Article 8: This AIF promotes environmental or social and governance (ESG) criteria but does not have a sustainable investment objective. It may invest partially in assets with a sustainable objective, for example as defined by the European Union classification.
Sustainability risk: This AIF is subject to sustainability risks as defined in Article 2(22) of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (Sustainable Finance Disclosure Regulation or "SFDR") as environmental, social or governance events or conditions that, if they occur, could cause an actual or a potential material negative impact on the value of the investment.
The investment process for the portfolio includes the ESG approach outlined below to integrate sustainability risks into the investment decision or process. The sustainability risk management policy is available on the Management Company's website.
Integration of ESG factors in investments:
Acquisition studies are broken down into a pre-due diligence phase and a due diligence phase.
In the pre-due diligence phase, the primary legal, technical, financial and ESG characteristics of the asset are assessed without input from external auditors. To do this, the investment team has to fill in an ESG grid that includes several criteria.
This grid is included in the investment memorandum sent to investors, for all assets managed.
The due diligence phase aims to assess financial performance, which must be consistent with the objectives set as part of the fund strategy. This phase also assesses the initial ESG performance of the asset and whether it is consistent with the chosen strategy.
It is also used to develop an ESG performance improvement plan for the "best in progress" asset category and to achieve the performance level established by the fund’s ESG strategy.
For new buildings, the fund's strategy also calls for the selection of the best assets in their reference universe, known as "best in class" assets, with environmental certification demonstrating a high performance level of at least "Good" for Breeam certification.
During the acquisition due diligence, the following audits are performed to assess the sustainability risks:
1. A technical audit
2. An energy audit
3. An environmental audit
The costs associated with ESG action plans are incorporated into asset spending forecasts and taken into account in the projected profitability studies to ensure that the fund's profitability objectives are met.
More about AEW's policy: https://www.aew.com/legal