Prologis US Agility Fund I, L.P. (the “Fund”)
Legal entity identifier: 254900WR5WVUZ2MHT086
Capitalised terms used herein but not otherwise defined will have the meaning given in the confidential offering memorandum of the Fund (the “Memorandum”).
1 Summary
The Fund promotes environmental characteristics within the meaning of Article 8 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 (“SFDR”) but does not have as its objective sustainable investment within the meaning of Article 9 of SFDR.
The Fund promotes the following environmental characteristics:
- Energy efficiency through the installation of LED lighting in real estate investments;
- The growth of renewable energy capacity through installation of solar ready roofs in new development projects; and
- Sustainable practices in the development of real estate investments, through pursuit of sustainable building certifications for all Eligible Projects (as defined below),
(together, the "Environmental Characteristics" and each, an “Environmental Characteristic”).
The General Partner will incorporate the Environmental Characteristics through its sourcing and investment approach by, among other things, identifying real estate assets to acquire where there are development and redevelopment opportunities in respect of which it will consider whether design, cost and commercial considerations allow for (i) the installation of LED lighting, (ii) the installation of solar ready roofs and (iii) the pursuit of a sustainable building certification.
The General Partner will invest a minimum proportion of 65% of the Fund's total assets in real estate investments used to attain any of the Environmental Characteristics. However, this minimum proportion may not be met during any ramp-up or wind-down phase of the Fund.
To assess, measure and monitor the attainment of the Environmental Characteristics promoted by the Fund, the General Partner will use the following core sustainability indicators:
- Percentage of total portfolio coverage (based on sqft) with LED lighting installed;
- Percentage of new development projects (based on number of projects) with solar ready roofing installed; and
- Percentage of all Eligible Projects (based on number of projects) that:
- are in the process of achieving a sustainable building certification;
- have achieved a sustainable building certification.
The Fund leverages Prologis’ internal global property database along with support from local external consultants, where needed, to capture data related to LED lighting, solar ready roofing and sustainable building certifications. Data quality is reviewed by the Fund management team and Prologis’ sustainability team.
In general, as the Fund’s management team and Prologis’ development team will have direct oversight over the development or redevelopment of all of the Fund’s real estate investments, and the General Partner will implement measures to ensure data quality, the General Partner does not expect that any of the limitations to its calculation methodologies or data will affect the Environmental Characteristics promoted by the Fund.
As part of the due diligence process for all acquisitions, the Fund will assess energy use and environmental impacts and evaluate opportunities to incorporate Environmental Characteristics into the investment.
Although the General Partner and Prologis may engage, on a case-by-case basis, with key stakeholders in local communities during project development of the Fund’s real estate investments in relation to environmental and social matters, such engagement is not part of the Fund’s environmental or social investment strategy.
A reference benchmark has not been designated for the purpose of attaining the Environmental Characteristics promoted by the Fund.
A translation of this Summary section into an official language of relevant EU Member States will be made available to investors upon request.
2 No sustainable investment objective
This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.
3 Environmental or social characteristics of the financial product
The Fund promotes the following environmental characteristics:
- Energy efficiency through the installation of LED lighting in real estate investments;
- The growth of renewable energy capacity through installation of solar ready roofs in new development projects; and
- Sustainable practices in the development of real estate investments, through pursuit of sustainable building certifications for all new constructions developed by the Fund, excluding expansions under 100,000 square feet and build-to-suit projects (“Eligible Projects”),
(together, the "Environmental Characteristics" and each, an “Environmental Characteristic”).
4 Investment strategy
The General Partner will incorporate the Environmental Characteristics through its sourcing and investment approach by, among other things, identifying real estate assets to acquire where there are development and redevelopment opportunities in respect of which it will consider whether design, cost and commercial considerations allow for (i) the installation of LED lighting, (ii) the installation of solar ready roofs and (iii) the pursuit of a sustainable building certification.
4.1 Sustainable Building Certifications
In June 2021, Prologis committed that every eligible new development project approved by its Investment Committee will achieve a sustainable building certification. A project typically receives a certification once built and stabilised. However, due to customer requirements and/or the limitations of certain co-development agreements, a small number of projects will be ineligible to receive a sustainable building certification. As such, the Fund’s binding commitment with respect to pursuing sustainable building certifications only applies to Eligible Projects.
The Fund may also acquire assets that are not newly built. For all acquisitions, the Fund will assess energy use and environmental impacts and evaluate opportunities to incorporate Environmental Characteristics into the investment.
4.2 Binding Elements of Investment Strategy
The binding elements of the investment strategy are:
For real estate investments
- Installation of LED lighting
For new development projects only
- Installation of solar ready roofs
For Eligible Projects only
- Pursuing a sustainable building certification within a reasonable period once the project is built and stabilised
4.3 Assessment of Good Governance Practices
As the Fund invests in real estate assets, the assessment of good governance practices in relation to investee companies is not directly applicable.
Nonetheless, Prologis and the General Partner will ensure that good governance practices are followed by setting clear expectations with respect to transparency and accountability around sustainability aspects of the Fund's portfolio towards the Fund's investors. Prologis and the General Partner promote high standards of ethics and governance as key elements of success. All Prologis personnel are subject to the Prologis Code of Ethics and Business Conduct, published on the Prologis website. Furthermore, all of the Fund's suppliers will be subject to the Prologis Supplier Code of Conduct. Each year, Prologis employees and board members are required to complete ethics training. Prologis also provides training on its Code of Ethics and Business Conduct, Foreign Corrupt Practices Act, harassment, and insider trading.
5 Proportion of investments
5.1 Minimum Proportion of Investments used to attain the Environmental Characteristics
The General Partner will invest a minimum proportion of 65% of the Fund's total assets in real estate investments used to attain any of the Environmental Characteristics. However, this minimum proportion may not be met during any ramp-up or wind-down phase of the Fund.
Up to 35% of the Fund’s total assets may be in "#2 Other" investments, which may include:
- investments in liquid assets (such as ancillary liquid assets, derivatives for hedging purposes, bank deposits and money market instruments) held for the purposes of servicing the day-to-day requirements of the Fund. Due to the neutral nature of these assets, they are not subject to any minimum environmental or social safeguards; and
- real estate investments not used to attain any of the Environmental Characteristics. While all new constructions developed by the Fund are expected to attain one or more of the Environmental Characteristics, the Fund may, where the General Partner considers it to be in the best interests of the Investors, invest in an asset that is not expected to attain any of the Environmental Characteristics, such as for example redevelopment opportunities where the existing asset does not support a commercially viable option to incorporate any of the Environmental Characteristics. These investments will not be subject to minimum environmental and social safeguards; however, the Fund will still apply the same good governance procedures as described above under “Assessment of Good Governance Practices”.
The Fund does not commit to making a minimum proportion of Sustainable Investments.
5.2 Use of Derivatives to attain the Environmental or Social Characteristics
Derivatives will not be used to attain the Environmental Characteristics promoted by the Fund.
5.3 Types of Exposure to Entities
The Fund may invest directly or indirectly in real estate investments through intermediate holding companies.
6 Monitoring of environmental characteristics
The General Partner will use the sustainability indicators set out below under 7 “Methodologies” to measure the attainment of the Environmental Characteristics. The related internal and external control mechanisms are described below under 8.2 “Data quality”.
The monitoring of the Fund’s sustainability indicators by the General Partner is part of Prologis’ global level tracking of LED lighting, solar ready roofing and sustainability building certifications. In particular, Prologis has, at a global level, set public goals related to LED lighting in 2016 and public goals related to sustainable building certifications in 2021.
7 Methodologies
To assess, measure and monitor the attainment of the Environmental Characteristics promoted by the Fund, the General Partner will use the following core sustainability indicators:
- Percentage of total portfolio coverage (based on sqft) with LED lighting installed;
- Percentage of new development projects (based on number of projects) with solar ready roofing installed; and
- Percentage of all Eligible Projects (based on number of projects) that:
- are in the process of achieving a sustainable building certification;
- have achieved a sustainable building certification.
The periodic report of the Fund will also disclose the percentage of all Fund real estate investments which are (i) new development projects and (ii) Eligible Projects, respectively (in each case, based on number of projects).
8 Data sources and processing
8.1 Data sources
For new developments, in case of Eligible Projects, the Fund will follow its sustainable building design specifications. The Fund will track LED lighting and solar ready roofing installation in Prologis’ global property database. For the pursuit of sustainable building certifications, the Fund engages with local consultants, where needed, to submit the required documentation to apply for the relevant certification. The Fund manually tracks sustainable building certifications with proof of certification received and timeline to expire or renew (as applicable).
With respect to existing properties that are acquired by the Fund, the Fund will track LED lighting at property and unit-level and will track solar ready roofing and existing sustainable building certifications at the property level and will include these metrics in Prologis’ global property database.
8.2 Data quality
The Fund requires documentation to be uploaded in Prologis’ global property database and within Prologis’ ESG reporting system to support the review of data quality.
KPIs associated with solar ready roofing are calculated and reviewed annually. KPIs associated with LED lighting and sustainable building certifications are calculated on a quarterly basis and reviewed by the Fund’s and Prologis’ accounting and sustainability teams. The KPIs associated with LED lighting and sustainable building certifications are published in Prologis’ annual 10-K and in Prologis’ annual Global Impact and Sustainability report. Prologis receives limited assurance over the LED and sustainable building certification metrics within Prologis’ Global Impact and Sustainability Report.
8.3 Data processing
The Fund leverages Prologis’ internal global property database along with support from local external consultants, where needed, to capture data related to LED lighting, solar ready roofing and sustainable building certifications. Data quality is reviewed by the Fund management team and Prologis’ sustainability team.
8.4 Estimated data
In general, it is not expected that any sustainability indicator data will be estimated. If, however, any estimated data is used in reporting of sustainability indicator data in the Fund’s periodic reports, the proportion of estimated data will be disclosed.
9 Limitations to methodologies and data
In respect of LED lighting installed, only office and warehouse space is measured and as such, a small part of the floor area (for example, mezzanine space) will be excluded. However, since this will only relate to a small part of the total floor area, the impact would be minor. In addition, the LED tracking process is dependent on the local teams’ operational efficiency and procedures and there could be a possibility of underreporting the numbers for a particular quarter if an LED conversion is not entered into Prologis’ systems on a timely basis. Periodic checks on the installed LED lighting are carried out, so any increase or decrease would be identified, reducing the chances of error.
In respect of solar ready roofing for acquired properties, property condition assessments conducted may not include sufficient documentation to support the conclusion of existing solar ready roofing, potentially leading to an incorrect determination. In respect of solar ready roofing for developed properties, incorrect or incomplete data uploaded to Prologis’ global property database could lead to inaccuracies.
In respect of sustainable building certifications for acquired properties, documentation for existing certifications may be unavailable or not provided in a timely manner, leading to delays of data inclusion in a reporting period. In respect of sustainable building certifications for Eligible Projects, long lead-times in jurisdictions processing applications could lead to properties not receiving certification receipts before developed properties are sold.
For all Environmental Characteristics tracked, Prologis maintains global processes for KPI calculation and documentation. Data in respect of LED lighting and sustainable building certifications is reviewed quarterly, and data in respect of solar ready roofing is reviewed annually, to ensure that any errors are detected and remediated in a timely manner.
In general, as the Fund’s management team and Prologis’ development team will have direct oversight over the development or redevelopment of all of the Fund’s real estate investments, and the General Partner will implement measures to ensure data quality as described under 8.2 “Data quality” above, the General Partner does not expect that any of the limitations described above will affect the Environmental Characteristics promoted by the Fund.
10 Due diligence
Each investment made by the Fund will be subject to the overall policy direction of Prologis’ Investment Committee, a cross-functional and geographically diverse executive body within Prologis that analyses investment opportunities and determines which to pursue. All assets acquired by the Fund must comply with the Fund’s Investment Guidelines (unless otherwise approved by the IAC) and must be approved by both the Prologis Investment Committee and the General Partner. The stages of the investment process are highly integrated, with Investment Committee and the Fund management team reviewing milestones at critical points in the process.
As part of this process, the Fund undertakes structured due diligence to assess, and where appropriate, mitigate or solve, physical, environmental and other potential risks associated with each potential investment. External due diligence providers and consultants will be engaged and consulted as required.
For all acquisitions, the Fund will assess energy use and environmental impacts and evaluate opportunities to incorporate Environmental Characteristics into the investment.
11 Engagement policies
Although the General Partner and Prologis may engage, on a case-by-case basis, with key stakeholders in local communities during project development of the Fund’s real estate investments in relation to environmental and social matters, such engagement is not part of the Fund’s environmental or social investment strategy.
12 Designated reference benchmark
A reference benchmark has not been designated for the purpose of attaining the Environmental Characteristics promoted by the Fund.