Once the asset is acquired, we then offer post transaction support to add value and improve the service, which includes a 12 month post transaction check in, implementation of the ESG action plan, and report updates as the asset evolves and actions are undertaken.

 

Product development process:

 

In Spring 2021, we identified a growing focus from our clients in the real estate asset acquisition market, on environmental due diligence. Whilst our clients were expressing a key desire to implement considerations for ESG factors, there was a clear lack of clarity on any set regional or global regulation or guidance. This was leading to clients failing at the first hurdle. 

 

An existing common approach to ESG at this point in time was often a generic section within existing Transactional Due Diligence (TDD) reports, primarily focused on HVAC and energy efficiency. These statements generally held no consideration for the Social or Governance aspects of ESG, and the Environmental factors fell short of considering the future impacts of the building. 

 

So, we started with first principles; to define “ESG”. We took into account the wide range of existing and emerging standards, which included: 

 

• Global Reporting Initiative (GRI), 

• CDP, a global disclosure system for investors, companies, and governments 

• Sustainability Accounting Standards Board (SASB), 

• UN Sustainable Development Goals, 

• UN Global Compact, 

• B-Corp, 

• GRESB, Global benchmarking for real estate assets

• WELL Building Standard

• UK National TOMs, evidenced based social value measurement (Themes, Outcomes, Measures)

• Social Value Portal, 

• and others

 

We cross-referenced these key indicators of performance across the holistic ESG landscape, which allowed us to establish a consistent series of “themes” across the 3 pillars of E, S and G.

 

Taking these themes, we designed a process that could effectively evaluate holistic ESG performance based on defined performance indicators, and imperatively, do this within the constricted timeframe of transactional due diligence, where urgency is essential. 

 

Evolution of product and service:

 

Our product and the approach we take to assessment has evolved over 18 months. Clients have increased their understanding of what is most important to them in relation to ESG. For some, that is Climate Risk, for others, Net Zero transition & decarbonisation, and for others it varies depending upon the scale of opportunity to enhance an asset, for example through improvement of biodiversity.

 

Regulation has continued to evolve and develop in this time which has also influenced our development. Most notably:

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• Sustainable Finance Disclosure Regulation (SFDR) – which work to set definitions and metrics to define sustainability credentials for organisations and real assets across ESG themes including climate, GHG emissions, water, waste, social and employee matters, energy efficiency and exposure to fossil fuels; 

• EU Taxonomy – which defines “substantial contribution” and “do no significant harm” criteria for construction and real estate across the 6 Environmental Objectives

  • Climate change mitigation

  • Climate change adaptation

  • The sustainable use and protection of water and marine resources

  • The transition to a circular economy

  • Pollution prevention and control

  • The protection and restoration of biodiversity and ecosystems

 

Evolution of the service has gone on to include the development of tools to evaluate climate risks to best inform the due diligence process to meet the needs of our clients and the demands of regulations in a continually expanding and evolving landscape.

 

“Boreal was delighted to work with Delta-Simons on our recent UK transactions. The team supported us with environmental phase 1 studies and peer reviews, flood risk assessments and ESG benchmark assessments. In a fast-paced market, where transactions typically close within 15 days, the Delta-Simons team have proved they are able to produce thorough, bespoke analysis under significant time pressure. As an ESG-focused investment manager, Boreal highly values Delta-Simons’ input to inform both our acquisitions and ongoing asset management. We look forward to continuing our work with them.”  Emma Waterhouse, Associate, Boreal

 

Example of where this innovation has been utilised

 

Project Sky, a 27-site portfolio we completed for Oxford Properties, including the provision of Phase 1 Environmental Assessments and Transactional ESG. 

 

The 223,800 sqm Danish portfolio, comprising  27 urban logistics and light industrial assets in the Nordics. 50% of the portfolio is located in Greater Copenhagen with a further 22% in Denmark’s Triangle region, an established logistics location that serves all major Danish population centres and the German border. A diverse 75 tenants make up the occupiers, with the majority operating in the transport & distribution (3PL), e-commerce & retail and manufacturing sectors.

 

For over 60 years, Oxford Properties has been connecting people to exceptional places, with environmental, social and governance (ESG) practices playing an important role in delivering on that vision. To support the commitments made at Board level, Oxford Properties prioritises  ESG in due diligence for every deal, and we provided the solution to do this, through assessments which benchmarked current ESG performance and identified potential material risks associated with the physical assets and management of the assets at all Sites. 

 

The scope of works included:

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• Provision of a Pre-Assessment Screening Form to establish key criteria for the assessment.

• Development of suitable questionnaires specific to the needs of the Client, based on the response to the above and in relation to the reporting categories (Environment, Social and Governance).

• Completion of an interview via telephone/video conferencing with a representative of the property management team for each site.

• Completion of desktop research specific to relevant criteria for each site.

• Production of an ESG Benchmark Assessment Report for each site and

• Production of a Portfolio ESG Benchmark Summary Report, summarising key findings across the portfolio of sites.

 

“As an investor, Oxford Properties prides itself on conducting thorough transactional due diligence with a particular focus on ESG. When looking to acquire a portfolio of this scale and complexity (27 assets across Denmark, a new market entry for Oxford), it is important that we align ourselves with trusted advisors who have the same principles: work efficiently but take no shortcuts. Delta-Simons proved to be equal to the task, delivering meaningful ESG reports which helped drive Oxford’s path forward for these assets.” - Landon Schultz, Investment Director, Oxford Properties.