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Transcript of J. Safra Sarasin Investment Foundation (SAST) 8 | J. Safra Sarasin Anlagestiftung (SAST) |...

  • J. Safra Sarasin Investment Foundation (SAST) «Sustainable Real Estate Switzerland» investment group Portfolio/sustainability report, 30 June 2019

  • Cover: RIVA property, Alemannengasse/Römergasse/Burgweg, Basel, canton of Basel

  • Content

    Introduction 5 Staying ahead in sustainability development 5 Portfolio news 6 Sustainability becoming the new standard 7

    Sustainability Approach 10 A holistic approach to sustainability 10 Sustainability analysis of real estate 11 Sustainability integral to the investment process 12

    Sustainability Report 13 Portfolio benchmark analysis 13 Environmental management system 14 Sustainability measures 16

    Portfolio 17 «Sustainable Real Estate Switzerland» portfolio 17

  • Introduction

    J. Safra Sarasin Investment Foundation (SAST) | Sustainable Real Estate Switzerland | 5

    Introduction

    Staying ahead in sustainability development

    As its name suggests, sustainability is central to the «Sustainable Real Estate Switzerland» investment group of the J. Safra Sarasin Investment Foundation and is embedded in the group’s investment guidelines. This report ex- plains the sustainability approach and documents the development of the real estate portfolio in this regard. In ad- dition to portfolio news, the report also includes Bank J. Safra Sarasin's view of developments in international sus- tainability targets and forthcoming regulations relevant to real estate on mitigating climate change. Our sustaina- bility approach helps to anticipate and absorb these developments at an early stage.

    Overview The investment group can look back on numerous im- portant events in the last six months. The successful fourth capital raising provided the invest- ment group with CHF 130 million of new capital aimed at meeting the strategic goal of reducing leverage and fi- nancing its ongoing construction projects. The laying of the foundation stone in Zuchwil (canton of Solothurn), Altdorf (canton of Uri) and Düdingen (canton of Fribourg) also testifies to the satisfactory progress of ongoing con- struction projects. The construction project in Reinach (canton of Aargau) was successfully completed and the first collective self-consumption association (ZEV) was put into operation. The ZEV enables tenants to use solar power from a building’s photovoltaic system. Given the strong trend moving sustainability from a niche towards a new standard, it is essential that we continue to strengthen the portfolio’s sustainability to stay ahead. Thanks to the comprehensive sustainability approach en- sured by Bank J. Safra Sarasin, we believe that the in- vestment group is well positioned to meet future chal- lenges. This should also lead to a sustainable performance and added value in the future with a view to ensuring that the investment group remains attractive versus the KGAST (Swiss investment funds association) benchmark for mixed properties. The current key financial figures can be found in the quarterly report.

    Sustainability report as at 30 June 2019 The following report is divided into four parts. The first part summarises important news from the in- vestment group and provides an outlook to future sus- tainability developments and regulatory efforts. Further- more, the strategic focus of ongoing construction projects on photovoltaic systems and ZEVs is explained. The second part explains the comprehensive sustainabil- ity approach, which covers the entire life cycle of real es- tate. Each individual property was evaluated to enable a comparison of the portfolio on the basis of benchmarks. The third part of the report provides the current sustaina- bility analysis of the portfolio. It also details environmen- tal management based on the annual consumption data of the properties. In addition, the sustainability measures implemented are described. The fourth part provides an overview of the current portfo- lio.

  • Introduction

    6 | J. Safra Sarasin Investment Foundation (SAST) | Sustainable Real Estate Switzerland

    Portfolio news

    Successful 4th capital increase for the SAST «Sustainable Real Estate Switzerland» The target amount of CHF 100 million was significantly oversubscribed. To mitigate the oversubscriptions, an amount of CHF 130 million was approved due to the necessary capital requirements. The capital will be used to meet the strategic goal of reducing the leverage ratio, to finance current construction projects and participate in an urban de- velopment project. In addition, opening the real estate portfolio enabled 54 new inves- tors to be acquired for the J. Safra Sarasin Investment Foundation.

    All about mobility - laying the foundations for the CUBO construction project This construction project is under way in Altdorf. It is located right next to the new «Neue Al-

    pen Transversale» (NEAT) train station, which from 2021 will be an important junction on the

    north-south axis of the NEAT and the gateway to the canton of Uri. The building contains two

    floors for commercial use and 36 rental apartments. A long-term tenant was found for the

    commercial premises. The project will underpin the new urban development around the sta-

    tion. The building features an environmentally friendly energy supply incorporating a heat

    pump and a photovoltaic system. There are plans to establish a collective self-consumption

    association (ZEV) for the tenants. The construction costs of the CUBO project total CHF 19.6

    million and the project is expected to be completed in March 2021.

    Award for the Lorymatte area in Münsingen The property in Münsingen has received a «modern and dense housing project» award from the «Verein für Ortsbildpflege Münsingen» (VOM) conservation association. VOM president Georges Dubied commented: «We think it’s really important that the devel- opment receives the recognition it deserves for being such an exceptional building.» The property features Minergie-P eco certification, low embodied energy use thanks to wooden components, environmentally friendly construction materials as well as a build- ing control system for consumption data and has an excellent sustainability rating.

    Commissioning of the first ZEV in Reinach, canton of Aargau Following completion of the construction project in Reinach, the first collective self- consumption association (ZEV) within our portfolio has now been launched. The tenants will benefit from inexpensive and environmentally friendly solar power. The building's own photovoltaic system is expected to produce 32,000 kWh per year. As far as possi- ble, the solar power generated will be consumed within the building, while excess elec- tricity will be fed into the grid. At times when insufficient power is produced, the intelli- gent system purchases and bills electricity from the grid. The PV system was installed in cooperation with Blockstrom, which will also manage the entire billing.

    Capital increase

    Laying the foundation

    Award

    Solar power

  • Introduction

    J. Safra Sarasin Investment Foundation (SAST) | Sustainable Real Estate Switzerland | 7

    Sustainability becoming the new standard

    A multitude of international efforts at the highest political levels are underway to establish sustainability as a new standard – from the Paris Agreement, the 17 Sustainability Goals of the United Nations to the EU Action Plan for Sustainable Growth. The financial and real estate sectors in particular are therefore facing comprehensive regula- tions. Thanks to our sustainability approach, we are well prepared for these developments.

    Climate Change at the heart of regulation in the EU The climate targets of the Paris Agreement aim to limit the increase in temperature to well below 2°C compared to pre-industrial levels of 1850-1900 and to a maximum of 1.5°C. The resulting reduction in greenhouse gas emissions (GHG) to net zero by 2050 is currently the most urgent societal challenge and the focus of a number of upcoming regulations. Risk management is becoming a crucial aspect as if we continue on the current pathway we are likely to overshoot the climate targets, sparking the attendant physical risks. But if the efforts relating to climate action and the implementation of climate goals are not vigorous enough, this will result in so-called tran- sition risks. Time is short because the remaining carbon budget (the volume of GHG that can be emitted until the 1.5°C target is exceeded) is limited. In a business-as- usual scenario, the budget will be used up in 10 to 15 years. Buildings are considered to play an important role in climate protection, as 40% of global energy-related greenhouse gas emissions and 36% of final energy are consumed by the building sector.

    The European Commission’s «taxonomy» presented in June 2019 defines what are referred to as «green eco- nomic activities». Buildings are identified as a cross- cutting issue that is particularly suitable for climate ac- tion. The taxonomy’s comprehensive impact on the real estate sector ranges from planning new buildings and ret- rofitting existing properties through to the acquisition of real estate. Construction projects must follow the nation- al requirements of the lowest-energy buildings and aim for an energy consumption of «EPC rating of B» or better. Retrofitting buildings and individual retrofit measures should boost energy efficiency by 30% and include the on- site production of renewable energies. The only buildings acquired should be energy and reso