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Dalmore Capital

PRI reporting framework 2017

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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


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