risk-adjusted return in line with its investment strategy with due consideration to environmental sustainability. The movement toward sustainable, or 'green', building practices is a structural change in the commercial real estate market and Sparinvest Property Investors advocates sustainable building practices throughout the funds invested in where it is economically efficient. E.g. by encouraging fund managers/property managers to work systematically towards energy certifying the properties in the portfolios (an example is the LEED Certification in the US).
Sparinvest Property Investors actively enters into alliances with co-investors on securing common policies on ESG risks in the property portfolios.