Fengate Asset Management’s 2023 sustainability report marks the first time it has publicized and standardized its company-wide initiatives, as the firm moves away from its past practice of sharing selected metrics within its various investor groups.

It has been an important next step for the Toronto-based alternative investment manager.

“Reporting is a reflection of how we’re running ESG and sustainability internally, which is this cross-business standardization of governance, process, people and tools. We really focus on having consistency of best practice across the firm to make sure that we are being consistent both internally and with industry standards,” Fengate’s director of ESG Della Wang told Sustainable Biz Canada in an interview.

Fengate has portfolios in real estate, infrastructure and private equity totalling $10 billion in equity commitments. Previously, select sustainability metrics were published separately by its funds.

Fengate does not yet have a collective climate target because it does not control all the activities (i.e. manufacturing processes by tenants) within all of its assets, Wang said, though it is now measuring greenhouse gas (GHG) emissions from the assets it manages.

At the same time, it is working to decarbonize its real estate and infrastructure portfolios, and to boost the climate resiliency of its assets.

The private equity fund is early in its sustainability journey, Wang noted, with data collection still underway. For now, Fengate’s ESG due diligence framework is in place, so the company is considering factors like potential carbon emissions from an asset, and conducting physical climate risk assessments.

Fengate’s real estate actions

With respect to the real estate portfolio, the sustainability report covers the Fengate Commercial Income Fund (FCIF) and Multi-Family Income Fund (MFIF).

Scope 1 and 2 GHG emissions from its commercial properties in the FCIF were cut 25 per cent from 2022 to 2023. The figure went from 1,921 tonnes of carbon dioxide equivalent (tCO2e) in 2022 to 1,434 tCO2e in 2023.

The decrease was attributed to its Building Insight Platform that optimizes HVAC operations, educating its building operations team, and Fengate using technology to identify which buildings are high-emitters so it can focus on mitigation at these properties first.

On the industrial side of the FCIF, the combined emissions rose from 3,790 tCO2e in 2022 to 4,228 tCO2e in 2023 - a 12 per cent increase. Noting that its tenants control the operations of the industrial assets (unlike the commercial assets) Fengate explained the escalation as a result of increasing industrial activity.

The combined emissions from the MFIF were 2,159 tCO2e, with no data from 2022.

Wang said the company will continue educating its tenants on how to align with Fengate on sustainability.

The ESG report is a first step to understanding the company’s values for this mission. A second step would be understanding what contributes to GHG emissions from the industrial properties.

The real estate fund is exploring:

• on-site renewable energy generation from geothermal and solar sources;
• heat pumps to switch from natural gas;
• adapting net-zero building guidelines for its industrial properties to consider embodied carbon; and
• future-proofing assets.

An example of this strategy at work is 315 Allendale Rd. in Cambridge, Ont. The industrial development has a solar-ready roof, upgraded insulation and will be set up for a switch to heat pumps and energy recovery ventilators from gas-fired equipment.

The commercial fund saved almost 3.3 million litres of water on its properties by improving management of the resource.

All 77 tonnes of waste from managed office buildings was diverted from landfills through U-Pak and Emerald Energy, a joint program that turns any waste that is not recyclable or biodegradable (plastic food wrappers, lined coffee cups) into steam-powered electricity, Wang explained. Residual hard waste is transformed into landfill cover.

Infrastructure and private equity

Fengate Infrastructure, which invests in transportation, digital, social and energy assets, has over 750 megawatts of capacity in wind, hydro and solar assets. The renewable power generated by the portfolio was 1.6 million megawatt-hours in 2023, helping to avoid over 410,000 tCO2e.

The fund has invested $1.1 billion in the energy transition to date, Wang said. Batteries for energy storage and gas-powered cogeneration plants are other areas of investment, she added.

Cogeneration plants are a way for its industrial partners to address carbon where other alternatives are not available, she said.

On the infrastructure side, 63 per cent of its assets under management are under some form of decarbonization plan: 16 per cent have a decarbonization or a net-zero target; 18 per cent are renewable energy assets; and 28 per cent under LEED Gold or Silver certifications.

Heat stress is a key climate risk for Fengate Infrastructure's portfolio. The company is changing its envelope design to cool buildings and designing equipment for high temperatures as adaptations to help mitigate this threat.

Almost 90 per cent of the 25 operational and under-construction projects in Fengate’s social and transportation assets were certified or targeting LEED Gold or Silver in 2023. The Clackamas County Replacement Courthouse in Oregon is one of these buildings, aiming for LEED Gold and a 62 per cent reduction in GHG emissions.

For 2023, Fengate Infrastructure’s Scope 1 and Scope 2 emissions were calculated as approximately 1.6 million tCO2e, with over 391,000 tCO2e of Scope 3 financed emissions. Figures for 2022 were not available.

For future sustainability efforts, Fengate is focusing on increasing its data coverage and range of metrics (Scope 3 emissions for example), progressing further on direct and indirect decarbonization, and improving its nature and biodiversity strategy, Wang said.