Orchard Street Investment Management has achieved the first close of a £400m impact fund, with Brunel Pension Partnership acting as its cornerstone investor.
Just under £90m of initial capital has been committed for the Orchard Street Social and Environmental Impact Partnership, which focuses on decarbonisation, community investment and wellness.
Orchard Street’s partners and members of its senior team have co-invested alongside Brunel Pension Partnership, which is one of the UK’s Local Government Pension Scheme pools. The LGPS pool invested on behalf of eight of its 10 underlying local authority partner funds.
The fund, which has been approved by the Townsend Group, will target value-add real estate investment opportunities with the potential to generate a measurable social and environmental impact.
It will focus on the three impact areas: decarbonising existing buildings via an accelerated programme of refurbishment; investing in local communities using a proprietary place-based needs model to identify and respond to local social issues; and making buildings healthier for those that live and work in them, for example through improving air quality, access to green space and wellness amenities.
The fund is sector-agnostic and will invest in a pipeline of UK-wide opportunities that meet its impact criteria.
The investment manager has linked 30% of its performance fees to the achievement of the fund’s specific impact objectives.
Philip Gadsden, portfolio director of SEIP and managing partner at Orchard Street IM, said: “One of the underlying drivers behind both our efforts as a business and the launch of this fund is the forecast that 80% of the buildings that will exist in the UK by 2050 already exist now, underlining the impetus for immediate action to be taken today to remediate existing but underutilised buildings, and aligning the fund with Article 8 of the SFDR.
“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.”
Vanessa Jacka, portfolio manager, Brunel Pension Partnership, said: “The Townsend Group has assisted Brunel and Orchard Street in securing a robust process for measuring and auditing outcomes, and we believe investors are well-placed to realise their financial and social targets as a result of Orchard Street’s SEIP strategy.”
Advisers to the fund include JLL’s upstream sustainability services team, which advised on the development of the fund; 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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