JLEN Environmental Assets Group has developed a suite of key performance indicators (KPIs) that aim to underpin its three main ESG goals.
The goals are to promote the efficient use of resources, develop positive relationships with the communities in which JLEN works, and ensure effective, ethical governance across the portfolio.
The KPIs cover environmental metrics, such as renewable energy generated or water treated, as well as social and governance factors that might have previously gone unreported but still affect a fund’s ESG footprint.
The latter include community funding, management of local biodiversity or assessment of major contractors against ESG criteria.
The indicators have been introduced by JLEN’s board to track the fund’s ESG performance accurately over time.
If the fund fails to meet some of these KPIs, a penalty will be incurred via the fund’s revolving credit facility, which adds 5bps to the headline margin rate.
However, if the fund meets its KPIs, the headline margin will reduce by 5bps.
JLEN Environmental Assets Group co-lead investment adviser Chris Holmes said: “The investment world has fully embraced ESG as a concept, but we believe that ESG taxonomy and measurement are still a long way off from where they need to be.
“Including ESG screening in due diligence processes results in better investment decisions and better outcomes for investors, but we felt strongly that transparency could be improved further by implementing an overlay of ESG KPIs which would provide us with the benchmarking data we needed to track the fund’s ESG performance over time.
“It is our view that until the industry settles on a measurement framework for ESG factors, we have a responsibility to our investors to adopt what we believe are high standards and continue to evolve them whenever possible.”