Aged Care Social Infrastructure Fund SFDR disclosure

Summary

Aged Care Social Infrastructure Fund invests in a diversified portfolio of social infrastructure assets (including, without limitation, elderly care facilities, senior housing, disabled care facilities, rehabilitation facilities, healthcare facilities, schools and day-care facilities), primarily in Sweden, Finland, Norway and Denmark.

Fund promotes environmental or social characteristics within the meaning of Article 8 of the Sustainable Finance Disclosure Regulation (2019/2088) (“SFDR”). The Fund does not have sustainable investment as its objective within the meaning of Article 9 of the SFDR, but it will make a minimum portion of sustainable investments. The environmental characteristics the Fund promotes are energy efficiency, carbon emission reduction and reducing the principal adverse impacts of the investments.

As part of promoting energy efficiency and carbon emission reduction the financial product promotes the following targets:

1. at least 30% of sustainable investments in the portfolio that qualify as environmentally sustainable under the EU Taxonomy;
2. 100% fossil free electricity across all real estate assets in the portfolio by 2025 and onwards.
3. 100% fossil free heating across all real estate assets in the portfolio by 2030 and onwards;
4. assets with green building certifications and integrated energy-efficient, environmentally friendly technical solutions (solar panels, geothermal etc.).
5. carbon neutral portfolio from operations by 2030.

In addition, the financial product promotes social characteristics by investing in Social Infrastructure assets which include Residential Care assets such as elderly care, senior housing, disabled care, rehabilitation facilities and other Social Infrastructure assets such as healthcare facilities, and schools and day-care facilities. In accordance with the limitations set out in 4.4 Investment Restrictions, the financial product will not invest more than 10% of Gross Asset Value which do not qualify as Social Infrastructure; more than 20% of Gross Asset Value which do not qualify as Residential Care.

The Fund measures the attainment of the characteristics by sustainability indicators such as share of assets in the portfolio that qualify as environmentally sustainable under the EU Taxonomy, share of assets in the portfolio using fossil-free energy sources, share of assets in the portfolio using fossil-free heating sources, portfolio GHG emissions generated by real estate assets – Scope 1, 2 and 3 emissions, share of investments in energy-inefficient real estate assets,  exposure to fossil fuels through real estate assets, share of assets in the portfolio that qualify as Social Infrastructure and share of assets in the portfolio that qualify as Residential Care.

The Fund has a minimum portion of 60 % of sustainable investment. The Fund commits to holding 60 % of sustainable investments of which 30 % is EU taxonomy (852/2020) aligned. The remaining sustainable investments that are not EU taxonomy aligned are considered “other environmental” sustainable investments in accordance with the definition in SFDR Article 2(17). The SFDR sustainable investment and EU taxonomy aligned sustainable investment definition overlap. In the case Fund would hold more than 30% of EU taxonomy aligned investments, the amount of sustainable investments that are not EU taxonomy aligned may be lower than 30 %.

The Fund follows Northern Horizon Capital Group’s  Responsible Investment Policy that has factored in the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, as well as Northern Horizon Capital’s risk management policies and processes.

For conducting ESG due diligence, monitoring the attainment of the characteristics and engaging with stakeholders, the Fund complies with Northern Horizon Capital Group’s Responsible Investment policy and Investment policy. The sustainability indicators are investigated in the due diligence phase for new investments and measured and reported at least annually. Northern Horizon Capital Group has established an ESG Task force that is led by Head of Sustainability and includes Portfolio, Fund and Asset Managers. In accordance with Northern Horizon Capital Group’s Responsible Investment policy, the Task Force gathers at least quarterly to discuss the relevant developments of the ESG factors for the Fund and it may recommend actions to achieve the Fund’s targets. Northern Horizon Capital’s Head of Sustainability, Asset and Fund managers actively engage with our key stakeholders with the goal of improving sustainability and addressing controversies.

The Fund collects information on the sustainability indicators with the assistance of asset managers, property managers and in cooperation with the tenants. The Fund may use external service providers to gain consumption metering data directly from the utility companies. EU taxonomy alignment is assessed in connection to the investment decision making by utilizing Northern Horizon Capital’s taxonomy screening tool. Sustainability data is managed and processed in an ESG data and reporting platform. The Fund aims to maintain its high data coverage on consumption data and other ESG characteristics and assure data completeness. However, there may be limitations of data common to the industry the Fund operates due to developing ESG regulations and reporting requirements.

There is no reference benchmark designated for this Fund.

Summaries in other relevant EU member state languages

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No sustainable investment objective

This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.

However, the Fund has a minimum portion of 60 % of sustainable investment. The Fund commits to holding 60 % of sustainable investments of which 30 % is EU taxonomy (852/2020) aligned. The remaining sustainable investments that are not EU taxonomy aligned are considered “other environmental” sustainable investments in accordance with the definition in SFDR article 2(17). The SFDR sustainable investment and EU taxonomy aligned sustainable investment definition overlap. In the case Fund would hold more than 30% of EU taxonomy aligned investments, the amount of sustainable investments that are not EU taxonomy aligned may be lower than 30 %.

Part of a portfolio that forms EU Taxonomy aligned sustainable investments will contribute to the environmental objective of climate change mitigation. The sustainable investments that are not aligned with the EU Taxonomy have the objective of reduction of GHG emissions and improving energy efficiency by investing in and acquiring high energy class buildings and targeting fossil free electricity and heating solutions.

For sustainable investments the “do no significant harm “(“DNSH”) -criteria will be assessed using the principal adverse impact indicators (“PAI”). The indicators taken into account in the DNSH evaluation are exposure to fossil fuels through real estate assets, exposure to energy inefficient assets and GHG emissions of real estate assets. Additional PAI indicators may be added to the review based on materiality analysis and/or changes in the relevant legislation.

For EU taxonomy aligned investment the “do no significant harm” -assessment will be performed against the criteria determined in the EU Taxonomy Climate Delegated Act in force from time to time. Do no significant harm to climate change adaptation will be considered and climate risk assessment will be performed based on EU Taxonomy requirements.

The Fund follows Northern Horizon Capital Group’s  Responsible Investment Policy that has factored in the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, as well as Northern Horizon Capital’s risk management policies and processes.

Environmental or social characteristics of the financial product

The Fund promotes energy efficiency, carbon emission reduction and reducing the principal adverse impacts of the investments. As part of promoting energy efficiency and carbon emission reduction the financial product promotes the following targets:

1. at least 30% of sustainable investments in the portfolio that qualify as environmentally sustainable under the EU Taxonomy;
2. 100% fossil free electricity across all real estate assets in the portfolio by 2025 and onwards.
3. 100% fossil free heating across all real estate assets in the portfolio by 2030 and onwards;
4. assets with green building certifications and integrated energy-efficient, environmentally friendly technical solutions (solar panels, geothermal etc.).
5. carbon neutral portfolio from operations by 2030.

In addition, the financial product promotes social characteristics by investing in Social Infrastructure assets which include Residential Care assets such as elderly care, senior housing, disabled care, rehabilitation facilities and other Social Infrastructure assets such as healthcare facilities, and schools and day-care facilities. In accordance with the limitations set out in Investment Restrictions, the financial product will not invest more than 10% of Gross Asset Value which do not qualify as Social Infrastructure; more than 20% of Gross Asset Value which do not qualify as Residential Care.

Investment Strategy

The investment strategy of the Fund is to invest in a diversified portfolio of social infrastructure assets (including, without limitation, elderly care facilities, senior housing, disabled care facilities, rehabilitation facilities, healthcare facilities, schools and day-care facilities), primarily in Sweden, Finland, Norway and Denmark.

The investment strategy aims for a carbon-neutral portfolio from operations by 2030, provided that the investment environment allows it. In real estate operations, carbon dioxide emissions derive mainly from energy use, i.e. electricity and heating. Therefore, the investment strategy aims at achieving:

1. 100% fossil free electricity by 2025 across all real estate assets in the portfolio;
2. 100% fossil free heating by 2030 across the portfolio;
3. carbon neutral portfolio from operations by 2030;
4. at least 30% of sustainable investments under the EU Taxonomy in the portfolio.

The Fund acquires real estate assets that are placed in special purpose vehicles for the benefit and purpose of owning these real estate assets. Therefore, the governance practices of these entities are not assessed. However, the management company of the Fund upholds itself to the highest corporate governance practices and all relevant regulations. Good governance principles are also an integral part of the Fund management that also stretches to special purpose vehicles owning the real estate assets.

Proportion of investments

To meet the promoted environmental characteristics, the Fund plans to generally invest up to 95% of its total equity commitments into real estate properties. The remaining proportion of investments, amounting up to 5% of the Fund’s assets could be held in a form of cash or cash equivalents to maintain sufficient liquidity.

The Fund aims to acquire assets that qualify as sustainable investments, as defined in Article 2(17) of SFDR, depending on market conditions and asset availability. The Fund commits to holding 60 % of sustainable investments of which 30 % are EU taxonomy (852/2020) aligned. The remaining sustainable investments that are not EU taxonomy aligned are considered “other environmental” sustainable investments by the definition of SFDR Article 2(17). The SFDR sustainable investment and EU taxonomy aligned sustainable investment definition overlap. In the case Fund would hold more than 30% of EU taxonomy aligned investments, the amount of sustainable investments that are not EU taxonomy aligned may be lower than 30 %.  However, a larger share of sustainable investments may be made as an indirect consequence of the Fund seeking to promote environmental and/or social characteristics in pursuing its investment strategy.

Monitoring of environmental or social characteristics

This financial product will use the following indicators and metrics:

1. Share of assets in the portfolio that qualify as environmentally sustainable under the EU Taxonomy: market value of environmentally sustainable assets divided by total portfolio value.
2. Share of assets in the portfolio using fossil-free energy sources: market value of assets using fossil-free energy sources divided by total portfolio value.
3. Share of assets in the portfolio using fossil-free heating sources: market value of assets using fossil-free heating sources divided by total portfolio value.
4. Portfolio GHG emissions generated by real estate assets – Scope 1, 2 and 3 emissions. Emissions could be calculated using both market-based and location-based methodology depending on the availability of information in tCO2e.
5. Share of investments in energy-inefficient real estate assets: market value of energy inefficient assets divided by total portfolio value.
6. Exposure to fossil fuels through real estate assets.
7. Share of assets in the portfolio that qualify as Social Infrastructure.
8. Share of assets in the portfolio that qualify as Residential Care.

Due to changing market environment, development of guidance and interpretation of legislation and other factors, this financial product might use different metrics and indicators other than the indicators and metrics listed above if they will be deemed better at describing the Fund’s attainment of promoted environmental characteristics. Under such a scenario, clear reasoning for such a decision will be provided with a description and calculation methodology of new metrics and indicators.

Northern Horizon Capital AIFM Oy assumes responsibility for the data quality and integrity of the sustainability indicators but may use external sustainability advisors to facilitate data collection and analysis where appropriate. Data on sustainability indicators is gathered directly from the assets and monitored with the assistance of external property managers.

The sustainability indicators are investigated in the due diligence phase for new investments and measured and reported at least annually. Northern Horizon Capital Group has established an ESG Task force that is led by Head of Sustainability and includes Portfolio, Fund and Asset Managers. In accordance with Northern Horizon Capital Group’s Responsible Investment policy, the Task Force gathers at least quarterly to discuss the relevant developments of the ESG factors for the Fund and it may recommend actions to achieve the Fund’s targets. The Fund managers are responsible for implementation of the Responsible Investment policy at Fund level.

Methodologies

In accordance with Northern Horizon Capital Group’s Responsible Investment policy, promoted environmental characteristics are to be considered as part of any due diligence process on a targeted investment and a summary conclusion provided as part of the investment proposal as further instructed by Northern Horizon Capital Group’s Investment Policy.

In addition to monitoring asset level actions, ESG Task Force may recommend and present fund specific actions to attain the fund’s sustainability targets.

Northern Horizon Capital will use its best efforts to include green lease clauses in all new lease agreements and renewals of existing leases. Possible green lease clauses may include agreements of consumption data sharing, preference over renewable energy forms, landlord assistance in relation to refurbishment projects and other matters related to ESG coordination deemed material at time to time.

Data sources and processing

The Fund collects information on the sustainability indicators with the assistance of asset managers, property managers and in cooperation with the tenants. The Fund may use service providers to gain consumption metering data directly from the utility companies. EU taxonomy alignment is assessed in connection to the investment decision making by utilizing Northern Horizon Capital’s EU taxonomy screening tool. Sustainability data is managed and processed in an ESG data and reporting platform.

The Fund aims to assure performance data on energy consumption, waste and water consumption. In case The Fund limits the use of estimations, and should they be used, it will be assessed on a case-by-case basis.

Limitations to methodologies and data

There may be limitations to data and methodologies due to developing ESG regulations and reporting requirements that are common to the industry. For instance, the complete data may not be available in case of newly constructed assets. The Fund aims to maintain its high data coverage on consumption data and other ESG characteristics and assure data completeness.

The limitations to methodologies and data do not affect the attainment of the promoted characteristics of the Fund.

Due diligence

Due diligence is conducted in accordance with Northern Horizon Group‘s Responsible Investment policy and Investment policy.

ESG factors are to be considered as part of any due diligence process on a targeted investment and a summary conclusion provided as part of the investment proposal as further instructed by Northern Horizon Capital Group’s Investment Policy. For the purpose of assessing sustainability factors and risks in relation to investments, special purpose questionnaires will be used. This questionnaire will cover relevant sustainability matters including but not limited to:

1. Assessment of energy performance – energy supply and access to renewable energy, sources of energy consumption data, energy ratings, building certification, emissions and other relevant topics and as laid down in applicable regulation;
2. Assessment of environmental aspects – building materials, contamination, water efficiency, water supply, waste management, EU taxonomy alignment, green lease provisions and other relevant topics;
3. Assessment of social aspects – building safety, indoor environmental quality, health and wellbeing, tenant and landlord ESG collaboration, other relevant topics;
4. Risks associated with new construction and renovations – site selection, biodiversity, developer selection, their commitment to the Minimum Safeguards, waste management, building materials and other relevant topics;
5. Other topics – access to transport links, regulatory risks, review of climate change related transition, physical and social risks, as well as human rights risk and should it be relevant for a specific fund, principal adverse impact indicators.

The Fund may also utilize the assistance of third-party consultants and property managers to conduct ESG due diligence. EU taxonomy screening is conducted in investment decision making in order to comply with the minimum amount of taxonomy aligned investment.

Northern Horizon Capital AIFM Oy uses its best efforts to incorporate ESG impacts (costs and income) into applied financial investment models.

Engagement policies

The Fund does not have a separate engagement policy.  Stakeholder engagement is part of Northern Horizon Capital Group’s Responsible Investment policy principle 7. Northern Horizon Capital Group’s Head of Sustainability, Asset and Fund managers actively engage with our key stakeholders with the goal of improving sustainability and addressing controversies.  Fund manager shall make reasonable efforts to ensure access to all relevant ESG data and stakeholder commitment through surveying, goodwill dialogue, and/or contract negotiations.

No designated reference benchmark

The Fund does not follow a reference benchmark.