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Storebrand ASA

PRI reporting framework 2020

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Pre-investment (selection)

PR 04. Incorporating ESG issues when selecting investments

04.1. Indicate if your organisation typically incorporates ESG issues when selecting property investments.

04.2. Provide a description of your organisation`s approach to incorporating ESG issues in property investment selection.

SAM manages three direct property portfolios. A) the 100% owned Storebrand LIV portfolio (Norway) and B) SEN KS a Norwegian property fund (Inrev type: Core) with abt. 75% external shareholders and C) the Swedish fund SPP Fastigheter (similar to B). Portfolio A) primarily invests in existing properties (re-developments), whereas portfolios B) and C) since inception in 2010 have been focused on growing it's portfolio, purchasing new properties.

Portfolio A): ESG is addressed in the investment selection, especially in re-development projects. Our ongoing Oslo CBD new-build project VIA (www.viavika.no) is one of Oslo's largest re-development projects and will be certified as BREEAM-NOR Excellent and Energy class A. Breeam certifiation, with target rating of minimum Very Good, will be used for certifiable (re)development projects. When this certification is not allowed, main BREEAM project quality requirements are part of the project's sustainability program, along with BREEAM In-Use requirements for grade Excellent. Where BREEAM Communities is relevant, it is incorporated, as is the case with the development of Økern Sentrum (http://okernsentrum.no/en/).

Portfolios B + C): In addition to the descriptions for A) and (re)developmen/refurbishment over, ESG is addressed during investment selection in a two-folded way. 1) This is a Core-portfolio with an investment strategy to buy modern, fully-let properties at central locations and profitable long-term outlooks, with attractive tenants. Investment opportunities within this space normally includes ESG postivie attributes, and we seek to push ESG standards throughout the process. This was the case with the 2019 SEN KS forward investment in a hotel redevelopment project, where scrutinizing technical and sustainablitiy DD served to increase environmental standards and introduce BREEAM certification to the whole of the project. 2) In our risk-assesment (cost of capital as well as due-dilligence) ESG factors are incorporated as to both screen yes/no and for valuation purposes.

04.3. Indicate which E, S and/or G issues are typically considered by your organisation in the property investment selection process, and list up to three examples per issue.

Environmental example 1, description

          Investment strategy clearly states as a main selection criteria that investments be centered around transport hubs. This supports green mobility solutions.
        

Environmental example 2, description

          In addition to short distance to transport hubs, energy use and energy efficiency is a main part of GHG efficiency and emissions of a property. Climate-friendly energy supply, electricity and district heating along with a building's own green energy generation from heat pumps, solar panels etc are sought after, while avoiding fossil fuelled buildings. Energy effeiciency screened in prospectus, where the building's energy label should be stated. Further in the process the standard of the energy installations is valuated (Technical DD), along with the actual energy consumption pattern (which gives an important picture of the functionality of the installations and the operating efficiency (eventual extra technical valuation). The age and energy standard of the building indicates 1) cost to bring it up to desired standard and  2) attractiveness at re-letting (low standard gives lower expected market rate). 
Self-managed renovation and new-build has minimum standards of energy label B and A respectively.
        

Environmental example 3, description

          Contamination is always carefully considered as part of technical DD upon purchasing, as responsibility for clearing may be costly.
        

Social example 1, description [OPTIONAL]

          Upon purchase, this is focused in the technical and sustainability DD of the building. 
BREEAM Building certification in renovation/new-build/purchase and standing investments constitute quality standards with third party verification. If no green building certification is provided, the technical DD must cover most important aspects specifically. 
E.g. asbestos, PCB, radon or other harmful topics are checked. Investments strategies mainly limit the scope of buildings to fairly new, not needing refurbishment, which also limits the risks. E.g when in 2019 SEN KS invested in a forward contract on a refurbishment and development project, steps were taken to secure the project was programmed to deliver installations and solutions for high indoor environmental quality, thermal user controls etc.
        

Social example 2, description [OPTIONAL]

          Accessibility standards are high in Norwegian building codes, and this has strong focus in renovation and new-build projects, as well as upon purchase and technical DD. BREEAM certification also to a certain degree verifies this.
        

Social example 3, description [OPTIONAL]

          Part of the selection method is to assess risk for re-letting, as part of the DD. Experiences from annual (third party) Occupier Satisfaction Assessments of all standing investments (portfolios) are integrated in the investment selection process.
        

Governance example 1, description

          Strong guidelines and regular training in own organization, with special focus on tendering processes and transactions where big money is involved, but also day-to-day dilemmas and running business. High ethical standards wmphasized.
        

Governance example 2, description

          The supply chain of (re)development and refurbishment projects constitute a major risk of breach of governance principles. 
On the general level Storebrand Procurement Policy clearly states the commitment to sustainability (https://www.storebrand.no/site/stb.nsf/Get/get243081ebe800720432893fda3022676b/$FILE/2013_Innkjopspolicy_Storebrand_Engelsk.pdf) 
Contractors are obliged to sign UN Global compact's 10 principles. 
General procurement requirements constitute part of the contract with the supplier /contractor, and is included in all procurements also on entity /property level. Sustainability requirements include among others: 
• Obligation to have and maintain environmental management system (ISO 14001, EMAS, Nordic Swan or Eco-Lighthouse) 
• Obligation to maintain carbon /climate neutrality through offsetting carbon emissions
Furthermore project contracts e.g. limits the number of levels of subcontractors to one, aiming to prevent social dumping and related violations. Also third party unnotified controls are conducted.
        

Governance example 3, description

          According to Norwegian and Swedish law and general practice, shareholders have strong rights and our fund companies hold high such standards. 
Upon investment, the fund board, which represents the investors/shareholders, carefully evaluates the manager's proposition to buy (including ESG review) and draws it's conclusion. Finally, the shareholder meeting accepts or refuses the board decision to buy.
        

04.4. Additional information. [Optional]


PR 05. Types of ESG information considered in investment selection (Private)


PR 06. ESG issues impact in selection process

06.1. Indicate if ESG issues impacted your property investment selection process during the reporting year.

06.2. Indicate how ESG issues impacted your property investment deal structuring processes during the reporting year.

06.3. Additional information.

For the two growing property core funds (Norway + Sweden), where development (and thus old buildings) is generally not within the investment strategy, ESG standard is a decisive risk factor for purchase. The simplest indicator is the green building certificate. No certificate generally means no deal, but as described in PR 16, documented high ESG standard can compensate for this. This goes for both the property itself and the tenant. Storebrand sustainable investment standards, with company exclusions and activites excluded from investments (certain weapons, tobacco etc) goes for all asset classes, and is considered in direct property investment alike.

As described in 04.2 and 04.3 Social example for Healt. Safety and Wellbeing, a forward contract on redevelopment and refurbishment of a building took more than 9 months to close, due to among others our strict demands and negotiations on several ESG issues. The deal was called off twice, before finally closed on terms where we secured green building certification (BREEAM) and several specific demands to safeguard ESG qualities. 

 


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