Impact investing in real estate

Over the course of its 125-year history, a.s.r. real estate has been committed to creating long-term value by investing responsibly in high-quality real estate. Since their launch, our sectoral real estate funds have therefore focussed on limiting their negative impact on the environment. In recent times, this commitment has been expanded from reducing their environmental footprint to making a positive impact on society.

In 2020, the ASR Dutch Core Residential Fund and the ASR Dutch Science Park Fund made a critical assessment of their ability to make a societal impact. This led to both funds expanding their strategies with a clearly defined and accredited approach to impact investing.

The Funds’ impact investment strategies and goals align with the INREV (European Association for Investors in Non-Listed Real Estate Vehicle) and GIIN (Global Impact Investing Network) standards for impact investing, and are further described below.

ASR Dutch Core Residential Fund - affordable housing

The Dutch residential rental market is experiencing a shortage of and pressure on affordability: a result of lagging production compounded by population growth and a rise in the number of households. These factors have increased the pressure on affordable housing, one of the most basic human needs. Since the Fund is able and willing to respond to this social challenge, it has developed an impact investment strategy that focuses on the addition of affordable dwellings to its portfolio.

The Fund defines the affordable rental range in the Netherlands as follows:

• Lower limit: €737 (based on the liberalised rental threshold);
• Upper limit: €1,250 (based on a modal income as defined by Statistics Netherlands, an average household of 1.0 and 1.5 persons, servicing mid-incomes from €35,000 to €60,000 and taking into account our allocation criteria of between 3.75 and 4.0 times the monthly rent).

As at 31 December 2020, 87% of the portfolio meets these affordability criteria. To make a measurable impact, the Fund monitors the addition of assets under management within the affordable range, as defined above. The objective is to add at least 1,200 affordable dwellings to the portfolio by the end of 2023.

The Fund also has a clear focus on affordability in its standing portfolio. To keep affordable dwellings in the standing portfolio affordable in future, the Fund:

• Implements moderated (yearly) rental increases;
• Caps rents in line with the current market rents;
• Actively lowers living costs by implementing energy-saving measures (PV panels, LED lights and the maintenance programme).

ASR Dutch Science Park Fund - science park ecosystems

Science parks in the Netherlands have rapidly evolved beyond their primarily academic origins to become engines of the Dutch knowledge economy, fuelled by strong commercial growth. These are knowledge hubs where companies, universities and research institutes form unique and collaborative R&D ecosystems and where fundamental research is applied to innovative real-world applications.

The conditions that enable science park ecosystems to flourish require both private and public investments, as the Dutch law ‘Wet Markt en Overheid’ (the Dutch Public Enterprises Market Activities Act) inhibits prohibits universities from investing in real estate for commercial purposes, while market participants such as real estate developers or investors, often lack the long-term commitment needed to positively influence science parks. The diversity of functions required for a science park to thrive is therefore unable to develop.

ASR Dutch Science Park Fund is dedicated to making a positive and measurable impact on the quality of science park ecosystems in the Netherlands by investing in real estate for the broad range of functions which are needed for science park ecosystems to realise their full potential. The Fund aims to invest at least 50% of its Portfolio in real estate that makes a clearly defined impact on its local ecosystem. As at 31 December 2020, 72% of the Fund’s Portfolio fits the determined criteria.

In addition to making targeted individual investments, the Fund also invests through partnerships with public and semi-public entities, most notably universities and local governments. These partnerships create the low risk environment which allows the Fund to invest in a broader range of real estate and work towards the further development of science parks in which the Fund and its partners have a shared interest.

By providing an ideal setting for companies that work on a wide range of innovative and sustainable products and solutions, the Fund is making a valuable contribution towards an equally diverse range of real world problems. With this in mind, the Fund not only reports on its direct positive impact on science park ecosystems, but also on the impact its tenants make in terms of the UN Sustainable Development Goals. The Fund does this using the UN PRI Impact Investing Market Map, which provides investors with a practical link between the broad ambitions of the SDGs and real-world impact investment opportunities.

-

a.s.r. real estate’s definition of impact investing is based on the GIIN definition, and aligns with the INREV definition, resulting in:

‘[real estate] investments made with the intention to generate positive social and environmental impact alongside a financial return’

 In line with this definition, impact investments should encompass the following key elements:

• Intentionality: The intention to have a positive social or environmental impact through investments.
• Measurability: The commitment to measure and report the social and environmental performance and progress of underlying investments, ensuring transparency and accountability.
• Additionality: A positive impact which would not have occurred without the investment.