UK’s workplace defined contribution scheme seeks sustainable real estate funds

Invitation to tender from major asset owner

The UK’s new workplace pensions scheme, the National Employment Savings Trust (NEST), has issued a tender for real estate fund funds with “strong sustainability credentials”.

The funds – a UK direct property fund and global Real Estate Investment Trust (REIT) – are part of a wider real estate tender to find “building blocks” for its 47 retirement date funds which form five fund choices, including its Ethical Fund and Sharia Fund.

NEST wants funds “with strong sustainability credentials and hence …aligned with the policies of the NEST Ethical Fund”.

A spokesperson said pooled investment vehicles are being sought to access long-term real estate returns.

The London-based body is a signatory to the UN-backed Principles for Responsible Investment and the Stewardship Code as well as being an affiliate member of UK Sustainable Investment Finance (UKSIF).

It explicitly aims to integrate environmental, social and governance (ESG) issues “across all asset classes and markets where practical”.

NEST will ask all bidders to confirm if they are a signatory to the PRI or similar initiatives and explain the extent to which the PRI’s principles are integrated into their real estate portfolios.If bidders are not signatories, they will be asked to explain why not – and to explain what extent sustainability practices are integrated into the investment process.

“Bidders will have to confirm they are PRI signatories”

NEST is a new defined contribution occupational pension scheme that is expected to have millions of members and grow to billions in assets.

In 2011 it awarded mandates to F&C Global Asset Management and HSBC Global Asset Management for its Ethical and Sharia funds respectively. And last year it took on the Co-operative Asset Management as its responsible ownership partner.

The tender states NEST will also consider solutions that can deliver any combination of its requirements, provided the risk management and asset allocation is satisfactory.

The closing date for the invitation to tender is January 25 and up to four managers are expected to be appointed in the second quarter of the year.