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The AXA Impact Fund - Climate & Biodiversity, launched in July 2019, was developed in response to increasing concerns about how climate change threatens biodiversity.

INREV Annual General Meeting 2020 was held online on 3 June. It provided all members with the opportunity to learn about our achievements, financial statements and membership growth in 2019. We also presented proposed re-appointments to the INREV Management Board and let you know what’s in store for 2020.

The INREV German Vehicles Quarterly Index covers the performance of non-listed real estate vehicles domiciled in Germany on a quarterly basis.

The All German Vehicles Quarterly Index can be further broken down by style, country, structure, legal structure and sector.

This year’s survey includes 140 managers and represents total real estate assets under management of €3.2 trillion as at end 2019.

The United Nations’ Sustainable Development Goals (SDGs) are a powerful organizational and communications tool for institutional investors and asset managers as they are universally accepted across multiple facets of society. But the SDGs are vulnerable to misuse, misrepresentation and dilution. Investors need to ensure that when a product is labelled as “aligned with the SDGs” that it moves beyond just alignment and makes a real contribution to positive social and environmental outcomes. In this article we explain how we have approached this challenge with an investment in affordable housing, one of the main sectors within social infrastructure.

As impact performance becomes a powerful differentiator and a meaningful new dimension of overall performance for all types of investing, understanding the current trends in the impact investing market becomes crucial to take part in this new type of race within the investment marketplace. 

With its latest Impact Measurement and Management (IMM) Survey  published in January 2020, the GIIN  provides a comprehensive overview of the current impact investing market .

The report take a look into how investors describe their objectives, motivations and strategies for understanding and improving their impact, and the processes for holding themselves and their investees accountable, along with the other elements of their IMM practices. 

Findings of the report reflect the growing sophistication and maturation of IMM, the integration of IMM into investment processes and the rising focus on impact results. 

Key Findings

1. While impact investors pursue diverse impact objectives, they universally agree on the importance of measuring and managing impact results. 

• The most commonly targeted impact themes or sectors include employment (71%), agriculture (63%), and financial services (62%).

2. Across the market, IMM practices have grown increasingly sophisticated as investors shift from building consensus for IMM to strengthening its integration within investment processes. 

• IMM responsibilities are allocated to investment teams (68%), to staff dedicated to IMM (50%), and to senior leadership (39%). 
• IMM is integrated into the investment process itself. Impact data is considered across each stage; most commonly during due diligence (81%), investment screening (77%), and identifying the social or environmental needs to address through investment (75%).

3. As the market grows and matures, impact investors increasingly demand insight into impact performance. 

• Key challenges of impact investing are cited as follows; a lack of transparency on impact performance (89%), the inability to compare impact results with market performance (84%), collecting quality data (92%), aggregating, analysing, or interpreting data (74%),
• Investors demanding resources; impact benchmarks (92%), pooled impact data (86%), case studies on best practices (86%), tools to strengthen impact screening (83%).

4. Impact measurement and management incurs some costs, but it also generates financial benefits.

• On average, impact investors spend an estimated 12% of their organisation’s total budget on IMM-related activities,
• Respondents use impact data directly related to an organisations’ financial strength, such as communicating results to stakeholders (89%) and assessing risk factors (45%), to strengthening IMM processes and improving impact results by identifying or refining metrics (69%), setting or revising impact goals (65%), and strengthening data-collection processes (62%). 

Summarised by Bahar Yay Celik, Analyst at INREV’s Professional Standards Team

The United Nations Environment Programme (UNEP) FI  Property Working Group and the Positive Impact Initiative  published a framework in 2018 in collaboration with RICS, UN PRI, and members of the Global Investor Coalition on Climate Change. The framework was initiated to develop an impact-based approach in real estate finance and management. 

The Positive Impact Real Estate Investment Framework offers a process tool for institutions to identify impact and corresponding investment opportunities, measure ex-ante and ex-post impact, and ultimately re-orient institutional capacities and capital for intentional delivery of outcomes that support the SDGs .

The framework provides a practical and action-oriented guidance for the real estate industry to accelerate the impact paradigm for the delivery of the SDGs. 

The Positive Impact Principles

• Four main principles are defined for positive impact within the paper; Definition, Frameworks, Transparency, Assessment
• The Positive Impact Principles require a holistic approach; appraisal of both positive and negative impacts, consideration of all three dimensions, i.e., economy, society and environment, and transparency and assessment of methodologies and impact achieved as a core requirement.

The Investment Objectives

• To operationalise the Positive Impact Principles, an action-oriented framework based on four Investment Objectives has been developed; Clarity of Impact, Market and Sustainable Returns, Measurement of Impact, Additional Finance and/or Impact Flows,
• The Investment objectives offer a way for institutions to frame decision-making for more immediate-term investment activities and longer-term aspirations that derive from a holistic and impact based approach,
• For each of the four Investment Objectives, the Framework provides a number of ‘leading questions’ and recommended actions to be considered by investment practitioners

Investors’ Motivation

• Positive Impact applies to all investment activities within institutions.
• Institutions will be subject to learning curves in building skills and capacity internally for an impact-based approach and for improved alignment between asset owners, asset managers, and others within the investment value chain.
• The framework listed the actions investors can take as they orient themselves on the adoption curve for applying an impact-based approach

Applying the Impact-Based Real Estate Investment Framework

• The paper provides a table showing an application of the framework for a preliminary assessment of property sector impacts and indicators, and how investment decisions can respond to those,
• Twenty two impact categories are included into the table with an aim of capturing all realms of sustainable development,
• Investment themes relevant to real estate investors are aligned to the impact categories,
• Suggested indicators are provided, both for delivered impact measurement and potentially for assessing additional finance and / or impact flows

Summarised by Bahar Yay Celik, Analyst at INREV’s Professional Standards Team

Jan Gruter, Legal Director and Jonathan Powling, Partner (Investment Management Team) and Zoe Connor, Partner at (Banking Team) Addleshaw Goddard present on emerging trends in real estate fund terms.

The Index is wholly comprised of open end core commingled equity real estate funds that have a strategy to invest across pan Europe and across multiple sectors. Funds must comply with a strict eligibility criteria for four consecutive quarters in a row to be included in the index. 

There’s broad agreement within the industry that we need to establish a more structured and common approach to pricing policies. To accelerate the debate INREV and AREF are pleased to present a consultation on Open End Fund Pricing.