LIM is committed to being a responsible investor. ESG and sustainability considerations are at the core of LIM’s strategy. With a dedicated team to meet the challenge, we are looking at ways to improve sustainability across our company and the funds we manage.
LIM recognises the significant importance of the issue of Climate Change. LIM strongly supports the objectives of the Paris Agreement. As such, LIM is committed to assisting in the decarbonisation of the economy and meeting the long term interests of our funds’ investors.
The principal goal of the 2015 Paris Agreement is to “hold the increase in the global average temperature to well below 2°C above pre-industrial levels”. Through LIM’s consideration of energy consumption and greenhouse gas (GHG) emissions across investment, management and development works, progress is being made against key climate-related objectives.
LIM considers the TCFD framework to be a key tool to improve transparency and reporting of climate change risks and opportunities. LIM supports the recommendations of the Task Force and the work being conducted to improve climate-related financial disclosures.
No consideration of adverse impacts of investment decisions on sustainability factors
Integration of sustainability risks into investment decision making
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 investment”. In the context of Lothbury Investment Management Limited (LIM), sustainability risks are risks which, if they were to crystallise, would cause a material negative impact on the value of Lothbury Property Trust’s (LPT‘s) assets and indirectly the assets of The Lothbury Global Feeder Fund LP.
Before any investment decisions are made by LIM it will have completed a process that seeks to identify the material risks associated with the proposed investment. This process includes assessing the sustainability credentials of the potential investment by considering a number of key environmental and social metrics including the Energy Performance Certificate (EPC) rating, renewable energy generation, flood risk, waste management, tenant operations and security. When making an investment decision, the Transaction Committee assesses identified sustainability risks alongside all other identified risks and other relevant factors which include the applicable investment policy and investment objective.
Sustainability risks are also integrated into LIM’s investment decisions through the application of a risk management framework which is the responsibility of LIM’s Environmental, Social and Governance (ESG) committee. This framework is part of LIM’s approach to the ongoing monitoring of LPT’s assets. The risk management framework identifies the transition and physical climate change risks to the portfolio and a specific strategy is devised annually which seeks to address these risks and formulate a plan for managing them. Within the annual strategy, assets that require mitigation measures or potential disposal are identified. The annual strategy is approved by the Investment Committee.
Principal adverse impacts of investment decisions on sustainability factors
LIM has elected for the time being not to consider the principal adverse impacts of its investment decisions on sustainability factors. LIM has opted out of doing so because, among other reasons, the regulatory technical standards supplementing the EU Sustainable Finance Disclosure Regulation (2019/2088) (SFDR) which set out the detailed rules applicable to the principal adverse impacts regime are yet to be formally adopted and their application has been delayed until 1 January 2023. Furthermore, on 6 May 2022 the Commission wrote to the ESAs requesting that they review and revise these regulatory technical standards. While ESG and sustainability considerations are at the core of LIM’s strategy, LIM does not consider it prudent to commit to a regime which remains in a state of flux and the benefits of which are uncertain. LIM intends to review its position in relation to the principal adverse impacts regime as matters develop.
Consistency of remuneration policy with the integration of sustainability risk
LIM’s staff are remunerated based on a number of factors. These factors include an individual’s compliance with and, where relevant, effective operation of, applicable policies and procedures. As outlined above, sustainability risks are integrated into the investment decision making process through these policies and procedures.