New Avenue Living (MMR Fund) ESG Policy
Table of Contents
New Avenue Living (MMR fund) is part of Thriving Investments, formerly known as PfP Capital. Thriving Investments is the only FCA-regulated fund manager that is a wholly-owned subsidiary of a not-for-dividend social enterprise. Thriving Investment’s parent company, Places for People, is a Regulated Provider of Social Housing and leading UK social enterprise.
Thriving Investments is proud to hold the AREF Quality Mark, an annual validation of our compliance with the Association of Real Estate Fund’s Code of Practice.
This policy is based on the Thriving Investments Responsible Value-Driven Investment policy that sets the overarching commitments that apply to all our managed investments across the Living sector. The policy serves to underline management’s belief that, beyond it being the right thing to do, there is inherent value in prioritising sustainability, targeting decarbonisation of our investments and delivering positive social impact outcomes for our customers through our investments across the Living sector.
Thriving Investments’ Policy includes four Guiding Principles for the firm’s approach to Responsible Investment and a commitment to develop investment strategies aligned with the UN Sustainable Development Goals (SDGs) striving for ‘peace and prosperity for people and the planet’ by 2030.
The core purpose of Thriving Investments and the wider Places for People Group fulfils SDG11 ‘Sustainable Cities and Communities’ but Thriving Investments activity contributes to nine of the 17 SDGs. Thriving Investments are also committed to the UN Principles of Responsible Investment (UN PRI) having been signatories since May 2019.
The environmental, social and governance agenda (often referred to as ESG) is evolving rapidly, and therefore the strategy and capabilities must evolve and advance alongside this.
Each individual investment strategy offered will have nuances around the specific ESG commitments that are required. As such, this policy not only echoes the core pledges but also sets out specific commitments related to the operation of the New Avenue Living (MMR) fund in Scotland.
To ensure that the New Avenue Living (MMR fund) aligns with the objectives of the Thriving Investments RVDI policy set out below:
- To establish a clear and cogent basis for the application of the Guiding Principles and the integration of relevant ESG considerations into the strategic planning, investment management procedures, investment decisions and the advice given to clients.
- To consider the material risks, and outcomes to be achieved, on behalf of investors, including those related to environmental and social issues, and their impact on risk-adjusted returns profile.
- To be transparent and engage proactively with investors and financial stakeholders regarding the environmental and social performance of their investments.
- To instil within the Thriving Investments team a clear understanding of the roles and responsibilities required of them regarding the implementation of the Guiding Principles.
- To make clear expectations of partners and supply chain – including property managers, agents and other service providers we appoint – in responding to and ensuring the effective implementation of the Policy in a collaborative and accountable spirit.
- To continuously assess, monitor and mitigate material ESG risks within the portfolio, whilst also seeking out opportunities to improve sustainability attributes and performance.
- To contribute positively to the responsible, sustainable and impact investment agendas through advocacy, collaboration with peers, and participation in relevant industry endeavours to drive better investment practices and standards.
Taken together, the pursuit by Thriving Investments and its partners of these objectives supports the overarching aim of supporting capital raising and retention, delivering growth in assets under management and optimising risk-adjusted investment performance for clients.
By investing clients’ capital responsibly, asset value can be protected and enhanced alongside improvement of long-term investment performance. A strong focus on investment in, and careful management of, each fund’s portfolio leads to the generation of additional value for residents, places and neighbourhoods, which ultimately helps foster sustainable and thriving communities.
Investments managed on behalf of clients deliver significant social value and impact for residents and communities. The environmental and social issues that arise from developing and managing residential assets and regeneration projects mean that integration of sustainability and ESG considerations into the investment strategy and process is fundamental.
Guided by four overarching principles and the specific management of ESG issues within all investment strategies, the principles determine appropriately tailored approaches and objectives for each of the fund strategies we manage and their investment assets. These principles were updated in October 2023 as part of the rebrand of the business from PfP Capital to Thriving Investments and reflect our commitment to embedding RVDI throughout all our investment, development and operational activity.
- Bringing institutional capital to help tackle the housing crisis
Helping to address the housing crisis in the UK by enhancing the supply of affordable homes through a mix of tenures in places where it is needed.
New Avenue Living (MMR Fund) was formed specifically to address the challenge of housing affordability across Scotland. The Fund’s rental policies are set out in a Deed of Entrustment agreed with the Scottish Ministers and are designed to ensure that homes are made available to a target tenant group. Broadly, eligibility for the homes is targeted at those who would be required to spend 25% or more of their annual gross household income in the private rental sector to secure an appropriate home for their needs, with a maximum household income of c. £45k.
Affordability is required to be measured against annually published median rental levels for the relevant property type and location, however, this is reviewed as part of the quarterly reporting cycle and against current open market rents. The rents are set, again in line with the Deed of Entrustment, using the relevant 30th percentile Broad Rental Market Areas (BRMA) rental level for the relevant locality and property time in line with figures published annually by the Scottish Government. Rents can be increased once annually within a tenancy and are not re-based between tenancies, ensuring ongoing affordability.
The homes within New Avenue Living’s portfolio are all newbuild to a high sustainability specification but over time as the portfolio ages, appropriate action will be taken to improve overall affordability (taking into account total occupancy costs including rents and utilities) by, for example, improving insulation, replacing and upgrading heating and cooling systems, installing renewable energy and water efficiency measures, and exploring opportunities to offer our residents access to renewable energy supplies at competitive prices.
- Developing and nurturing thriving communities
An established track record in developing and managing residential property and understanding the needs of residents and other local stakeholders. This helps to create and steward thriving communities.
Residential properties and urban regeneration projects can have a significant impact, not just for residents but for the wider communities in which they are located. Thriving Investments is developing an Impact Management Framework to be launched in 2024 which will emphasise a place-based approach to optimising real world outcomes and will inform all stages of the investment decision-making process. This will be adopted by New Avenue Living (MMR Fund), which already monitors social impact outcomes across its communities but the framework will enable more robust measurement and reporting.
Where possible, New Avenue Living (MMR Fund) will prioritise actions around the relative needs of and impact for occupiers, in line with the principles of a Just Transition. i.e. that the substantial benefits of a green economy transition are shared widely, while also supporting those who stand to lose economically – be they countries, regions, industries, communities, workers or consumers. In addition, work will be undertaken with communities to advance and support initiatives to enhance the public realm and community engagement. This may include partnership with local charities or leveraging the Places Impact match funding through the Places for People Group for community projects.
- Supporting the health and wellbeing of residents and communities
Strive to ensure the homes managed and the services provided support the health, comfort and financial security of residents and offer meaningful social impact in the communities in which they live.
Poverty is recognised as being intrinsically linked to poor health and wellbeing, and that housing costs and utility bills represent a significant proportion of costs faced by residents. As a manager of people’s homes, there is a responsibility to ensure that vulnerable occupiers are protected and the property manager,Touchstone, has policies in place to ensure adherence to the Places for People Group Safeguarding Standard but also to be able to offer appropriate advice and support, whether through access to a Hardship Fund or assistance in dealing with energy suppliers.
Access to nature has been shown to be material to mental and physical health. There is significant social inequity inherent in the disparity in access to nature between affluent and lower income communities. Quality and accessibility of green spaces within and around our communities will be continually assessed and actions identified which we can undertake to facilitate better access to nature for residents.
- Protecting the environment and restoring natural capital
Recognition that investment and management decisions can have a significant impact on the environment both locally and globally. Adverse environmental impacts are intended to be minimised and, wherever possible, a net positive outcome delivered for the environment.
The Guiding Principle of protecting the environment and restoring natural capital recognises the importance of nature and biodiversity in building thriving communities that are resilient to the increasingly severe impacts of our changing climate.
Nature-based solutions offer co-benefits to our residents, communities and other stakeholders too. A Nature & Biodiversity Strategy will be developed to inform development and property management decision-making across Thriving Investments. Critically, this will consider the nature-related risks, opportunities, dependencies and impacts of both physical assets and supply chains, in line with the recommendations of the Task Force on Nature-related Disclosures (TNFD).
Thriving Investments intends to put in place Net Zero Carbon commitments which cover scope 1, 2, and 3 emissions in line with recognised industry standards, such as those defined by The Partnership for Carbon Accounting Financials (PCAF). New Avenue Living (MMR Fund) will have its own Net Zero Carbon Pathway as part of this project.
The integration of sustainability and ESG considerations continue to be developed throughout all stages of the investment decision-making process in alignment with the UN Principles for Responsible Investment (UN PRI) to which Thriving Investments has been a signatory since May 2019 and with the wider UK regulatory requirements around responsible investment and reporting.
Reporting to investors already exists under the Taskforce for Climate Related Financial Disclosures (TCFD) framework and preparations are in place for the adoption of UK Sustainable Disclosure Requirements (SDR) labelling regime and anti-greenwashing regulations that come into effect from May 2024 in addition to the Taskforce for Nature Related Financial Disclosures (TNFD) framework.
New Avenue Living (MMR Fund) investors will be asked to input into the appropriate SDR label in the first half of 2024 to ensure that the proposals are fully endorsed and the fund is ready to adopt the label from 31 July 2024 to demonstrate a clear and ongoing commitment to sustainability in investment and operations.
Industry frameworks, standards and examples of best practice are constantly evolving. Policies, procedures and guidance documents will therefore be regularly updated and aligned to best practice where possible within investment mandates.
The recent indication by GRESB in November 2023 of its intention to evolve the structure of its Real Estate assessment to better reflect the circumstances of residential investment entities and their portfolios is noted. Its progression and commitment to engaging with the continued development of the GRESB Foundation Roadmap will be monitored, particularly through participation in relevant industry bodies including AREF (Association of Real Estate Funds) and BPF (British Property Federation).
Performance measurement and benchmarking will continually be evolved to ensure maximum transparency and disclosure and further detail will be added on evolving policies and processes as they are approved and implemented.
The areas in which policy and processes are focussed include but are not limited to the following:
- Strategy and capital raising
- Sustainability-linked finance
- Origination, due diligence and acquisition
- Portfolio management, including asset management, lettings renewals and expiries, property management and customer engagement
- Development, refurbishment and retrofitting
- Responsible exit
- Investor reporting at fund and house levels
As action is undertaken in each of these areas there will be clear communication updates to all people, partners, customers, investors suppliers and key stakeholders with clarity on the standards that Thriving Investments expect to be adhered to, the relevant information to ensure changes can be effectively adopted and adequate training provision for any specialist requirements.
Thriving Investments have the significant benefit of an in-house property management company within the PfP Group – Touchstone is a leading property manager who manages the vast majority of Thriving investment’s homes across the UK. In addition to offering investors greater transparency and detailed reporting through the vertical alignment of investment, asset and property management teams; the benefit of leveraging the wider PfP Group policies and customer benefits and appropriately influence Touchstone’s operational policies is possible to ensure commitments set out in this policy are met.
ESG decision-making and accountability at Thriving Investments sits ultimately with the Board and, by delegated authority of the Board, to the Chief Executive Officer. These responsibilities include setting the ESG Strategy for Thriving Investments, overseeing the development and implementation of investment processes and corporate activities for the purpose of integrating ESG considerations into, and outcomes from, our work.
Investment and Sustainability Committee
An Investment and Sustainability Committee is the body responsible for approving investment decisions having followed discretionary fund guidance and met the relevant investment criteria as well as the UN Principles of Responsible Investment.
The typical functions of investment and sustainability committees have been combined into one decision-making body to reflect the importance attached to ensuring that all investment decisions taken have ESG considerations integrated fully.
The Investment and Sustainability Committee is chaired by a Non-Executive Director, appointed in particular because of their deep experience and industry-leading expertise in sustainability in real estate. Previous roles included eight years serving as CEO of the UK Green Building Council.
Every member of our team is assessed for performance annually. Sustainability goals are being incorporated within performance matrices at every level, starting with our Board and the Senior Management Team Directors through a new Long-Term Incentive Plan (LTIP).
Diversity, Equity & Inclusion (DEI)
DEI efforts and initiatives are actively supported, including through the wider ‘Inclusion and Belonging’ programme of the Places for People Group, as well as through the specific activities of Thriving Investments. These include mentoring, apprenticeships and developing a recruitment approach to develop career pathways for individuals from diverse backgrounds, including socio-economic disadvantage.
A priority is to communicate the breadth and the impact of these activities more comprehensively and regularly to investors and other stakeholders, particularly through sustainability reporting.
Our Partners, Suppliers and Service Providers
Thriving Investments has long understood the value of commercial partnerships with organisations which align with its vision and it has a strong track record of successful joint venture partnerships.
The importance of having a systematic approach to integrating sustainability and ESG considerations into a supplier policy to inform the selection, monitoring and remuneration of – as well as our engagement with – agents, property managers and developers acting on our behalf is also recognised.
Beyond primary supplier relationship with Touchstone, engagement with all key stakeholders and utilisation of PfP Group’s sustainable supplier policy that underpins and formalises our RVDI commitments will be undertaken.
Policy Approval and Review
The Thriving Investments’ Executive Directors (CEO and FD) are ultimately responsible for the contents and implementation of this ESG policy for New Avenue Living (MMR Fund) in alignment with the Board responsibility for the RVDI policy. This will include reviewing the adequacy of the policy on an annual basis, as well as keeping under review its interpretation and implementation across each of our investment strategies. The Investment and Sustainability Committee will maintain in-year oversight of appropriate implementation of the commitments in this policy.
This ESG policy was approved by the Thriving Investments Directors on 25/01/2024.