ESG Lending Policy

Introduction

Fairfield Real Estate Finance (“Fairfield”) recognises the importance of Environmental, Social and Governance (“ESG”), sustainable finance and responsible investment factors, with ESG screening a key part of Fairfield’s loan origination and loan management processes.

Fairfield believes that all stakeholders should have an active interest in, understanding of and responsibility for ESG. Given the long-term nature of the built environment and, in particular, the urgent need to address climate change, Fairfield believes it is important to incorporate parameters that generate ESG benefits over the whole life of real estate assets. Furthermore, Fairfield believes that ESG factors can directly and materially impact both credit risk and financial returns. Failure to consider ESG factors throughout lending and loan management processes could expose investors to unnecessary risks and potential losses. It is therefore essential to embed ESG throughout our approach.

Our Commitment

Fairfield is committed to only lend to Sponsors with strong ESG credentials, in terms of the built environment and their social and governance policies. Fairfield has considered ESG factors since its inception in 2016 and has continually enhanced its processes to reflect the changing ESG landscape. As ESG principles develop and evolve Fairfield’s own policies will continue to evolve, with active screening and horizon scanning for new developments in this field.

Our Approach

Fairfield’s approach to lending presents opportunities to identify and manage a wide variety of risks and the opportunity to influence Sponsors through tailored facility terms. By carefully considering a wide variety of ESG risks and using our influence in a considered fashion, we can provide our clients with the appropriate funding packages and our investors with attractive risk-adjusted returns. Each member of the Fairfield team is responsible for considering if and how ESG factors may be relevant throughout the lifecycle of a loan:

Loan Origination:

Consideration of ESG factors forms part of the initial scoping and screening stage. In our due diligence, the prospective Sponsor is asked to complete a questionnaire which contains ESG-related questions requiring supporting evidence and each new deal is given an ESG rating. Considerations of the key ESG matters are then incorporated in the risk and opportunities of every Investment Committee memorandum. Where appropriate, material ESG factors can be incorporated directly into Fairfield’s underwriting and loan documentation.

Loan Management:

Any previously identified ESG-related issues are monitored, and any emerging risks managed with the Sponsor as required. As part of Fairfield’s loan management process, there is continuous engagement with Sponsors and other stakeholders to ensure the portfolio is managed in line with ESG expectations and each loan undergoes an annual review to ensure ongoing compliance with terms.

Reporting:

Fairfield reports ESG activities on a quarterly basis to our investors, including a combination of quantitative and qualitative information. ESG reporting is an evolving area and so the quality of the reporting to improve as the quality of ESG data, and its familiarity by stakeholders, improves over time.

Conclusion

ESG is an important aspect of Fairfield’s business strategy and how we do business. Fairfield’s approach to ESG will continue to improve and evolve and will always be an important part of the lending process.