Ivanhoé Cambridge has embraced innovative financing to advance its quest for a carbon-neutral commercial real estate portfolio by 2040. Under the conditions of a CAD $8.5-billion agreement announced this fall, the real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ) has converted its loan program with 11 North American and European banks to a new structure, which indexes financing costs to “extra-financial” ESG (environmental, social, governance) performance to be measured with three key performance indicators (KPIs).
“We are convinced that sustainable investments are profitable over the long term and we are committed to combining our environmental performance with the continuous improvement of our financing terms,” says Stéphane Villemain, vice president, corporate social responsibility, with Ivanhoé Cambridge.
The three KPIs include: low-carbon investments; the portfolio’s carbon intensity; and the company’s score in the GRESB assessment and global benchmark for ESG performance of commercial real estate portfolios. Slippage in any of those elements will flow through to financing considerations.
Speaking in conjunction with the online presentation of the 2021 Canadian GRESB results earlier this month, Rob Simpson, director of sustainability at Ivanhoé Cambridge, acknowledged it’s an uncharted path, but one that provides more consistent financing for GHG-reducing initiatives than most commercial real estate operators have enjoyed to now. Similarly, he framed GRESB’s ongoing adjustment of program parameters as both a challenge and a prompt.
“There’s a risk in tying some of your financial metrics to something that’s going to increasingly get more difficult, but the converse of that is, what we’re doing needs bold thinking and it needs sort of fundamental transformational change to address these things,” Simpson maintained. “As GRESB evolves away from management and policy driven outcomes to performance driven outcomes, we’re going to see more emphasis put on how operational assets actually perform — whether it’s through carbon emissions, energy, climate change preparedness — and all those key things that are fundamental to where we need to go.”
In the interim to 2040, Ivanhoé Cambridge has pledged to reduce the carbon intensity of its portfolio by 35 per cent relative to 2017 levels by 2025, and to ensure all new development projects will be net-zero from 2025 onward. It has also set a demanding bar for maintaining its GRESB score — this year earning a 5-star ranking, with a score of 91 out of 100, for its Canadian portfolio, and a 4-star ranking, with a score of 86, for its global portfolio.
Simpson affirmed that he and his team are excited about the goals and are relishing the opportunities ahead.
“The financing piece obviously is a critical component. It’s hopefully a game-changer in how we think about some of these things,” he noted. “We’ve tried to map it out as well as we can, and really think through the variables, but there’s also an understanding that some of this is unknown. There’s a leap of faith here. But it’s great. It’s really motivating to have these massive sorts of initiatives to be working on.”
