Orchard Street announces first close of £400m impact fund for decarbonising buildings
Commercial property investment manager Orchard Street, which manages retail units, offices and industrial facilities worth more than £4bn has launched a £400m impact and decarbonisation fund, which has seen more than £90m committed in the first phase to help local communities decarbonise buildings.
The launch of the firm’s first Impact Fund saw just under £90m committed at the first close. Orchard Street will target real estate investment opportunities that would deliver social and environmental benefits.
The impact fund will focus on decarbonising existing buildings through refurbishment, investing in local communities through place-based models and making buildings healthier by improving air quality and wellness amenities.
The close of the first phase will see Brunel Pension Partnership, one of the UK’s Local Government Pension Scheme pools, acting as the Fund’s cornerstone investor. Brunel Pension Partnership will invest on behalf of eight of its ten underlying local authority partner funds.
Orchard Street Investment Management’s managing partner Philip Gadsden said: “Buildings that offer top quality space and strong ESG credentials will continue to command the best rents and prices, with this Fund, therefore, providing not only an avenue for investors to enjoy strong financial returns but also a significant positive social and environmental impact.
“By fully integrating impact into our investment approach – with ambitious decarbonisation, wellbeing and community investment targets – the Fund will accelerate the property sector’s decarbonisation, while maximising the value of buildings as a tool to promote health and community investment.”
Orchard Street has outlined plans to reach net-zero ahead of the UK government’s 2050 deadline.
Last year, the company unveiled a pathway to its net-zero ambitions. The pathway includes two new commitments – to reach net-zero across corporate and landlord emissions and refurbishments by 2030 and to reach net-zero for occupier emissions and fit-outs by 2040. These announcements are 20 and 10 years ahead of the original plans respectively.
The pathway was devised following extensive and direct engagement with its clients.
Occupiers’ emissions represent more than 90% of Orchard Street’s total annual carbon footprint. With this in mind, its net-zero strategy focuses more on its managed buildings than its direct operations.
To ensure that decarbonisation work starts across the broader portfolio as soon as possible, the business is targeting a 25% reduction in occupier carbon intensity by 2025. Occupiers will be supported to improve energy efficiency through retrofitting, digital technologies and behaviour change schemes. The company will also aim to have a maximum of 210 kgCO2e/m2 of embodied carbon on refurbishments by 2025.
Targets for 2035 and 2040 will be set in 2030 to ensure “they are sufficiently ambitious and reflect current best practice”, the pathway report notes. This is in line with the advice of the Net Zero Asset Managers Initiative.
The impact fund will be linked to the firm’s sustainability endeavours. Orchard Street has confirmed that it is linking30% of its performance fees to the achievement of the Fund’s societal and environmental impact objectives.
The fund will also be supported by external sustainability experts. Advisors include JLL Upstream Sustainability Services, Carbon Intelligence, part of Accenture, which will manage the ESG performance data for the Fund’s assets; and BlueMark, which will provide ongoing independent assurance of the Fund’s impact objectives and reporting.
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