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Colonial First State Global Asset Management (including First State Investments)

PRI reporting framework 2016

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Outputs and outcomes

INF 20. ESG issues affected financial/ESG performance

20.1. Indicate whether your organisation measures how your approach to responsible investment in Infrastructure investments has affected financial and/or ESG performance.

Describe the impact on:
Impact
Funds' financial performance
Describe the impact on:
Impact
Funds' ESG performance

20.2. Describe how you are able to determine these outcomes.

Our approach to responsible investment is one where driving value for our investors is paramount. This means that, for instance, when making an investment decision that decision is optimised by careful diligence of all factors affecting value, including ESG factors. It also means that in the ongoing operation and maintenance of our infrastructure businesses, ESG initiatives are supported by robust business cases that drive investor value. Several measures are used across the range of our portfolio of infrastructure businesses to assess financial performance from ESG initiatives, including:

  • Business case assessments focused on return on capital - for example a water saving initiative which has an upfront capital cost will also provide a reduction in the amount of potable water consumed by the infrastructure business. This will have a direct financial benefit through a reduction of operational costs. This cost/benefit outcome can then be used to determine a return on investment measure for the business case.
  • Achievement of an ESG outcome for no net increase in unit cost - for example the reduction in embodied carbon in concrete used in the construction of new assets for no net increase in supply cost of that asset (benchmarked against previous provision of similar assets) reduces the carbon exposure of the business at no additional cost to the delivery of the infrastructure.
  • Reduction in pollution or other regulatory compliance breach events - each event has a cost to the business to rectify. The reduction of the occurrence of these events provides a direct and definable reduction in this response cost to the business.
  • Time delay outcomes - projects can be delivered on time through good community and workforce engagement. If a project is delivered early then this will have a direct benefit to the financial performance of the business.

ESG performance measures include:

  • Resources use (water, energy, materials)
  • Waste generation
  • Carbon generation
  • Safety performance
  • Days of operational interruption (from protests, strikes, regulatory intervention)

It can also be measured by individual asset accreditation; for example, some of our airport investments have recently achieved higher levels of Airport Carbon Accreditation.


INF 21. Examples of ESG issues that affected your infrastructure investments

21.1. Provide examples of ESG issues that affected your infrastructure investments during the reporting year.

ESG issue
          Environmental - climate related (storms, floods)
        
Types of infrastructure affected
          All physical infrastructure potentially affected
        
Impact (or potential impact) on investment
  • Physical inundation of assets making the infrastructure inaccessible and unusable
  • Power outages
  • Delay or cancelation of services
  • Penalty payments or loss of incentive revenues
  • Financial costs for repair or replacement of assets
Activities undertaken to influence the investment and the outcomes
  • Appropriate capex programs to mitigate the risk of physical impacts of climate related events (incl. impacts from climate change)
  • Establishment of incident response procedures, time effective implementation
  • Active engagement and communication with customers through media, social media and calls, 22,000 free meals served to customers, proactive calls to vulnerable customers
  • Active engagement and communication with regulators and governments with a view to receive cost compensation
ESG issue
          Environmental - Renewable energy policies
        
Types of infrastructure affected
          All infrastructure with an energy requirement 
Electricity grids with obligation to connect renewable generation
All infrastructure assets with direct and indirect emission
        
Impact (or potential impact) on investment
  • Opportunity to install renewable generation capability to participate in the Renewable Energy Targets
  • Operational challenges for intermittent energy
  • Growth opportunities through regulated investment budgets
  • Additional investment requirements for emission reduction
Activities undertaken to influence the investment and the outcomes
  • Acquisition of portfolio of wind farms in Portugal
  • Installation of Australia's largest airport rooftop solar PV system
  • Utilisation of biogas from water treatment plants
  • Improve network resilience
  • Agree delivery of investment projects with regulators
  • Assessment of use of alternative fuel - switch diesel to electric
  • Reduction of embedded carbon in investment projects
ESG issue
          Social - Health and safety
        
Types of infrastructure affected
          All Infrastructure assets
        
Impact (or potential impact) on investment

Implementation of H&S procedures to secure:

  • Safety of passengers (ferries, airports, etc), clients and the public (construction in public places) 
Activities undertaken to influence the investment and the outcomes

Regular review of the procedures and updates to manuals have been implemented to avoid similar incidences reoccurring. 

Safety at workplace is paramount for our assets; all portfolio assets are OHSAS 18001 or equivalent accredited.

ESG issue
          Governance – governance codesand policy changes
        
Types of infrastructure affected
          All companies
        
Impact (or potential impact) on investment

Implementation of different corporate governance codes in different jurisdictions.

Changes to company structures and board voting procedures.

Activities undertaken to influence the investment and the outcomes

Application of most advanced corporate governance codes across all portfolio companies whilst respecting specific local circumstances.

Engagement of independent non-executive board members.

Establishment of subcommittees to the board.

ESG issue
          Social – Community impact of infrastructure
        
Types of infrastructure affected
          Physically imposing infrastructure in populated areas, e.g. airports
        
Impact (or potential impact) on investment

Impact on social license to operate.

Legal permitting and licensing process. 

Activities undertaken to influence the investment and the outcomes

Community and political engagement.

Investment in mitigation measures.

21.2. Additional information.


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