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Dalmore Capital

PRI reporting framework 2017

You are in Direct - Infrastructure » Post-investment (monitoring and active ownership)

Post-investment (monitoring and active ownership)

Overview

INF 14. ESG issues in post-investment activities

14.1. Indicate if your organisation, and/or operators, consider ESG issues in post-investment activities relating to your infrastructure assets.

14.2. Indicate how your organisation, and/or operators, considers ESG issues in the following post-investment activities relating to your infrastructure assets.

14.3. Describe how your organisation, and/or operators, considers ESG issues in post-investment activities related to your infrastructure investments. [Optional]

The environmental focus during the post-investment phase is on ensuring adherence with environmental legislation, policy and best practise as it continues to evolve and develop.  This may include implementing new procedures or monitoring practises, educating Dalmore staff and other stakeholders and participating in industry and government consultations. 

Most recently, an construction industry wide issue has materialised regarding the passive fire proofing of compartments within buildings. Buildings regulations require that where compartments are compromised by pipes, cables and other services, that they should be protected and sealed so as not to impair fire resistance.  The construction industry has generally been slow to adopt these requirements and initial construction works and/or subsequent variations and maintenance works may not be fully compliant.

Infrastructure assets are no more affected that other buildings, but there has been an initial focus in this area, given the restricted mobility of users of certain infrastructure assets (ie hospitals) and that the terms of construction contracts used for infrastructure assets, usually require the contractor to be responsible for rectifying latent defects for a period of 12 years.

Since becoming aware of this issue, Dalmore has worked to understand the impact on its portfolio.  Dalmore has appointed a fire-stopping consultant to work across the portfolio, to liaise with project companies and their sub-contractors to identify compliance with fire safety requirements, to commission surveys of buildings, to liaise with public sector clients and contractors to arrange for rectification of issues found and to ensure that the costs are met by the appropriate party.

The social focus during the post-investment phase is mainly on building and maintaining the relationship with the public sector client.  This typically means responding to issues raised by the public sector client in a prompt and proactive fashion to ensure that they get best use of the facility within the terms of the agreement for the asset.  In some instances there are opportunities to work with the public sector client make changes to facilities and or the level of services provided over the course of a concession.  This may include providing additional facilities or changing the nature of facilities to meet the evolving need or to remove facilities as demographics or demand changes over time.  The level and type of services may change over time too; in recent years there has been a focus on reducing government expenditure and project agreements have been changed to remove or downgrade services which were initially specified by the public sector, but which are now considered to provide less value.

The governance focus during the post-investment phase is mainly on proactively monitoring performance of project companies, intervening when necessary protect the interests of the project, investors and other stakeholders, escalating issues to Dalmore senior management, which require shareholder input.  Aligned with this is external reporting to investors to make sure that they are kept appraised in a timely and transparent way as to the operational and financial performance of funds and individual assets.  In addition to reporting on a quarterly basis to investors, Dalmore holds advisory committees, AGMs, investor days and site visits for investors to discuss reports, performance, to highlight particular issues and to discuss the general development of the infrastructure sector.

As part of the governance focus, Dalmore also participates in formal consultations and informal discussions with the government about aspects of the development of the infrastructure sector.  Most recently, we have participated in government discussions and consultations to:

Encourage more pension funds and long-term investors to invest in the infrastructure sector;

Advise the government what the infrastructure investing industry and Dalmore specifically is doing on fire-stopping

Provide input on the implementation and effect on investors of the BEPS initiative

Encourage further inward investment into UK infrastructure assets


Infrastructure monitoring and operations

INF 15. Proportion of assets with ESG performance targets

15.1. Indicate the proportion of infrastructure assets where your organisation, and/or operators, included ESG performance in investment monitoring during the reporting year.

 (in terms of number of infrastructure assets)

15.2. Indicate ESG issues for which your organisation, and/or operators, typically sets and monitors targets (KPIs or similar) and provide examples per issue.

List up to three example targets per issue

          Lifecycle maintenance costs
        
          Availability and service point deductions and whether passed down to sub-contractors
        
          Buildings defects identified particularly related to fire stopping and wall ties and external surveys done before the expiry of a 12year latent defects period.
        

List up to three example targets per issue

          Relationship with public sector client
        
          Service delivery and impact of this on clients and users of facilities.
        
          Implementation of anti-bribery policy and keeping record of corporate gifts/events.
        

List up to three example targets per issue

          Adherence with banking covenants – risk of lock-up
        
          Financial performance against target
        
          Risk of delay in distributions
        

15.3. Additional information. [Optional]


INF 16. Proportion of portfolio companies with ESG/sustainability policy

16.1. Indicate if you track the proportion of your infrastructure investees that have an ESG/sustainability-related policy (or similar guidelines).

16.2. Indicate the proportion of your infrastructure investees that have an ESG/sustainability-related policy (or similar guidelines).

(in terms of number of infrastructure investees)

16.3. Describe how your organisation, and/or your operators, contribute to the infrastructure investees’ management of ESG issues. [Optional]

Dalmore believes in proactively exercising our shareholder and governance rights as long-term custodians of the assets in which we invest and to developing and implementing strategies that enhance wider stakeholders as well as shareholders’ experiences. We ensure that project investments have appropriate anti-bribery, health and safety and community engagement policies.


INF 17. Type and frequency of reports received from investees (Private)


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]

Maintenance forms a significant proportion of the management time applied to the management of the assets in which Dalmore invests.  This will be focused on two main areas being:

Proactive, reactive and preventative maintenance undertaken by sub-contractors to ensure that the building is provided in the best continuous state to facilitate the delivery of essential public services.In the event that facilities fall below required levels, then the public sector client may be entitled to levy a deduction in the revenue it pays which would typically be passed down to the sub-contractor that is responsible for maintenance.Dalmore will focus on monitoring and understanding areas of underperformance and liaising between contractor and public sector client to improve performance and resolve any disagreements. As part of this in the last year building surveys, some intrusive, were carried out accross the whole of our portfolio to identify potential building defect and where issues were identified these were addressed in a timely manner while managing client expectations. External audits of contractors providing facilities management services on sites was also carried out during the year to ensure that these services were provided as per the required specifications and at a reasonable quality.

Lifecycle management, being the replacement of key components of a building that have a useful economic life of less than the concession length.Dalmore’s focus will be on ensuring that lifecycle replacement budgets are sufficient to meet the needs of the project and that expenditure is targeted to be incurred at the right time and on a value for money basis.This needs-based approach to lifecycle maintenance is considered to be a significant improvement on the budget-led approach of traditional public sector expenditure.It should allow facilities to maintained to a consistently high standard.


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