Investing with social and environmental responsibility and leading by example – these are core values of AIF Capital. We want to preserve natural resources, contribute to environmental protection and promote social cohesion. AIF Capital currently develops a comprehensive ESG-Strategy for all branches of the business.
Under EU Regulation (EU) 2019/2088 of the European Parliament and of Council of 27 November 2019 on sustainability-related disclosure requirements in the financial services sector (Sustainable Finance Disclosure Regulation “SFDR”), financial market participants must disclose their strategy for incorporating Sustainability Risks into their investment decision processes.
A Sustainability Risk is an environmental, social and governance (ESG) event or condition that may have an actual or potential negative impact on the value of an investment (“Sustainability Risk”). Such a Sustainability Risk may also affect the other common types of risk.
At AIF Partner KVG, Sustainability Risks are considered in the investment decision process and in risk monitoring. This rule applies to the entire investment process, both for the fundamental analysis and for the investment decision itself as well as for on-going monitoring. For this purpose, AIF Partner KVG collect consumption data at its properties together with its service providers whenever available, and obtains data on physical risks from an established service provider.
The impact, probability and severity of Sustainability Risks differ depending on the respective region and property. For this reason, AIF Partner KVG consider the significance of Sustainability Risks as a part of the investment process. Sustainability Risks resulting from the analysis of ESG criteria are continuously evaluated regarding their financial impact and taken into account in the assessment of the risk-return-profile of an investment. This is done, both during the analysis of potential investment opportunities, and in the monitoring of existing assets. AIF Partner KVG reduce physical risks by concluding respective insurance policies. Transitory risks are continuously analysed – depending on availability – via consumption data from the properties. Very high Sustainability Risks may also be reduced by structural measures, or, in case of doubt, by disposal of the property.
To ensure due diligence, AIF Partner KVG consider in each investment decision the most significant adverse impacts on sustainability factors (environmental, social, labour rights, human rights, corruption, bribery and corporate governance).
Within the context of the investment decisions, also the indicators for significant adverse effects on sustainability are being considered. In addition to mandatory indicators, we also take into account other optional indicators:
We regard energy inefficient properties as the main drivers of sustainability risks in our funds.
We see the use of fossil fuels in the operation of real estate as a further driver.
Other Sustainability Risks include the intensity of energy consumption, the proportion of non-renewable energy sources, the reliance on fossil fuel companies, the carbon footprint and the generation of greenhouse gas emissions. Finally and optionally, we see – in environmental economic terms – the consumption of raw materials for new constructions and renovations on a larger scale as well as – in social terms – the insufficient protection of whistle blowers as to be taken into account in the context of investment decisions for our funds.
In case threshold values are exceeded, it may lead to exclusion from the investment decision, to construction measures or to the disposal of the respective property.
By taking adverse impacts into account in the context of investment decisions, we seek to ensure that the investment objective of a financial product is not achieved through adverse impacts on sustainability factors.
Since AIF Partner KVG invest almost exclusively in real estate, it is not feasible to actively contribute to the reduction of adverse impacts on sustainability. However, in the context of consumption data for energy-inefficient buildings, structural measures that may reduce energy consumption are continuously being considered.
Ecological, social and corporate governance criteria are anchored in the business strategy of AIF Partner KVG. Sustainability Risks are taken into account in the context of investment decisions and in investment consulting. At the same time, our remuneration policy ensures that the performance of our employees is evaluated in such a way that they act in the best possible interest of our clients.