ESG Principals and Practices

Overview

Quadrant Real Estate Advisors (“Quadrant”) is an SEC registered investment advisor.  Our business involves the development and execution of privately placed commercial and multifamily real estate debt investment strategies (“Private Debt”) for institutional investors, including insurance companies, sovereign wealth funds, pension funds, and high net worth individuals.  Our investment products are structured primarily as single client accounts or closed-end commingled funds designed to invest in Private Debt in the United States, the United Kingdom, and or Ireland.   

As an investment advisor, we are a fiduciary to our clients.  Our primary responsibility is to add economic value to our clients’ portfolios over the long-term, within the constraints imposed on us by the applicable investment management agreements.  At Quadrant, we believe that environmental, social, and corporate governance (“ESG”) factors can impact long-term performance on investments.   Specific to real estate, we understand the impact buildings have on people, communities, and the environment. We also know that issues such as climate change, regulatory environments and building operational efficiencies will increasingly impact lending decisions and financial performance.  As a result, Quadrant are committed to following our well-established ESG practices and seeking ways to continually enhance practices to incorporate evolving ESG issues into our investment decision making process and our asset management practices in order to:

  • Achieve sustainable long-term returns
  • Meet client investment objectives
  • Collect and track meaningful information that can help us access financial risks and reduce the environmental impact of our Private Debt investments. 
  • Support our commitment as a signatory to the Principles for Responsible Investment (PRI).

ESG Principles and Practices

Quadrant has adopted the following principles and practices to incorporate ESG issues and analysis throughout our lending process, including due diligence, investment  approval and ongoing monitoring:

Private Debt Investment ESG Due Diligence

Our analysis begins by considering the nature of the loan, the borrower and property to identify the key E, S or G risks and opportunities.   For example:   

ENVIRONMENT

  • Exposure to climate risk (physical, e.g. weather events, and transition, e.g. energy performance regulation)
  • Environmental impact of the underlying properties (e.g. industrial plants waste & pollution)
  • LEED or other energy performance certification of the buildings

SOCIAL

  • Community benefits and public space provisions
  • Affordable housing

GOVERANANCE

  • Borrower: Risk from business practices and legal standing
  • Borrower: Obtain disclosure of ESG-related goals, commitments, and performance

For the evaluation of ESG factors, we require:   Environmental Assessment Report, Property Condition Assessment Report, Valuation Report, Insurance Report, due diligence discussions with broker and borrower representatives, completion of Borrower / Sponsor questionnaires, background and credit checks, and review of public information including announcements from the various government regulatory agencies.

Private Debt Investment Committee Loan Approval

Our investment committee (IC) evaluates potential loans using a process that incorporates findings from the ESG due diligence.  IC consider the sustainability attributes of the building(s) and borrower(s) as part of the broader strengths and weaknesses of the Private Debt Investment.  For Instance:

  • Properties with potential adverse environmental impacts, such as large industrial plants, carry greater legal, default and liquidity risks.
  • Conversely, buildings with Leadership in Energy and Environmental Design (LEED) or similar certifications based on environmental characteristics including energy and water efficiency tend to be associated with lower operating costs and higher occupancy and rental rates, translating to reduced credit risk for Lenders. 
  • The behavior of property owners, their business practices and legal standing are also considered, including information regarding eviction practices, environmental issues, and corporate governance. A pattern of poor business practices can indicate a heightened probability of legal issues which can affect loan performance.

Tracking ESG Information

On an annual basis, ESG factors are re-assessed on a loan-by-loan basis to evaluate and track changes (positive or negative) since origination.   In addition, third party service providers confirm insurance policies are in place and meet guidelines established at origination to mitigate against floods, earthquakes, windstorms and other natural hazard risks as applicable.  

Collaborate with the Lending Industry to Improve ESG Practices

Quadrant is committed to staying up to date on ESG best practices and collaborating with the

real estate lending sector toward better ESG performance.  

Maintain Strong Governance Practices

Over the past 30 plus years, Quadrant’s management team has demonstrated its commitment

to safeguarding client assets. This commitment extends to Quadrant’s governance practices in lending.  Quadrant has consistently applied prudent lending and reporting standards to ensure the highest levels of due diligence, quality, and transparency.