SG Capital Partners Fund I, KS

The Fund’s main sustainability objective is to reduce the carbon dioxide or CO2 emissions associated with its portfolio of real estate assets, thereby contributing to climate change mitigation. By investing in improving the sustainability of buildings, the Fund promotes environmental and social characteristics.

The Fund acquires existing office and warehouse buildings, invests in improving energy efficiency, sustainability and environmental accessibility, enhances the environment around buildings, and leases space in these buildings. The buildings owned by the Fund are certified under the BREEAM In-use Sustainability Certification Scheme, thus demonstrating responsible environmental management and sustainability of the buildings.

The Fund shall consider the principal adverse impacts of investment decisions on sustainability factors, ensure their management and report on minimum climate and other climate and environment-related indicators. The impact of sustainability factors and sustainability risks are assessed already in the pre-acquisition phase of investments.

The Fund assesses the performance of environmental and social characteristics by evaluating the performance of the indicators set out in the Fund’s Sustainability Strategy (e.g. energy consumption of buildings, GHG emissions) and the principal adverse impacts of investment decisions.

The Fund has implemented good governance practices within the Fund and requires its partners and clients to do the same.

The following sections provide key information on the environmental and social characteristics promoted by the Fund and their monitoring, but you can find a more detailed outline of all the aspects set out here.

The Fund promotes environmental or social characteristics but does not have a sustainable investment objective.

By renovating the office and warehouse buildings it owns, improving their thermal insulation, installing energy-efficient equipment and lighting, improving the buildings’ internal network systems, and introducing alternative energy sources, the Fund improves these buildings’ energy efficiency, reduces GHG emissions and improves environmental accessibility. Thus, part of the investments made by the Fund to improve the sustainability of buildings contribute to the environmental objective of mitigating climate change and are classified by the Fund as sustainable investments.

To ensure that the Fund’s sustainable investments do not significantly harm any of its other environmental objectives, the Fund shall consider the principal adverse impacts on sustainability factors and report on the minimum climate and other climate and environment-related indicators applicable to real estate investments.

The Fund Manager monitors the impact of the Fund’s investment activities on the environment by assessing the extent of the adverse effects annually.

The environmental and social characteristics promoted by the Fund are related to improving the sustainability and environmental accessibility of the assets owned by the Fund – office and warehouse buildings, environmental improvement and social inclusion.

Improving the sustainability of buildings involves renovating and improving the energy efficiency of buildings to extend their lifetime, reduce energy consumption and GHG emissions from buildings, and introduce alternative energy sources to fossil fuels.

In addition to improving the sustainability of buildings, the environment around them is also being improved, focusing on people and their well-being.

The Fund invests in line with its commercial real estate strategy, i.e. the Fund’s investment strategy focuses on acquiring existing office and retail buildings and logistics centres in or near Riga, certifying them under the BREEAM In-Use Sustainability Certification Scheme and improving the level of certification by investing in the sustainability of the buildings, and leasing space in these buildings.

The Fund’s main objective is to reduce the CO2 emissions associated with its portfolio of real estate assets, but there are other sustainability objectives.

In addition, following the Engagement Policy, the Fund implements good governance practices concerning managing and controlling the subsidiaries owned by the Fund.

The Fund’s investments are primarily concerned with enhancing environmental and social characteristics, resulting in improved sustainability of the assets managed by the Fund – office and warehouse buildings.

Although the Fund does not have a sustainable investment objective, some of its investments are classified as sustainable¹, as they contribute to the environmental objective of mitigating climate change.

¹ in accordance with the requirements of Article 2(17) of Regulation (EU) 2019/2088.

Monitoring environmental or social characteristics is based on the key performance indicators in the Fund’s Sustainability Strategy. By measuring the extent to which the Fund’s sustainability objectives have been met, the progress of these indicators is regularly monitored by the Fund Manager and the Fund’s Sustainability Committee.

The Fund also considers the principal adverse impacts on sustainability factors, compiles data on several climate and environment-related indicators and reports on them annually.

The Fund Manager annually assesses the sustainability performance of the Fund, including its environmental and social performance, by evaluating the Fund’s sustainability performance against the targets defined in the Sustainability Strategy.

For the Fund to calculate/report environmental and social performance, data is collected and compiled from the accounting and data management systems of the Fund and its subsidiaries, contract registers and documents, the Fund’s consolidated annual report, and public databases and registers.

The Fund’s Scope 1 and Scope 2 emissions and energy consumption are calculated using the CRREM¹ tool, which inputs data from the above sources.

A third-party service provider shall calculate Scope 3 GHG emissions with the appropriate qualifications and expertise.

¹ https://www.crrem.eu/tool/

As substantially all data comes from databases and systems managed by the Fund’s subsidiaries and the Fund Manager is directly involved in managing these companies, there are no restrictions on data extraction.

The market still needs and expects a standard methodology for calculating GHG emissions.

Due diligence on a potential investment property (i.e. a real estate asset such as an office or warehouse complex) is carried out before the acquisition of each asset. The due diligence aims to obtain as much information as possible about the investment asset, define its business plan, and identify potential legal, technical, financial, tax and sustainability risks.

The Investment Committee of the Fund shall decide to initiate such a study. On receipt of the results of the research, the Investment Committee shall decide on the investments to be made.

There are no external controls.

The Fund Manager, through its ownership of the Fund in the subsidiaries and its representation on their boards, participates in the investment decision-making, mitigation, management and control of the principal adverse impacts of investment decisions to maximise the investment value of the Funds’ assets and achieve the objectives set out in the Funds’ Investment and Sustainability Strategies.

There is no reference benchmark set for the environmental and social characteristics promoted by the Fund.