Guidelines

The INREV sustainability guidelines reflect the principles of the INREV Governance module.
 

Act lawfully and ethically

All parties involved in the operation of a vehicle should strive to meet the highest professional standards of ethics and integrity whilst complying with applicable laws. Acting ethically goes well beyond mere compliance with the law and written contracts.

Investment managers operate under a duty of care and should act ethically and with integrity towards investors and other stakeholders. Respect for the law and compliance with constitutional terms of the vehicle provide a basic framework against which the vehicle should operate. Acting ethically entails the investment manager, the governing body of the vehicle, and the other relevant actors understanding and adapting how they conduct themselves to ensure the achievement of desired long-term outcomes.

The INREV sustainability guidelines emphasise that acting lawfully and ethically requires the consideration of the impact a vehicle may have over its lifetime on the environment and the society in which it operates. Defining and including specific ESG-related goals in an overall vehicle strategy is a cornerstone of meeting these aspirations.
 

Act in the best interest of investors and consider other stakeholders

The investment manager should, in its actions, seek to maximise value for investors. Investors should clearly and actively express their expectations of the investment manager so that they can be duly considered and aligned.

The investment manager should also consider the interests of other stakeholders who transact and interact with the vehicle, such as tenants, lenders, and regulators. In addition, there are other categories of stakeholders related to the broader external environment and society that are covered by these guidelines.

Identifying and understanding the interests of stakeholders will vary from vehicle to vehicle.

In its actions, the investment manager should constantly strive to achieve alignment of interests with investors, while avoiding conflicts of interest that cannot be effectively managed. Alignment of interests between the investment manager and stakeholders creates shared values, expectations, and objectives and ensures commitment to a common purpose.

When establishing an investment vehicle, main goals such as portfolio strategy, investment horizons, and risk appetite should be clearly identified and understood by all parties. Methods of alignment that are specific to the vehicle structure, such as co- investment, performance and management fee models, as well as protocols around investor consultation and decision-making, should also be considered and implemented. Effective alignment ensures that risks and rewards are appropriately allocated between investors, the investment manager, and other parties, and that investors are treated fairly as a result.

The investment manager has a general duty to act reasonably, fairly, and transparently when balancing the interests of investors. As a general rule, while taking account of the interests of each individual investor, the investment manager should, as a priority, consider the impact of any decision on the interests of all investors collectively. The application of this principle requires judgment and has an ethical dimension as it could have an adverse impact on a minority of investors.

In considering the interests of investors and other stakeholders, the investment manager should take a long-term view regardless of the investment strategy, which may vary considerably from vehicle to vehicle. The culture, strategy, and operational approach of the investment manager should support appropriate long-term outcomes.

In the context of developing and pursuing a certain vehicle strategy, there should be a balance between financial returns and ESG outcomes which take account of the best interests of investors and other stakeholders.
 

Act with skill, care, and diligence

The investment manager should ensure that its activities related to investment vehicles are conducted prudently with diligence and care. It should also ensure that all parties involved, including its own personnel, the members of the governing body, and related service providers, behave with the highest standards of conduct and professionalism.

The investment manager should possess adequate knowledge, skills, and experience. It should constantly strive to apply best practices in arranging and supervising the business operations of the vehicle.

The investment manager should effectively engage with the governing body of the vehicle to enable it to effectively monitor its activities related to the vehicle. Acting with skill, care and diligence also means that the investment manager should refrain from engaging in any activity where it does not have or cannot secure the required expertise or capacity.

Monitoring and measuring ESG criteria require specific training and skills that should be developed across the organisation.
 

Design and operate an adequate oversight and control framework

The investment manager, in collaboration with the governing body of the vehicle, should design and operate an effective supervisory, decision-making, and control framework that adequately addresses the specific risks related to an investment vehicle. Such a framework, which extends to key service providers, needs the involvement of sufficiently qualified persons, who should possess the necessary skills and knowledge. In addition, the rights, obligations, and representation of investors, including their role in decision-making, should be clearly defined in the constitutional documents of the vehicle and respected.

The investment manager should ensure that its governance framework considers and is adapted to adequately define, implement and monitor specific ESG-related goals, risks and initiatives throughout the organisation.
 

Be transparent while respecting confidentiality considerations

The investment manager should be transparent and disclose information on a timely basis that is accurate, balanced, and clear. The investment manager should not only disclose information when there is a legal obligation to do so, such as when it is defined in the constitutional documents of the vehicle but should also proactively communicate and engage with investors and certain key stakeholders where the matter or information is considered relevant. At the same time, certain information regarding the vehicle and its investors that is not publicly available should be treated confidentially.

A vehicle should provide a complete and transparent summary of its ESG goals, organisational structure, and performance to investors.
 

Be accountable

The investment manager, together with the governing body of the vehicle and other related service providers, should be accountable to investors for the execution of their responsibilities given their roles and functions. This implies a duty of care, acceptance of scrutiny, and a reasonable level of liability.

The investment manager should specifically communicate on, and be accountable to investors and other stakeholders, in relation to ESG aspirations and performance.