Schroder Reit (SREI ) has proposed a change of strategy that will see it focus on sustainability in its property investments while extending the notice period it has to provide to the manager.

The £220m UK commercial property investor is asking shareholders to vote in favour of a strategy shake-up that will ‘formally include sustainability at the centre of the…investment proposition’.

Under the amendment, manager Nick Montgomery will focus on adapting existing buildings to deliver a ‘sustainability improvement and decarbonisation strategy’.

The new investment plan, which was created following feedback from the board, investment manager and shareholders, will allow the trust to ‘proactively respond to the UK’s net zero carbon objectives’ while delivering enhanced performance for shareholders.

Shareholders will be asked to vote on the change at an extraordinary general meeting on 15 December. They will also be asked to approve a change in the fees that are charged by Schroders and the terms of its notice.

The board said to ‘align the manager’s compensation with the delivery of specified sustainability objectives’ the existing fee arrangement will be tweaked to include a ‘5 basis points increase or decrease in the management fee depending on sustainability and income related key performance indicators being achieved’.

The contract with the manager will also be amended so that it cannot be terminated on less than 12 months’ notice and ‘such notice [is] not to expire prior to the second anniversary of the passing of the resolution’.

Alastair Hughes, chair of the real estate investment trust (Reit), said: ‘As sustainability considerations become even more important for investors and occupiers, we have a strong conviction that it will clearly help to differentiate the company and drive more sustainable, risk-adjusted returns.’

The trust reported a net asset value (NAV) of 60.5p per share for the six months to the end of September, representing a 1.6% decline over the period from a March NAV of 61.5p, driven by a downturn in property values.

NAV total returns, which include dividends paid, were 1.1% thanks to two quarterly payments of 0.836p each, which were 1.02x covered by earnings.

This income return was above average and helped by exposure to multi-let industrials – industrial assets make up 47% of the portfolio – where rental growth was 2.4% over the period.

Montgomery has increased exposure to the ‘higher growth multi-let industrial sector’, including the completion of the Stanley Green trading estate, an 80,000 square foot, net zero warehouse scheme in Manchester, that has 60% of its £1.3m estimated rental value either let or in advanced negotiations.

Balancing this move to multi-let was the disposal of a non-core office asset in Rugby ‘in line with valuation at the start of the financial year, with further disposals planned and in progress’, said Montgomery.

Montgomery said he had increased allocation to ‘higher growth sectors and larger assets with strong fundamentals’ and added that he has ‘a pipeline of positive activity including regears with major tenants in return for sustainability-related asset improvements’.