SFDR / RI & CR

What is the Sustainable Financial Regulation Disclosure

On 10 March 2021, the Sustainable Finance Disclosures Regulation (hereafter: SFDR) came into force. This legislation is part of a major European Union legislative package and aims to create more harmonisation in sustainability-related disclosures to clients and facilitate the comparison of financial products from different providers in terms of their sustainability. In doing so, the SFDR aims to combat the so-called greenwashing of financial products.

Why does the SFDR apply to Bouwinvest?

The SFDR applies to Bouwinvest Real Estate Investors B.V. as a manager of investment institutions, as well as to the separate investment institutions: Bouwinvest Residential Fund, Bouwinvest Retail Fund, Bouwinvest Office Fund, Bouwinvest Healthcare Fund, and the Dutch Social Impact Real Estate Partnership (hereafter: Impact Partnership).

In addition, Bouwinvest aims to contribute to the following United Nations Sustainable Development Goals (SDGs):

SDG 3 - Good health and well-being
SDG 7 - Affordable and sustainable energy
SDG 8 - Decent work and economic growth
SDG 11 - Sustainable cities and communities
SDG 13 - Climate action

Bouwinvest has translated this contribution into objectives at fund level, distinguishing between environmental, social and governance (ESG) objectives. The aim is to ensure that the capital we invest delivers an above-average performance on these aspects.

Investing in responsible real estate

Bouwinvest focuses entirely on investing in real estate and has both Dutch and international activities. The Dutch activities involve direct property investments in the Netherlands. The international investments are indirect investments and can be divided into listed and unlisted real estate investments.

Real estate is responsible for approximately 30% of total CO2 emissions and 40% of total energy consumption worldwide, and plays a significant role worldwide when it comes to reducing both CO2 emissions and energy consumption.

Bouwinvest’s objective is to have real estate that scores above-average in terms of sustainability (GRESB 4/5 stars). This requires Bouwinvest to work in a structured way to reduce these adverse impacts of real estate investments.

What does the SFDR mean for Bouwinvest?

The SFDR stipulates that every financial product must be classified. The SFDR has three classifications: dark green (article 9), light green (article 8) and neutral (article 6).

Bouwinvest's products classify as Article 9 and Article 8 products. The Impact Partnership has specific sustainable objectives and is therefore an article 9 product. The Bouwinvest Residential, Office, Retail and Healthcare funds promote ecological and social characteristics and are therefore classified as Article 8 products.

Article 9: sustainable investments in the Impact Partnership

Within Bouwinvest’s portfolio, the Impact Partnership has a sustainable social investment objective. This partnership aims to have a positive impact on people’s well-being by creating fair opportunities in the housing market for disadvantaged target groups by investing in residential properties, care-related homes and social real estate.

Article 8: promoting environmental and social characteristics in the Bouwinvest Residential, Office, Retail and Healthcare funds

With its Article 8 products, Bouwinvest promotes ecological and social characteristics but has not set sustainable investment as an objective.

For each of Bouwinvest’s financial products, Bouwinvest explicitly had explicitly made the ecological and social characteristics, not specifically defined by SFDR, that the fund promotes transparent and linked these to Bouwinvest’s four ESG objectives. Bouwinvest then defined KPIs (Key Performance Indicators) for each characteristic.

Integration of ESG risks in investment policy

In a general sense, the organisation of risk management within Bouwinvest aims to protect Bouwinvest’s continuity now and in the future and to create awareness throughout the organisation of the potential material risks to which Bouwinvest is exposed. This is to protect both Bouwinvest’s resources and the resources and interests of its clients.

In addition, the SFDR requires that specific Environmental, Social and Governance (ESG) risks should be an integral part of risk management within Bouwinvest at strategic and fund, mandate and investment levels. ESG risk is equivalent to the term ‘sustainability risk’ as defined in the SFDR.

In the ESG risk category, Bouwinvest distinguishes between five risk types:

Physical risks related to climate change
Transition risks related to climate change
Other environmental risks
Social risks
Governance risks

Bouwinvest has developed a methodology for ESG risk, in line with the existing Risk Management Framework, to systematically clarify and maintain the relevance of specific ESG risks. This methodology determines the relevance of risks on the basis of two pillars:

What is the impact on people and the environment if this risk occurs?
What is the impact on our portfolio if this risk occurs?

This methodology provides a clear picture of the inherent relevance of ESG risks at fund, partnership and mandate level. Having insight into the risks at fund, partnership and mandate level also improves insight into how ESG risks can have an impact on the risks of Bouwinvest Real Estate Investors.

For the management of the most relevant risks, Bouwinvest has a system aimed at gaining and maintaining insight into the measures and KRIs (Key Risk Indicators).

The ESG risk profile applicable to the fund, partnership or mandate is also used as a frame of reference for the assessment of ESG risks in all investment and divestment proposals. This ensures that all potentially relevant ESG risks are systematically taken into account.

Bouwinvest is convinced that the impact of ESG risks on its investment products can be partly mitigated by reducing the impact of the investments on people and the environment. The extent to which this is the case varies between the different funds and mandates that Bouwinvest manages.

Sustainability in general and the mitigation of the impact of our products on people and the environment are still evolving, which means that adverse impacts may have an impact on the value and returns of our investments. At the same time, we also see opportunities to actually have a positive impact in the value and returns of our investment products.

The ESG risk methodology and determining the impact on investment products is constantly evolving. We are devoting particularly close attention to the move towards the further quantification of these risks, aligning with developments in the market (e.g. in terms of availability of data and tools) where relevant.

Bouwinvest’s SFDR disclosures

Bouwinvest reports periodically and in accordance with the SFDR via the following documents:

Pre-contractual disclosure as an appendix to the Information Memorandum
Periodic disclosure as an appendix to the fund annual reports
Product-specific website disclosures on the fund-specific pages of the Bouwinvest website
PAI disclosure via the website as per 30 June each year
Website disclosures via the SFDR page on the Bouwinvest website

Bouwinvest firmly believes that long-term financial success in real estate investment for our pension fund clients is indelibly interlinked with our social responsibilities to adhere to the highest sustainability standards achievable in our work. By doing so we also ensure that our assets maintain their value for the long-term and also insure against the risks of obsolescence in our investments.

Bouwinvest includes environmental, social and governance (ESG) criteria in all its investment decisions to ensure long-term sustainable returns, in line with the United Nations Principles of Responsible Investment (UN PRI). By endorsing the UN PRI, Bouwinvest recognises the importance of responsible investments and is committed to implementing the principles in its investment process.

We are also committed to achieving the targets laid down in the Paris climate agreement. Its long-term goal is to have a near energy-neutral portfolio - a Paris Proof portfolio – by 2045.

Bouwinvest aims to have above-average sustainability ratings (GRESB 4 or 5 stars) for at least 80% of its invested capital in 2023, and to make a positive contribution to the United Nation’s Sustainable Development Goals (UN SDGs).

Bouwinvest is explicitly committed to the five Sustainable Development Goals (SDGs) that fall within its sphere of influence:

Health and well-being (SDG 3): invest in healthcare real estate, healthy buildings and lifecycle-proof homes.
Affordable and clean energy (SDG 7): reduce energy use and invest in renewable energy.
Decent work and economic growth (SDG 8): maintain an active dialogue with our partners to ensure good health, safety and working conditions at building sites.
Sustainable cities and communities (SDG 11): invest in real estate with an above-average sustainability rating and in affordable homes.
Take urgent action to combat climate change and its impacts (SDG 13): invest in sustainable and climate-adaptive real estate, which will result in a near energy-neutral portfolio in 2045.

Responsible real estate investment
Investing in the environment, society and good governance helps to combat climate change and generates broader social, economic, ecological and health benefits. We are convinced that our approach reduces risks, improves returns and makes our real estate and portfolios more attractive.

Our objective can only be achieved through close collaboration with stakeholders, ranging from tenants and shareholders, to local and national government authorities, suppliers and local operating partners. We also recognise that dedicated and hard-working employees   are crucial to Bouwinvest achieving its goals and we do our best to create a pleasant and encouraging atmosphere at work. Our strict corporate governance, risk, integrity and control programmes and frameworks, guide our responsible business practices.