Redefine is preparing to access less expensive funding through better sustainability
REDEFINE Properties has approved a R200 million investment to expand its solar PV programme in the 2022 financial year to exceed the targets set in its first sustainability-linked bond issue, the group said in a presentation on its ESG (environment, social, governance) initiatives yesterday.
ESG is becoming an increasingly more important factor in the management of listed groups as asset owners and key institutional investors have increasingly been advocating a greater emphasis on sustainability.
Redefine, which has a diversified South Africa property portfolio worth R75.3 billion, issued a R1bn sustainability-linked bond in its 2021 financial year, the largest issued by an Reit in Africa, and the group said yesterday the intention was to further access sustainable finance markets beyond this issuance.
On the renewable energy front, the recent lifting of the regulatory cap on renewable energy in South Africa meant Redefine had the opportunity to add new solar PV capacity of 8 519kWp (kilowatts peak), resulting in a reduction of 13 060 tons of carbon dioxide equivalent in carbon emissions.
“We are continually conducting solar PV feasibility studies and will be adding projects to the PV pipeline on a regular basis. The renewable energy installation target for August 2022 is 3MWp (megawatt peak) installed capacity. We have a total of 19 281MWp installations in the pipeline with an investment of R206 million,” the group said.
The sustainability-linked bond was an important platform to participate in sustainability-related markets and there was a direct link between achieving long-term ESG strategic objectives, for example to achieve net zero transition goals, and the ability to access cheaper sources of funding in the future, the group said.
Underlying ESG-related risks also needed to be identified and dealt with to manage the impact of ESG on its credit risk profile, the group said.
“We understand the importance of securing short-term savings on the cost of funding, although we anticipate the financial benefits will increase as the local market develops.”
The group was developing an ESG risk management framework that emphasised materiality in the South African context.
Some of ESG-related risks and opportunities, as identified by MSCI for diversified Reits such as Redefine, included, on the environmental front: carbon emissions, renewable energy, toxic emissions and carbon emissions.
On the social side, the MSCI identified privacy, labour management and community relations, while on governance it could include aspects of pay, ownership and control and business ethics.
Some ESG milestones of the past year included improving the coverage of its Green Star building certifications to 123 active certifications, focused professional development sessions for board members regarding ESG in the real estate context, clear commitment from the board to ESG, and notably being ranked first in the 2021 EY Excellence in Integrated Reporting Awards.