GCP Europe Management S.à r.l. (“GCP Europe Management” or the “AIFM”) makes the following disclosures in accordance with the Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”).
Sustainability is at the heart of delivering GLP’s business objectives and its continued ability to provide enhanced value to all of its stakeholders (shareholders, partners, clients, customers, colleagues, suppliers and the communities in which GLP operates), both now and into the future. GLP continues to further evolve its sustainability platform and has an extensive track record of constructing and operating high-quality buildings that maximise supply chain efficiency and help meet the needs of domestic consumption-led growth in its core markets in a more sustainable way. As part of the GLP group, GCP Europe Management is fully embedded in this strategy.
Article 3 of SFDR requirement – Integration of sustainability risks into the investment decision making process:
Pursuant to Article 3 of the SFDR, GLP Europe is required to disclose the manner in which sustainability risks (as defined hereafter) are integrated into the investment decision-making process and risk management process.
A sustainability risk means an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investments made by GCP Europe Management. In the context of the AIFM, sustainability risks are risks which, if they were to crystallise, would cause a material negative impact on the value of the assets of the funds managed by the AIFM.
Such risks are principally linked to climate-related events resulting from climate change (i.e. physical risks) or to the society’s response to climate change (i.e. transition risks), which may result in unanticipated losses that could affect an investment. Sustainability risks can also affect companies by introducing social risks (e.g. gender gaps, social inequality) and governance risks (e.g. bribery issues, selling practices).
The impacts following the occurrence of a sustainability risk event may be numerous and vary in significance depending on industries, regions and asset classes. The sustainability risks that are particularly relevant to GLP Europe Management and its real estate investments include:
1- The exposition to potential physical risks resulting from climate change. For example, the tail risk of significant damage due to increasing erratic and potentially catastrophic weather phenomena such as droughts, flooding and heavy precipitations, heat/cold waves, landslides or storms. As the frequency of extreme weather events increases, GCP Europe Management real estate funds’ assets exposure to these events increases too. In order to reduce exposure to such external events, GCP Europe Management strives to invest in and develop a resilient infrastructure. Flooding, as an illustrative example, may cause damage requiring refurbishment works. In the event of a more severe flood, the building might be incapable of being occupied resulting in the loss of rents. Finally, flood damage might impact the resale value of the building and/or the owner’s ability to sell the real estate assets.
2- The exposition to environmental risk emerging from the need of mitigating climate change. Being an important contributor of global carbon emissions and being energy intensive, the Real Estate industry faces great regulatory and public pressure calling for improvement in energy and water management, among other, in order to reduce emissions. GCP Europe Management is highly cognisant of the need to minimise the impact of the GLP business on the natural environment and this is reflected by our pledge to minimise the carbon footprint of our properties throughout their lifetime and opting for more responsibly sourced building materials wherever possible. Efforts to cope with this pressure and to meet the strengthening regulatory requirements may impose higher financial input which could impede the total performance of a fund. On the contrary, failure to cope with this pressure may lead to reputational damage which could also impede with a fund return.
GCP Europe Management is committed to ensuring that material ESG risks and opportunities are built into investment research and screening, selection of investments and portfolio management. Before any investment decisions are made by GCP Europe Management, the proposed real estate asset will be subject to in-depth sustainability due diligence including the alignment of the proposed investment with GCP Europe Management’s sustainability initiatives and with safeguarding the health and safety of employees customers and communities, pollution risk, flooding risk and any other sustainability risks deemed relevant. The result of due diligences will be part of the Investment Memorandum. Such processes help to minimise sustainability risks, ensuring that ESG matters remain at the heart of GLP’s investment strategy. This process ensures that sustainability and ESG risks are integrated into the investment decision making and risk monitoring to the extent that they represent a potential or actual material risks and/or opportunities to maximizing the long-term risk-adjusted returns.
To find out more about the other principles supporting the overall ESG integration effort at GCP Europe Management please refer to our European ESG Policy at: https://www.glp.com/global/impact
No consideration of sustainability adverse impacts
Whilst GCP Europe Management considers ESG risks as part of its investment process as outlined above; GCP Europe Management does not consider the adverse impacts of investment decisions on sustainability factors (as defined hereafter) in the manner prescribed by Article 4 of the SFDR considering that non-financial data is still not available in satisfactory quality and quantity to allow the firm to adequately assess the potential adverse impact of its investment decision on sustainability factors.
The position will be kept under review as the underlying rules are finalised and are embedded in the short to medium term. During this time, GCP Europe Management will aim to progressively build capabilities in relation to the measurement of sustainability adverse impacts.
Sustainability factors means environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters.
GCP Europe Management pays its staff in accordance with its remuneration policy which takes into account compliance with the AIFM’s internal risk management framework and internal policies, including those relating to the integration of sustainability risks. In this regard, GCP Europe Management’s remuneration policies do not encourage risk-taking which is inconsistent with its internal risk limits or with the risk profile of the funds that GCP Europe Management manages, including regarding sustainability risks stemming in particular from climate-related events or from the society’s response to climate change.