The UK commercial property investment manager will tie 30% of its performance fees to the fund’s specific impact objectives.
Orchard Street has secured £90m (€105m) from investors at the first close of its £400m inaugural impact fund focused on decarbonisation, community investment and wellness.
Brunel Pension Partnership, one of UK’s local government pension scheme pools, acted as the fund’s cornerstone investor on behalf of eight of its ten underlying local authority partner funds. Orchard Street’s partners and senior managers also invested in the Orchard Street Social and Environmental Impact Partnership (SEIP).
The new fund will invest in real estate opportunities “with the potential to generate a measurable social and environmental impact,” Orchard Street said. It will focus on three impact areas: investing in local communities, decarbonising existing buildings and improving air quality, access to green space and wellness amenities for those that live and work in them.
The investment manager will tie 30% of its performance fees to the achievement of the fund’s specific impact objectives.
Vanessa Jacka, portfolio manager at Brunel Pension Partnership, said Brunel and its clients were “delighted to be seeding this enlightened fund launch, whereby manager performance returns are linked to specific responsible investment objectives”. She said investors “are well-placed to realise their financial and social targets as a result of Orchard Street’s SEIP strategy”.
The launch of its first impact fund marks “a new phase in Orchard Street’s commitment to responsible investment, following the launch of the firm’s net zero carbon pathway in 2021”, the London-based investment manager said.
Orchard Street, which has £4.2bn in funds under management, recently delivered the first operationally carbon neutral industrial estate in West London.
“Buildings that offer top quality space and strong ESG credentials will continue to command the best rents and prices, with this fund therefore providing not only an avenue for investors to enjoy strong financial returns but also a significant positive social and environmental impact,” said Philip Gadsden, portfolio director of SEIP and managing partner at Orchard Street Investment Management.
“By fully integrating impact into our investment approach – with ambitious decarbonisation, wellbeing and community investment targets – the fund will accelerate the property sector’s decarbonisation, while maximising the value of buildings as a tool to promote health and community investment,” Gadsen said.