Sustainable Value Creation Responsible Investment Policy
REQ Alternative Investments AS
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Sustainable Value Creation
Introduction............................................................................................................................................. 4 Responsible Investment Policy ................................................................................................................ 4 ESG Commitment .................................................................................................................................... 5 REQ Contribution..................................................................................................................................... 6 Responsible investment strategy ............................................................................................................ 6 ESG integration .................................................................................................................................... 7 Engagement......................................................................................................................................... 8 ESG Questionnaire................................................................................................................................... 9
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Introduction REQ Alternative Investments (REQ AI) is a partner-owned management company managing alternative investment funds (AIF) within real estate. In this document the company’s responsible investment policy will be outlined. The fund’s manager incorporates these principles into their work and decision making. The responsible investment policy reflects our commitment to investors, employees, and all other stakeholders.
Responsible Investment Policy REQ Alternative Investments defines responsible investment as investments that integrate ESG criteria into the investment process. We believe that ESG factors are critical for sustainable value creation, and for generating value to investors. REQ AI does not need to balance sustainable development and growth. Sustainability is growth and we will not settle for minimum criteria. The responsible investment policy relates to all decision-making processes in REQ AI and investment activities. We base our business activities on the UN Sustainable Development Goals and relevant ESG initatives and goals for the real estate industry. Our decision-making process is based on sustainability – from the board, Investment Committee, and management, who have the ultimate responsibility, to each employee who promotes sustainability in their own area. REQ AI act as a responsible employer and we are transparent about our work. We shall promote (i) good governance practices (e.g., sound management structures, tax compliance, employee relations, staff remuneration.), (ii) environmental practices (e.g., through effective energy use, promoting biodiversity, waste management and use a supplier Code of Conduct.), and (iii) social good outcomes (e.g., promote human rights, labour rights, working environment and safety in connection with its real estate investments and projects). Sustainability risks will be integrated into the existing risk management frameworks demonstrating linkages, dependencies and potential impacts to support investment decision making. REQ AI intends to actively mitigate identified sustainability risks through preinvestment due diligence. REQ AI establishes a comprehensive approach to ESG integration throughout the life cycle of a direct deal. A specific ESG analysis and assessment will therefore be completed to identify and mitigate material sustainability risks. Sustainable Finance Disclosure Regulation (SFDR) entered (partially) into force in EU on 10 March 2021. However, the SFDR has not yet been implemented in Norway, and it is expected that an implementation will take place sometime during 2022. Thus, it is currently uncertain how the final implementation of the SFDR will be in Norway, including how the product categories will be implemented into Norwegian law. Certain obligations are subject to elaboration by Regulatory Technical Standards to the SFDR (“RTS”) which are expected to enter into force in the EU from July 2022. The RTS is only available in draft form and may change before final implementation.
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Based on the current available EU sources and the expected implementation of the SFDR into Norwegian law, REQ Alternative Investments will consider REQ Fund I to fall within the scope of an Article 8 fund under SFDR based on the following: ▪
REQ Fund I promotes, among other characteristics, environmental, social and governance (“ESG”) characteristics in line with Article 8 of the SFDR and therefore qualifies as a so-called “Article 8 financial product” under the SFDR; and
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The Manager is committed to investing in a responsible way by actively integrating ESG considerations in its investment decision and ongoing monitoring process.
When the SFDR enters into force in Norway, REQ Fund I shall actively seek to adopt any requirements and comply with all reporting obligations being applicable and mandatory for an Article 8 fund under Norwegian law, provided that REQ Fund I continues to qualify as an Article 8 fund.
ESG Commitment REQ AI is a proud signatory of the United Nations Principles for Responsible Investments (UNPRI) and are committed to incorporating environmental, social and corporate governance considerations into investment analysis and decisionmaking processes.
REQ AI is a member of the Norwegian Green Building Council, a member organization for the entire value chain in construction and real estate. The association’s purpose is to develop the Norwegian construction and real estate sector so that environmental and sustainability considerations will be the obvious choice. The Norwegian real estate sector’s "Roadmap towards 2050” is the Norwegian Green Building Council’s and Norsk Eiendom’s recommendation to owners and managers of commercial buildings on what choices they should make in the short and long term for the real estate sector to contribute to a sustainable society in 2050. Part of the road map is “10 Immediate actions” version 1.0, and the 2.0 version by November 2021 which states an additional 10 immediate actions. REQ AI will commit to the version 1.0 in first quarter 2022. The 20 immediate actions are principles for real estate companies in Norway to achieve a sustainable society by 2050. Environmentally certifying the organization is immediate measure no. 1, as “Miljøfyrtårn” or ISO 14001. “Miljøfyrtårn” is Norway's most widely used certificate for an enterprise that wants to document their environmental efforts and show corporate social responsibility. REQ AI will strive to certify as “Miljøfyrtårn”.
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Building Research Establishment Environmental Assesment Method (BREEAM) is the world’s leading sustainability assessment method for buildings. REQ AI will seek to classify all assets according to the BREEAM system (BREEAM-NOR and BREEAM In-Use), if we are planning to hold the asset for a period sufficient to perform the full assessment and work with improving factors that can improve the BREEAM Classification. In-order to effectively do this, we will incorporate improvement factors in acquisition and CapEx decisions.
GRESB is a mission-driven and investor-led organization that provides actionable and transparent ESG data to financial markets and the world’s leading sustainability assessment method for buildings. We will integrate ESG as a key part of the asset and investment management with the aim of reporting according to GRESB when the portfolio is established.
REQ Contribution REQ Contribution is our way of giving back to society. We donate 5% of our annual net profit to associations, foundations and non-profit organizations that contribute to the UN sustainability goals. It feels good to know that the better results we achieve for our clients, the more we can contribute to society.
Responsible investment strategy Our responsible investment strategy is based on integrating ESG into all investment decisions. Real estate has a relatively long investment horizon and ESG issues are more likely to be assessed over long periods of time. Further, ESG considerations play out on a local level and are linked to a specific geographical location. (i.e. extreme weather, water stress and community relations). Environmental sustainability and climate change are particularly important factors for REQ AI as the real estate sector stands for one of the largest, 40%, of the 6
CO2 footprint in the world. We will strive to lift the level of sustainability development in the process of creating value. At REQ AI we are committed to working towards the UN sustainability goals. We place particular emphasis on the following goals, which is considered especially important in the real estate industry. 8 Decent Work and Economic Growth – We will promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. REQ AI has a Code of Conduct and a Supplier Code of Conduct (for all suppliers providing services worth more than TNOK 500 per annum) and will promote diversity amongst employees. 9 Industry, Innovation and Infrastructure – We will promote resilient infrastructure, inclusive and sustainable industrialization and foster innovation, hereby promoting the use of new technological solutions (part of 20 immediate measures), contribute to enhanced solutions currently in place and actively use EOS (Nrw: Energi-oppfølgingssystem) to monitor buildings and their energy consumption. 11 Sustainable cities and communities - We will integrate green public spaces and urban planning as part of the assessment in development projects or larger refurbishments, e.g., establish “green roofs” (part of 20 immediate measures) where appropriate. 12 Responsible consumption and production – Waste management and reduction will be part of our focus on property level. No use of toxic building materials (part of 20 immediate measures), LCC analysis and use of Supplier Code of Conduct for all of our suppliers providing services worth more than TNOK 500 per annum. 13 Climate action- Use of energy efficiency programs for the property portfolio (EOS). Climate risk assessment is a part of the investment decision (flood, wind, avalanche, etc.) 15 Life on land - REQ AI will not take on projects that challenges virgin land, water security or food production, or land that works as natural habitat or promotes biodiversity. One of the highlighted criteria for classifying as «Miljøfyrtårn» is the UN Sustainable Development Goal 15- Life on Land and various aspects of this. By integrating ESG factors into the investment process, we aim to enhance investment returns and protect value for our investors while aiming for the companies and assets in which our funds invests ideally to benefit investors, society and the environment.
ESG integration The decision-making process for investments is organized into three levels. First, the Investment Team, which sources a pipeline based on our investment policies. If an opportunity meets the investment criteria and policies, the team does a preliminary underwriting, including input from the asset management team. The team considers and decides which of the opportunities that will be presented to the second level, the Green 7
Light Assessment (GLA). The GLA is an interdisciplinary discussion forum based on key information of the potential investment. The last level is the Investment Committee (IC). The GLA provides valuable input and insight to the investment team before moving forward with the opportunity. ESG risks and opportunities are reported to the Investment Committee by the Investment Team and shall be evaluated under the Green Light Assessment. The consideration of ESG risks and opportunities is documented in the investment memo submitted to the Investment Committee meetings at which potential investment opportunities are discussed, with any key areas that need to be addressed factored into a step plan to be implemented post-acquisition
Engagement We believe engaging with companies is the best way to impact them. We will actively engage with tenants in our property portfolio and our investors. Engagement and close co-operation will enable us to fully implement our ESG commitment and maximise the full effect of our actions.
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ESG Questionnaire General: How does your ESG approach differ from that of other fund providers? We invest in real estate, which creates long term value. Our investment philosophy implies that we must conduct a thorough analysis of all ESG factors as part of our investment decision-making. We believe that properties that exemplify sustainable development will gain a competitive advantage over time.
You are committed to sustainable value creation, but how exactly do you differentiate yourself from other fund providers, and is not everyone promoting a focus on sustainability these days? Our investment strategy is to invest in already existing buildings, and through early identification and certification (BREEAM in- use) we will set goals to improve the building and achieve a better level of sustainability using the measures through the BREEAM classification for all our investments. We are not focused on buying new green buildings, as we strongly believe that the most sustainable buildings are the ones that are already built and that we should focus on maintaining and improving these buildings. We also donate 5% of our annual net profit to organizations that contribute to the UN Sustainability Developments Goals and thus make a direct contribution to society. Do you do anything else in the area of ESG that goes beyond the minimum required? We do not view ESG only as a formal requirement that we must meet to check a box with our clients. At REQ Alternative Investments, ESG is a natural consequence of our investment strategy, as we place great emphasis on sustainable growth in our investments. Sustainability is growth and we will not settle for minimum criteria in our investments. We will also donate 5% of our annual net profit to organizations that contribute to the UN Sustainability Developments Goals
ESG reporting: Do you use third party data to assess your ESG score? We will report through GRESB, the world’s leading sustainability assessment method for buildings, when our portfolio is established.
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Will you publish a separate ESG report on your investments? We will report on all relevant ESG data as required by the EU taxonomy regulations.
With your ESG focus, why don’t you provide an Article 9 fund (dark green) according to Sustainable Finance Disclosure Regulation (SFDR)? Article 9 funds according to SFDR require that the fund has “…sustainable investment as its objective or a reduction in carbon emission as its objective...” we believe in adopting a commonsense approach and taking care of and improving existing buildings to make them last longer and contributing to a more sustainable real estate industry.
Real Estate specific: How are climate change related risks incorporated into your investment process and engagements? As part of the investment analysis, the assessment of climate change, including the risk of flooding, wind, landslides, etc. climate change considerations are an important part of the framework that REQ AI will follow, as “Miljøfyrtårn" and as a part of the UN Sustainable Development Goals.
How does your organisation include ESG issues in your selection of third-party property managers, and how those managers contribute to managing ESG issues in your real estate investments? ISS has been chosen as property and facility manager. As a global actor with a leading market position, focusing on «people, places and planet» we found our preferred property manager. Through ISSs “Green Management” the building's technical facilities are connected to the ISS Eco Centre central which monitor, report, and support for operational operations.
At which BREEAM- level will the properties in the fund’s properties be required to be at? We will not set a requirement for BREEAM level when we enter a project/ investment, but we will, based on property level analysis and actions, make improvements during our investment period to make the property more sustainable.
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ESG integration in investment decisions:
How do you integrate ESG in your investment decisions? Before any investment, we conduct a thorough analysis of a predefined set of ESG criteria. This is part of our investment analysis. The ESG analysis is the same for all investments.
REQ Contribution: What types of organizations will REQ Capital support with 5%? The first organization we support through REQ Contribution is the Norwegian non-profit organization EAT. EAT works to transform our global food system, and connects partners with organizations across science, policy, business, and civil society to achieve five urgent and radical transformations by 2050.
How do you ensure that these organizations contribute to the UN sustainability goals? On a regular basis we have meetings with management of EAT to get insight into the activities of EAT and how these activities contribute to the UN sustainability goals. EAT will challenge us on our sustainable investment policy and help us understand ESG-risks in our portfolios better.
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