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) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.

The principal adverse impacts statement covers the reference period from 1 January 2022 to 31 December 2022 and will be disclosed prior to 30 June 2023.

Since inception in 2005, Harrison Street has sought to combine innovation and process rigor to execute differentiated strategies that improve the lives of its stakeholders. In 2013 Harrison Street began a formal effort to expand its focus and reporting of environmental, social, and governance (ESG) aspects of the business, which included its first submission to GRESB. To date, robust policies and procedures have been implemented to integrate ESG considerations into investment management processes and ownership practices in the belief that these factors can have an impact on financial performance.

These processes include an ESG policy which the Firm first established in 2013, and updates annually.  The policy applies across corporate and investment operations and provides a framework for ESG integration.  In addition, since 2014 the Firm publishes a Corporate Impact report annually, which presents the Firm’s strategy, goals and performance of the previous year.  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.

Description of principal adverse sustainability impacts

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://lis-aifm.com/esg (.)

Today, the Firm seeks to make an impact, a vision that encompasses not only the discrete impact of assets but also the positive societal and environmental benefit created through the Firms’ investment activities. 

ESG is integrated into each investment vehicle.  Our annual Corporate Impact Report, found in the Impact section of the Firm’s website, highlights this integration with respect to specific funds.

Description of policies to identify and prioritise principal adverse sustainability impacts

Harrison Street Advisors, LLC  established its ESG policy for the first time in 2013, which was last updated December 2022.

The policy applies across corporate and investment operations and provides a framework for ESG integration. The Firm’s approach is defined 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. Execution of the policy resides across the Firm’s various departments. ESG is integrated throughout the Firm. The overall initiative is overseen by the Firm’s Chief Impact Officer and the Sustainability Leadership Team. The team leaders report activities and progress toward meeting ESG objectives quarterly to Harrison Street’s Executive Committee and the Firm at large.

In the Firm’s 2017 materiality assessment, the topics of highest priority were more focused on the individual issues within assets. In 2020, the results show focus is moving toward a more global, collective mindset. Instead of focusing singularly on energy reduction, the Firm will be focusing on net carbon emissions which includes energy reduction but also includes topics like clean energy procurement, on-site renewable energy development, and on-site fuel choices. In addition, the focus on tenant satisfaction will be broadened to encompass a complete picture about the residents and tenants served at assets, encompassing health, wellness, safety, and even affordability.

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.

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 minimizing risk. These practices are continuously evaluated and enhanced as the global landscape of risks and evaluation processes evolve.

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

Engagement policies

Partners, investors, and employees are engaged in and educated about Harrison Street’s ethics policies. Training on ethics, anti-corruption, and specialized topics like foreign corrupt practices and cybersecurity are provided annually, during quarterly certifications, and when new regulations or situations arise. Investment policies and procedures 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.  In addition, annually the Firm updates and publishes its ESG policy to reflect changes or enhancements to the ESG policy, if warranted, due to changes in stakeholder demands.

Reference to international standards

The ESG Frameworks the Firm follows include:

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

Annually, the Firm submits to GRESB and UN PRI, follows GRI Standards in our Corporate Impact Report, and completes TCFD requirements.

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.