In March, the SEC proposed rule changes which would oblige listed companies to produce a range of climate-related disclosures (see below), including greenhouse gas emissions.
The proposed rules are open to public comment until 20 May.
If finalised, the proposal would become the first-ever rule requiring all companies registered with the SEC to report, measure and quantify material risks related to climate change in their registration statements and periodic filings.
SEC chair, Gary Gensler, added: “Investors representing literally tens of trillions of dollars support climate-related disclosures because they recognise that climate risks can pose significant financial risks to companies and investors need reliable information about climate risks to make informed investment decisions. Companies and investors alike would benefit from the clear rules of the road proposed.”
The SEC measures are in line with the European Union requirements of the Sustainable Finance Disclosure Regulation and the EU Taxonomy, which provides a common language regarding environmentally sustainable activities. If the proposals are finalised, they will effectively merge climate-risk reporting into a company’s financial disclosures.
Around a third of US public companies include some information about climate-related risks. Real estate companies are expected to be substantially affected by the new regulations, both with regard to their own reporting and also the disclosures required by their tenants.
US REITs have tended to be ahead of the curve on climate risk reporting, but developers and smaller listed entities are more likely to need a dramatic reporting upgrade.
One proposed requirement is that companies would need to assess the risk of events such as flooding, heatwaves or wildfires. However, aside from flooding risk, there is no standardisation in this reporting. If the proposals are ratified, more standardisation is expected to emerge.
A report from law firm White & Case notes that the proposals in many instances go beyond what listed companies are already voluntarily disclosing and says: “Given the scope and complexity of the proposed rules, comments are expected to be extensive, and there will likely be threats of litigation if the proposed rules are adopted.”
Indeed, the proposal is opposed by SEC commissioner Hester Peirce, who argued that existing reporting rules already required the disclosure of material climate risks, that it requires disclosure which is outside the SEC’s remit and that the cost of compliance has not been properly estimated.
The measures have elicited broad support from larger real estate organisations. “For long- term, meaningful action to occur, there needs to be consistency in reporting and data,” says JLL sustainability vice president Cynthia Curtis. “Then, it elevates
it more closely to the financial reporting and puts the topic smack in the middle of boardrooms and finance departments. And that’s an excellent thing.”
Matt Ellis, chief executive of proptech firm Measurabl, says the disclosures would be “a bold step toward regulating an area that has largely remained unregulated for too long”.
The new rules will require US listed companies to make a number of regular disclosures, which vary depending on the size of the company; smaller companies have more time to comply. The rules require disclosure of:
The full version of this article appears in the May issue of Sustain
Taurus Investment Holdings and Aegon Asset Management have entered a four-year, $600 million venture to invest in US multifamily properties.
The venture will acquire assets across the US, after which Taurus subsidiary Renu Communities will undertake a retrofit programme for each asset with the intent to make them zero carbon and low energy buildings. Renu introduces energy efficiency upgrades, onsite renewables production and electrification of all services in order to reduce emissions and energy use.
The first investment will be the recapitalisation of Canopy Villa Apartments, a 296-unit apartment complex in Orlando, Florida, which was built in 1981.
Previous projects by Renu include South Winds (pictured above), a 404-unit complex in Fall River, Massachusetts. Renu has installed LED lighting, upgraded insulation, installed heat pumps and fitted rooftop solar panels.
“Taurus and Aegon AM have made a commitment to building a business that delivers returns to our investors, while also positively impacting both society and the environment, so it only makes sense to partner for this substantial decarbonization venture,” said Peter A. Merrigan, CEO of Taurus.
“The strong return potential and durable cash flows of the multifamily value-add strategy paired with this accretive, one-of-a-kind decarbonization initiative aims to set the standard for a new way to approach these investments,” said Alexia Gottschalch, global head of client strategy, Aegon Real Asset and US head of equity real assets.
California State Teachers’ Retirement System (CalSTRS) has backed SoLa Impact’s fourth US social impact real estate fund with a $50 million commitment.
The $311 billion US pension fund has invested through its partnership with Belay Investment Group and its investment brings fund-raising for SoLa’s Black Impact Fund to $250 million. The vehicle seeks to raise $300 million to invest in affordable and workforce housing development in California’s minority communities.
The commitment from CalSTRS includes capital from the pension fund’s real estate and sustainable investment and stewardship strategies. Other investors in the fund include PayPal Holdings, Equitable Insurance, the Skoll Foundation, Ally Bank, Potenza Capital, Pacific Premier Bank and Adirondack Capital.
SoLa was founded in 2015 by CEO Martin Muoto (pictured above) and COO Gray Lusk with a mission to “to deliver superior financial returns by driving positive social change in America’s toughest neighbourhoods”. The firm owns and manages a portfolio of 1,500 apartments in Los Angeles and has a similar number in the pipeline. It is also developing a business campus, The Beehive, in an LA Opportunity Zone.
Asia Capital Real Estate (ACRE) has hired Linda Isaacson as the real estate private equity firm’s first head of ESG and Impact.
Isaacson joins from Ferguson Partners, where she was global head of innovation and technology. She is based in ACRE’s New York office and will oversee the firm’s ESG initiatives and investment strategy for a forthcoming venture and impact capital strategy.
Founding partner Les Menkes said: “As ESG initiatives take on greater importance to investors and other stakeholders around the globe, the addition of a globally recognized leader in the space such as Linda will be critical as we expand our portfolio and broaden our strategic playbook to include emerging technologies. We are extremely excited to welcome her to our firm as we begin a new era of growth and success in the months and years to come.”
ACRE’s forthcoming venture capital vehicle will invest in early-stage companies and technologies “aimed at creating social impact and disruption related to the built environment”, including sustainable communities, climate technology and health technology.
The company was founded in 2011 and has around $2.9 billion in debt and equity real estate assets under management, primarily in the US but also in Southeast Asia and the UK, with a primary focus on workforce and affordable housing assets.
Canadian investment manager Middlefield Group has published the final prospectus for its Sustainable Real Estate Dividend Fund, seeking to raise up to C$75 million ($60 million).
The fund, which will be listed on the Toronto Stock Exchange, will invest in the dividend paying securities of entities involved in sustainable real estate. This might include real estate owners such as real estate investment trusts or companies involved in sustainable property management or building materials.
An ESG screening process, considering factors such as third party ESG scoring and data, as well as direct issuer research, will be used to select investments. The expected portfolio allocation will be 50-70% weighted towards REITs and the geographical weighting will be 60% North America and 40% rest of the world.
Fund units are being offered at C$10 each and the initial public offering will close on March 30, 2022. The fund may borrow up to 25% of asset value and is targeting an annualised 5% dividend yield, paid monthly.