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First Sentier Investors (including First State Investments)

PRI reporting framework 2016

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Infrastructure maintenance

INF 18. Proportion of maintenance projects where ESG issues were considered

18.1. Indicate the proportion of active infrastructure maintenance projects where ESG issues have been considered.

(in terms of number of active maintenance projects)

18.2. Describe your approach to ESG considerations for infrastructure maintenance projects. [Optional]

Major and ongoing maintenance forms a large part of the expenditure line for most infrastructure businesses. As such it is an area where there is significant scope for driving value. As highlighted in Section 16.3 we have an active approach to managing, monitoring and reporting on ESG matters across our entire infrastructure portfolio.

The drivers for ESG considerations include:

  • Proven economic benefit (makes good business sense);
  • Focus on sustainability drives operational efficiencies; 
  • Mitigation to climate change effects (rising seawater levels etc.) drives investments to secure asset's sustainability;
  • Compliance with existing regulation (note: many of our portfolio infrastructure businesses operate in the European Union which has some of the highest standards with respect to environmental regulation in the world); and
  • Leading the implementation of ESG considerations increases the resilience against changes in regulation;
  • Investors looking for responsible and sustainably managed investments.

Management teams within our portfolio companies are incentivised to target ESG specific initiatives which move the company towards the top of their industry. As such the ESG targets shape every part of the business: from how the company procures its services, manages its supply chains down to treatment of the natural resources it exploits.

Below are some examples of ESG considerations for Infrastructure maintenance projects:

  • On a recent pipeline maintenance program, environmental issues were considered to minimise the potential for future leaks and spills.
  • Recent focus has been on supply chain improvements in the ESG space for supply contractors to our businesses, particularly in relation to energy use and embodied carbon. Our regulated water utility in the UK, for example, is on track to reduce embodied carbon on all new capital investments by 50%. This will be a significant achievement and has been achieved without significant escalation of input costs to the maintenance programs. On the contrary, in most of the cases a clear and quantifiable economic benefit could be achieved.

Contractors’ compliance with portfolio companies ESG targets is controlled through setting up procurement processes which drive ESG outcomes and allow contractors to innovate in their contract delivery to ensure cost efficient ESG outcomes. These procurement processes generally reward contractors for better ESG outcomes via incentive payments or sharing of company financial benefits.

The long term ownership of portfolio assets allows for long term procurement strategies, which help suppliers and manufactures to optimise their processes, produce more efficiently and reduce costs. This allows for economic outperformance of capex plans which in turn will benefit customer through lower cost for the services provided.

18.3. Additional Information. [Optional]

Another focus has been on full life cycle ESG impacts and managing the individual assets over their whole life. This may or may not involve a higher upfront cost (asset replacement vs maintenance), but delivers whole of life savings on things such as resource use (energy for example) and better environmental outcomes (such as reduced carbon output or embodied carbon).