Our ESG Philosophy
At Paladin Realty Partners, we believe that driving social and environmental impact can and must co-exist alongside opportunistic financial returns for our investors. In executing the firm’s Latin American affordable housing strategy for more than twenty years, Paladin Realty has been a leading impact investor, supported by our institutional investors, including internationally recognized organizations such as the Overseas Private Investment Corp. (OPIC) and the International Finance Corp. (IFC). Paladin Realty has developed and implemented comprehensive policies for itself and its local operating partners with regard to environmental protection, life and fire safety, human resources, occupational health and safety, as well as policies to address potential community and employee grievances. Paladin Realty endeavors to operate its real estate investment management business in a manner that is aligned with the United Nations’ Sustainable Development Goals (UN-SDGs) and Principals for Responsible Investment (UN-PRI), driving meaningful social returns.
Paladin Realty’s Latin America investments are underwritten and managed to comply with rigorous environmental, social and governance (ESG) polices, including applicable codes of conduct and principles established by the PREA/NCREIF Real Estate Information Standards (REIS); the CFA Institute’s Global Investment Performance Standards (GIPS) and Asset Manager Code of Professional Conduct, INREV Guidelines; the United Nations’ Principles for Responsible Investing (UN PRI); the Institutional Limited Partners Association’s (ILPA) Private Equity Principles; California State Teachers Retirement System’s (CalSTRS) 21 Risk Factors; the Overseas Private Investment Corp. (OPIC); and the International Finance Corporation’s (IFC) Environmental, Health and Safety (EHS) Guidelines Section 3.3 regarding Life and Fire Safety.
The firm strives to be an industry leader in applying world-class ESG practices to the real estate investment and development business in emerging markets.
A link to Paladin’s 2020 Impact Report can be found here.
A link to Paladin’s 2019 Impact Report can be found here.
Alignment with U.N. Sustainable Development Goals
The following reflect certain important characteristics of Paladin Realty’s business in achieving its ESG goals:
Good Health & Well-Being – Paladin Realty strives to develop safe, clean, modern housing within communities that offer open space and amenities that promote well-being for residents of all ages.
Gender Equality – Paladin Realty’s Human Resources Policy provides a framework for local operating partners to conform to international best practices with regards to non-discrimination and equal opportunity.
Clean Water & Sanitation – Residents within Paladin’s housing developments benefit from modern, efficient water (potable where feasible) and sanitization systems.
Employment & Economic Growth – Paladin Realty’s hiring of local construction labor, in addition to the ancillary industries that benefit from housing development (e.g., concrete, lumber, fixtures, equipment, engineers, architects and other professionals etc.), helps to promote broad and resilient economic growth.
Industry, Innovation & Infrastructure – Where feasible, Paladin Realty takes advantage of new green building technology to produce sustainable residential and commercial developments.
Reduced Inequalities – Increasing homeownership in markets within Latin America enables local residents to accumulate equity, helping to reduce inequality.
Sustainable Cities & Communities – Paladin Realty strives to develop environmentally-friendly homes within communities that are safe, inclusive and sustainable.
Climate Action – Where feasible, certain of Paladin Realty’s real estate investments are developed according to IFC’s Excellence in Design for Great Efficiencies (EDGE) requirements for a 20% reduction in water usage, energy consumption, and embodied energy in materials, reducing communities’ carbon footprints.
Peace, Justice and Strong Institutions – Paladin Realty requires that local operating partners adhere to Paladin’s anti-corruption, bribery and money laundering policies as well as local law and regulations.
Recent Project: Villas del Fresno (Mexico City 2018)
In 1Q18, Paladin’s fifth pan-regional fund approved a $5 million commitment to a new programmatic joint venture to develop affordable housing in the greater Mexico City area with an experienced local operating partner, Casas Krea. Casas Krea focuses on developing low-income residential projects in and around Mexico City, using aluminum molds rather than concrete blocks to build faster, more efficiently and with substantially less waste. Its projects incorporate environmentally friendly components such as roof-mounted solar-powered hot water heaters, low-flow plumbing fixtures, LED lighting and special insulative waterproofing, among others.
The venture’s initial project, Villas del Fresno, is planned for 1,913 low-income housing units in a northern suburb of Mexico City. The project broke ground at the end of 2018 and launched sales in 2Q19. With Paladin Realty’s assistance, Villas del Fresno’s sustainability was pre-certified by the International Finance Corp.’s Excellence in Design for Greater Efficiencies (“EDGE”) program. The EDGE program determined that, compared to conventional concrete block projects, Villas del Fresno will achieve a 24% reduction in water, a 28% reduction in electricity and a 74% savings in embodied energy in building materials. Community amenities include five acres of recreational space with walking paths, BBQ areas, four sports courts, indoor and outdoor equipped exercise areas, and playgrounds, among others. The project will also provide a new kindergarten, elementary and high school.
Villas del Fresno is the largest EDGE-certified affordable green housing project in the Western Hemisphere and will save more than 1,300 tons of CO2 from entering the atmosphere each year. More information on the project can be found here.
Paladin and IFC’s EDGE Program
Paladin endeavors to certify each one of its new projects with the International Finance Corp.’s EDGE program whenever feasible. As of December 2019, Paladin has certified or pre-certified 13 projects in Mexico, Colombia, Brazil and Peru. Together, these 13 projects, totaling more than 4,800 units, expect to save more than 2,200 tons of CO2 from entering the atmosphere each year.
Paladin Environmental Social Governance Master Plan
Paladin, in conjunction with international consultant ERM, created and adopted an Environmental, Social & Governance Master Plan (ESGMP) which is applied to all projects, partners and builders. The ESGMP consists of a variety of tests and checklists that ensure that a given investment’s stakeholders shall operate according to international best practices with regards to Human Resources Management, Operational Health & Safety on jobsites, and that neighboring communities and disgruntled workers shall have access to grievance mechanisms, among others. Any Paladin partner or builder that does not have written HR policies (which include provisions for non-discrimination, equal opportunity, and the other requirements of Paladin’s ESG Master Plan), shall adopt Paladin’s default version.
Prior to finalizing partnership agreements, “Partner Screening” checklists are completed, ensuring that a local partner is not in violation of any laws pertaining to the environment, health, safety, labor or public disclosure, that the company is not included on any black lists of slave labor or child labor, that the company has certain policies relating equal opportunity, anti-discrimination, etc. A “Project Screening” checklist will be completed before funding any project, which ensures that the project will not have any negative social or environmental impacts, and does not appear on any exclusion lists that Paladin has adopted, such as DFC’s “Illustrative List of Category A Investments”. Similarly, the Joint Venture will not be developing any projects which involve “Prohibited Activities”, which among others, includes the construction of infrastructure which could disrupt ecosystems, resettlement of indigenous populations, production of radioactive materials, impacting natural World Heritage Sites, etc. If any ESG-related risks are identified, and Paladin opts to move forward with the project, an Action Plan will be developed to ensure that identified risks are properly considered and mitigated; in reality, any project that poses any material ESG-related risks will be discarded.
Monitoring is an integral part of the ESGMP, where on an annual basis, information pertaining to accidents, incidents, inspections, grievances, violations, policies, and the like, are compiled for all Partners and Builders and are reviewed by Paladin’s ESG Committee. Such results are communicated to Paladin’s Investment Committee at quarterly Valuation Meetings, and any necessary action plans developed.