Fidelity launches its second real estate fund focused on climate impact

Fidelity announced today the launch of its second real estate fund focused on climate impact, the Fidelity Real Estate Logistics Impact Climate Solutions Fund (LOGICs), with which it has managed to raise 200 million euros in its first closing and will promote an accelerated energy transition in the real estate sector. Rest Super, one of Australia's largest pension funds, is one of the inaugural investors in the fund and has contributed 80 million euros in its first closing. In addition, it has committed to contribute another 120 million euros to the fund during subsequent closings.

40% of total carbon emissions come from buildings, hence this class of assets plays a crucial role in the race to achieve neutrality. 85% of EU buildings are over 20 years old, so there is an urgent and attractive investment opportunity to drive the ecological transition.

LOGICs Investment Approach

The fund, which will invest exclusively in the logistics sector in Western European markets, will apply a value-added approach when acquiring existing assets with the intention of renovating and repositioning them to offer high-quality properties that can be exploited with zero net emissions. In addition, by installing solar panels, tenants have the opportunity to generate and obtain their own source of non-polluting energy.

Being a fund covered by Article 9 of the Sustainability Financial Information Disclosure Regulation (SFDR), LOGICs has a comprehensive climate impact framework for building renovation that aims to use and implement external certifications and frameworks, such as the EU taxonomy, to ensure that its approach to generating climate impact is transparent and measurable. For each asset acquired, an accelerated trajectory towards net zero carbon emissions will be traced through the company's renovation plans.

According to Fidelity's analysis, conventional logistics buildings are currently trading at attractive entry points, between 20% and 30% below the maximum valuations of 2022. Meanwhile, Western Europe is benefiting from several positive demand factors, such as sustained growth in e-commerce and reinforced attention to supply chain resilience after COVID. Faced with a shortage of quality logistics assets, Fidelity predicts strong rental growth in well-located green warehouses. Together, these two factors create a rare opportunity to achieve very substantial returns for moderate risk over the coming years.

This news comes after the launch of the Fidelity European Real Estate Climate Impact Fund at the end of 2023.

The launch of the LOGICs fund is an excellent example of partnering with our clients to develop solutions together that meet their changing investment needs. We are very pleased with the clear and growing interest from clients in our climate impact strategies in the real estate sector, which support the energy transition in this market by accelerating the trajectory of acquired assets towards net zero emissions and, at the same time, offer attractive investment opportunities to our clients. After this excellent first closing, investors will have the opportunity to invest in the second closing of the fund at the end of the year. With around 550 million of investable capital within our climate-focused real estate strategies, we are excited about the opportunity to leverage current market conditions and generate solid returns, as well as a tangible reduction in carbon emissions with accelerated timelines.

Andrew McCaffery, Co-CIO of Fidelity investors

Rest is pleased to join Fidelity in the launch of the LOGICs fund as a lead investor. We believe its emphasis on climate impact offers a fantastic opportunity to benefit Rest's approximately two million participants, including over one million people under 30 who will retire in the net zero emissions world that will emerge after 2050. Logistics properties are trading at attractive levels and demand for energy-efficient facilities is increasing, so we believe that the LOGICs fund will achieve rental returns and property values that should translate into solid financial returns and help accelerate the path to a carbon-neutral economy".

Andrew Lill, investment director of Rest