Sustainable Finance Disclosure Regulation

Summary

Harrison Street Advisors, LLC (the “Firm”) considers the principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated principal adverse sustainability impact statement of the Firm for the purposes of regulation (EU) 2021/1255 of the European Parliament and of the Council of 21 April 2021 on sustainability‐related disclosures in the financial services sector.

This statement on principal adverse impacts on sustainability factors covers the reference period from 1 January 2022 to 31 December 2022.

Description of principal adverse impacts on sustainability factors

Indicators applicable to investments in real estate assets

Other indicators for principal adverse impact

This statement does not take into account principal adverse impacts on sustainability factors associated with Harrison Street Core Property Fund B S.C.S., SICAV-RAIF, which are reported at https://www.fundrock-lis.com/esg/.

Description of policies to identify and prioritise principal adverse impacts on sustainability factors

The Firm  identifies and prioritises principal adverse impacts on sustainability factors in accordance with its Environmental, Social and Governance Impact Policy (“Policy”). The Policy was approved by the impact team, compliance team and marketing team of the Firm in 2013, and last updated and approved by the impact, compliance and marketing team in December 2022. The Firm updates the Policy annually to reflect changes or enhancements.

The Firm’s Executive Committee has ultimate responsibility for implementation of the Policy. Day-to-day responsibility for implementation of the Policy lies with the Firm’s Chief Impact Officer, who is supported by a number of ESG committees, including regional teams in both North America and Europe, as well as an Executive committee. Execution of the policy resides across the Firm’s various departments

The Policy provides a framework for ESG integration in two parts, Corporate Operations and Investment Operations. Within Investment Operations, each investment vehicle follows this framework to define a specific approach to ESG integration that aligns with the investment strategy, control, asset class, investment time horizon, and portfolio construction.

Every three years the Firm conducts a materiality assessment in which it asks key stakeholders what is most important from an environmental, social and governance perspective. The prioritization of indicators is informed by the Firm’s 2017 materiality assessments, most recent of which was conducted in 2020 and identifies carbon emissions reduction, ensuring assets were resilient to climate risk, and enhancing the health and wellbeing of building occupants as among the most material topics. In addition, the focus on tenant satisfaction has been broadened to encompass a complete picture about the residents and tenants served at assets, encompassing health and wellness.

Sustainability metrics are integrated into due diligence processes, and evaluation criteria include alignment with the Firm governance and ethics standards, presence of certifications, and opportunity for increased efficiency in the future. Internal due diligence policies, procedures, and checklists are defined for specific asset classes and investment vehicles. ESG risks and opportunities are captured in the initial investment underwriting process, the Investment Committee presentation, and during the due diligence period.

The Firm seeks to develop or acquire assets that prioritize high efficiency standards and occupant health attributes. Development partners are engaged in enhancing their sustainable practices in design, construction, and operation. The Firm offers guidance resources and access to expert consultants to evaluate sustainable building strategies and ensure long-term economic benefit and tenant well-being. The Firm collaborates with development partners to integrate viable sustainability strategies into project proforma and design plans on a case-by-case basis, considering location, building type, tenant population, and portfolio goals. Harrison Street’s Asset Management team continues to monitor the property during the development phase and engages third-party vendors to review construction drawings to determine energy optimization and utility expense estimates.

For key environmental indicators, such as energy efficiency, GHG emissions and energy intensity, the Firm uses an energy management platform, which both captures and calculates this information.  The social indicators are captured in both initial and ongoing management and company background checks.

Integration of ESG risks in investment decision-making processes

The Firm recognizes that changing climate conditions can impact the operation, performance, and value of real assets. Natural disasters pose a high potential financial loss to assets in key geographic areas, and other societal risks (like geopolitical disruptions or pandemics) influence the operational performance of assets. Therefore, the Firm has implemented resilience and risk management procedures in order to recognize and plan for these events, thus supporting long-term value creation and reducing risk. These practices are periodically evaluated and enhanced as the global landscape of risks and evaluation processes evolve.

ESG risks and opportunities are integrated into the investment team’s standardized assessment tools, diligence procedures, and closing checklists.  All assets considered for investment undergo an ESG analysis which is presented to Investment Committee (IC) in advance of approval. This process is led by Harrison Street’s dedicated Impact Team in conjunction with the Transaction Team.

• The ESG evaluation includes, but not limited to, an analysis of the surrounding community ESG factors, building-level tenant health and wellness certification or programs, operating partner DEI metrics, physical climate risk, energy transition risk, building certifications, and building-level efficiency or carbon reduction measures in place.
• Any physical risks identified as “high”, as defined by the modeling software, is further diligenced after IC and any material impacts are considered in underwriting. 
• Any accretive ESG intervention identified during diligence, such as energy retrofits or solar installation, are also considered in underwriting.

Pertaining to climate risk, the Firm seeks to take progressive steps in assessing physical and transition climate risk in each of its investment funds and defining actionable steps for internal decision-makers and insights for the Firm’s clients on how to effectively manage and mitigate these risks. The Firm reports on climate risk strategy, management, and governance following the recommendations of the Task Force on Climate-Related Financial Disclosures.

Climate risk ratings are collected for each new investment and are included in the investment committee memo. For locations with material risk exposure, diligence on risk vulnerability is conducted. Material recommendations for insurance or physical improvements are considered during the diligence and underwriting process. Ongoing assessment of climate risk exposure is conducted by the Impact team in partnership with Asset Management for assets under management.

Engagement policies

Employees are engaged in and educated about the Firm’s ethics policies. Training on ethics, anti-corruption, and specialized topics like foreign corrupt practices and cybersecurity are provided annually and when new regulations or situations arise. The Firm maintains  policies and procedures that promote compliance with the SEC’s Investment Advisor requirements and assist the Firm in preventing, detecting, and correcting violations. Policies against bribery and corruption are maintained, consistent with the US Foreign Corrupt Practices Act and similar laws in other countries. Anti–money laundering checks are conducted for every new investor and background checks are conducted on all new joint venture partners and employees.

In addition, Harrison Street recognizes that incorporating the feedback of its stakeholders is vital to delivering superior investment strategies and a focused ESG strategy. The Firm regularly engages with employees, investors, third-party operators, joint venture partners, tenants/residents, lenders, and consultants to understand priorities and concerns. Forums for engagement include the annual investor conference and advisory board meetings for each fund, annual operating partner sector-specific conferences, quarterly investor webinars, satisfaction surveys, and a materiality survey conducted at least every three years. Ad hoc feedback from industry conferences, one-on-one calls, industry trade magazines, and webinars is also integrated into materiality assessments.

As mentioned above, stakeholder feedback is critical to the ESG initiative and is collected at least every three years to update the Firm’s priority list of most material ESG issues, including sustainability impacts and indicators. 

Reference to international standards

The Firm also reports the annual performance of its Corporate Operations and Investment Operations in accordance with the following frameworks:

• GRESB Real Estate
• GRESB Infrastructure
• TCFD (Task Force on Climate Related Financial Disclosures
• UN PRI (Principles for Responsible Investing)
• GRI Standards (Global Reporting Initiative)

The Firm uses results from reports such as GRESB, feedback from key stakeholders, and internal strategic analysis to identify areas of improvement. Results from these combined activities serve to further and continually enhance the broader ESG strategy.

The Firm uses results from reports such as GRESB to identify areas of improvement. The assessments themselves do not predict future performance, but rather are lagging indicators of how one was performing in the previous calendar year.  Identifying areas where full points were not awarded, and then setting goals to lessen the gap are how forward-looking scenarios are executed.  These goals then roll into the broader ESG strategy.

Historical comparison

N/A

Remuneration Disclosure

The Firm follows a pay-for-performance framework that encompasses total compensation, base salary and bonus, such that pay is commensurate with the overall performance of the Firm and individual performance. This includes a balanced assessment of the employee’s annual performance against the Firm’s core values: excellence, integrity, passion, innovation and teamwork.  These performance dimensions consider short and long-term priorities that drive sustained shareholder value, while accounting for risk, controls, and conduct objectives.

The Firm’s Performance Management Cycle includes: annual goal setting, manager-employee check-ins, a midyear and annual review. To track performance, a comprehensive online talent management system is utilized, which streamlines all aspects of the Performance Management Cycle. It is the Firm’s intent, that our performance management process provides transparency to all employees with respect to job performance. For select employees involved in ESG related tasks or activities, regard is given to the performance of said strategies.  For each of these employees regard is given to the performance of relevant ESG related projects/strategies.