Catella fund’s new ‘dark green’ status attracts Norwegian KLP

Norway’s largest pension company KLP and a group of eight German pension funds and insurers have made commitments of €270 million to The Catella European Residential III Fund (CER III), relaunched as the first “dark green” pan-European residential ESG impact fund.

The new capital has increased CER III’s total equity to €750 million since its launch two years ago.

The capital raise follows CER III’s transition during the first quarter of 2021 from being a “light green” property fund to becoming the first pan-European “dark green” residential property impact fund according to the EU SFDR Article 9. This status means that the vehicle pursues sustainable societal objectives, or the reduction of carbon emissions, in its investments.

The fund is managed by Berlin-headquartered Catella Residential Investment Management (CRIM).

Fund protects against black swan events with ‘antifragile’ concepts

CRIM said that CER III is structured around professor of risk engineering Nassim Taleb’s “antifragile” investing concepts.

“Black Swan events, such as the global financial crisis or the Covid 19 pandemic, have a significant impact on housing markets.” Michael Fink, managing director, CRIM, explained. “Catella has found solutions to manage these market events by implementing Nassim Taleb’s concepts.”

Fink said that the random pattern of severe market disruptions will almost certainly occur more frequently in the future.

“Prevailing market wisdom dictates that rental income should be maximised, but we have demonstrated that a lack of social justice, or real affordable rents in a portfolio, are a major source of risk. Now with our impact fund, we are adding the third ESG pillar of our investment philosophy by incorporating Taleb’s ‘skin in the game’ thesis through a close alignment of investor and investment manager interests, or the governance ‘G-factor,’ in CER III’s fee structure.”

The alignment of interests in CER III is achieved through incorporating a penalty clause into the management agreement whereby CRIM will donate part of its recurring management fee to a relevant ‘impact-related’ United Nations fund should the manager fail to meet the financial or societal targets set for the fund.