Oxford Properties, one of Canada’s largest real estate investors and managers, is accelerating its transition to a low-carbon portfolio with the launch of its Green Financing Framework.
The initiative will fund clean energy, green buildings and climate change adaptation.
Toronto-headquartered Oxford manages $82 billion of assets around the world and almost 165 million square feet of commercial space. It is owned by Ontario Municipal Employees Retirement System (OMERS), a public pension fund with $121 billion in total assets.
“Our purpose is to create economic and social value through real estate, and our Green Financing Framework is directly in line with this goal," Allison Wolfe, CFO and global head of portfolio management at Oxford Properties, told SustainableBiz. "Proceeds from these green financing instruments will help decarbonize our buildings and help achieve change resiliency to protect the future of our assets, for our pension members and the communities in which we operate.”
The Green Financing Framework
Oxford will issue financing instruments such as debentures, bonds, loans and mortgages to finance its sustainable investments and expenditures.
Proceeds will go toward seven eligible categories of projects: green buildings, renewable energy, energy efficiency, clean transportation, sustainable water and wastewater management, pollution prevention and control, and climate change adaption.
Eligibility requirements are embedded into each of the sectors. Renewable energy, for example, must be created via wind, solar, geothermal or waste biomass and have lifecycle emissions lower than 100 grams of carbon dioxide per kW-h. Climate change adaptation would encompass developments such as flood defence improvements or storm water management systems.
Nathan de Haan, the director of real estate finance and capital markets at Oxford, explained how a bond would work. He said Oxford would issue a green bond and allocate the proceeds to eligible projects under the framework. A bond would primarily fund green buildings and energy efficiency projects.
Oxford then issues an annual report to confirm proceeds of the equity raise were under the green framework and how it maps to the seven categories over the life of the financial instrument.
A loan or mortgage would be allocated to one project, unlike a bond that could be allocated to more than one investment because it is unsecured, de Haan explained.
de Haan said Oxford is in the process of canvassing its entire portfolio to look for eligible projects, but did not offer specifics at this point. Some projects have been identified already, he said, which “gives us confidence to issue green instruments against those projects.”
Wolfe said she has witnessed increasing demand from investors and lenders for green financing instruments.
"We think this is good business," she explained. "It very much aligns with our principles and objectives and will provide us more access to investors and lenders going forward.”
Assuring investors of its credibility
To provide assurance to investors their money will be invested into effective, relevant projects and assets, Oxford's framework has been reviewed by ESG research and analytics firm Sustainalytics. In a release, Oxford says Sustainalytics verified the framework is “credible and impactful.”
It will also be aligned with the UN’s Sustainable Development Goals, the International Capital Markets Association (ICMA) 2021 Green Bond Principles, the Loan Market Association and Loan Syndications and Trading Association’s (LSTA) 2021 Green Loan Principles.
de Haan said Oxford chose the Green Financing Framework because it requires annual reporting, clear links to the projects and proceeds raised, and transparency about how funds are allocated.
Oxford took its time in creating the green financing instruments because of growing fears some companies are inflating the impact of so-called sustainable investments, or greenwashing, Wolfe said.
“As the various institutions over the last 24 months have clarified certain standards and reporting, we wanted to make sure to take our time to get that right and make sure that we were comfortable that the Green Financing Framework would be thoughtful and would have zero risk of being perceived as any type of greenwashing.”
Ties to Oxford’s sustainability plans
The Green Financing Framework expands on Oxford’s existing sustainability efforts.
In its Global Sustainability Report 2022, Oxford underscored a 37 per cent reduction in portfolio carbon intensity compared to a 2015 base year, generating more than 125 gW-h of green electricity from onsite solar or low-carbon sources and certifying more than 95 per cent of its buildings from a green building organization.
While Oxford has met some of its ESG goals, most remain ongoing or in progress, including reducing Scope 1 and 2 carbon emissions by 30 per cent by 2025 on a per-square-foot basis against a 2015 base year.
de Haan said the framework is another step toward reaching those goals: “I think those goals that we set out, we were going to aspire and accomplish those regardless, but this framework really helps to reinforce those targets.”