Regulation (EU) 2019/2088 on disclosure about sustainability in the financial sector (the Sustainable Finance Disclosure Regulation, SFDR) and Regulation (EU) on the establishment of a framework to facilitate sustainable investment (Taxonomy Regulation) have direct force in all European Member States. As alternative investment fund managers, Sentinel Fund Advisors, Inc. and its reliant advisors (the Sentinel AIFMs) fall within the scope of the SFDR and the Taxonomy Regulation to the extent its activities involve participants or investment funds established in a European Member State, and it therefore provides (potential) investors information about the following topics:
- Sustainability considerations with respect to the funds under management of the Sentinel AIFMs;
- its policy on the integration of sustainability risks in its investment decision-making process;
- a statement that it does not consider adverse impacts of investment decisions on sustainability factors; and
- a summary of how its remuneration policy is consistent with the integration of sustainability risks.
Sustainability considerations with respect to the funds
Article 7 Taxonomy Regulation
Last update: 11 February 2025
Sentinel Real Estate Fund and Sentinel Diversified Living Fund (formerly known as Sentinel US Core-Plus Multifamily Fund) do not promote ecological and/or social characteristics ("light green investments" as referred to in Article 8 SFDR) nor are they explicitly aimed at including sustainable investments ("dark green investments" as referred to in Article 9 SFDR). The underlying investments of the funds do not take into account the EU criteria for environmentally sustainable economic activities.
Sustainability risk policies
Article 3 SFDR
Last update: 11 February 2025
A sustainability risk is an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment. The Sentinel AIFMs acknowledge that sustainability risks may have a negative impact on the returns of an investment in an investment fund under its management.
Sustainability risks are integrated into all aspects of our real estate operations and the investment cycle as a whole. Sustainability risks are considered throughout our due diligence, acquisition, construction and development, operations, management and disposition processes.
Analysis of the sustainability risks represented by a property begins prior to its acquisition. During the underwriting of each potential investment, climate risks are analyzed, the local regulatory environment is assessed to determine sustainability requirements, access to transit and the quality of local schools are evaluated and the affordability of an asset is quantified. During due diligence, a detailed review of building systems takes place to identify the sustainability status of the asset with respect to energy, water and waste metrics and to determine what opportunities will exist following acquisition to mitigate any risks in these areas. This serves as a framework for asset management in developing a business plan post-acquisition that will continue to monitor the sustainability risks of each property during the holding period.
Possible examples of sustainability risks are the potential negative impact on the disposition price of a property if it is not up to standard when it comes to sustainability measures, or alternatively the savings in energy expenses resulting from sustainability measures undertaken. By integrating consideration of sustainability risks into investment decisions and our risk management framework, we try to limit the potential negative impact of sustainability risks on the performance of the investments. Sentinel Fund Advisors, Inc. and its reliant advisors will run a regular update assessment of the likely impacts of sustainability risks and the potential impact of these risks on the returns of the investments.
The sustainability risks that may arise in respect of a specific fund's management and the potential impact on returns of those risks, are reflected in the relevant information disclosure documents provided in respect of such fund, if applicable.
No consideration of adverse impacts of investment decisions on sustainability factors
Article 4 SFDR
Last update: 11 February 2025
The Sentinel AIFMs do not consider adverse impacts of investment decisions on sustainability factors (i.e.; environmental, social and employee matters, respect for human rights, anticorruption and antibribery matters) within the meaning of Article 4(1)(a) of the SFDR for the following reasons:
- The Sentinel AIFMs do not promote environmental or social characteristics or a combination of these characteristics with the investment portfolios, nor does it aim for sustainable investments with the investment portfolios. Therefore, it is not meaningful to measure the possible effect of investment decisions in these areas.
- If the Sentinel AIFMs were to decide to take into account adverse sustainability impacts of investment decisions, a detailed statement would be prepared annually in a prescribed format (the Principal Adverse Sustainability Impacts Statement) as required under the SFDR. Numerous detailed regulations must be taken into account in the preparation of these statements, many of which are not relevant to the type of investments the Sentinel AIFMs include in the portfolios.
The Sentinel AIFMs consider it only useful to issue a Principal Adverse Sustainability Impact Statement each year if it were to begin promoting sustainability factors or sustainable investments, because it would allow investors to assess whether the promises made in this regard are being kept by the Sentinel AIFMs.
Remuneration policy & sustainability risks
Article 5 SFDR
Last update: 11 February 2025
The Sentinel AIFMs follow an informal performance measurement process which includes an end of year informal performance review of the persons working under its responsibility (Staff Members). For each position, expectations will be made clear and confirmed by the Staff Member. The performance criteria are used for review of performance in general and may be used to determine whether a Staff Member might be entitled to a bonus remuneration in accordance with the remuneration policy of Sentinel US. The manner in which sustainability risks are observed, to the extent applicable for the function of the relevant Staff Member, may affect the financial part of the aforementioned performance criteria.