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

PRI reporting framework 2017

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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, both of our airport investments have recently achieved higher levels of Airport Carbon Accreditation (ACI Level 3, ‘Optimisation’). 


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
          Social license to operate
        
Types of infrastructure affected
          Infrastructure with a physical or financial impact on the community
        
Impact (or potential impact) on investment

Loss of social licence to operate, which can lead to restricted operations, difficulty in completing projects, or loss of assets.  

Activities undertaken to influence the investment and the outcomes

Community and political engagement. 

Investment in measures that mitigate negative effects. 

Consideration of community impacts (e.g. price rises on electricity bills) of business plans.  

ESG issue
          Environmental / Climate
        
Types of infrastructure affected
          All physical infrastructure
        
Impact (or potential impact) on investment

Physical impacts of the climate may lead to unusable infrastructure, which may flow onto delays, costs or repair or replacement, lost revenue, and lost services for the community.  

Activities undertaken to influence the investment and the outcomes

Appropriate capex (new build and maintenance) programs; for example, undergrounding of electricity distribution cables for storm-proofing, or increased runway heights to allow for rising sea levels and storm surges. 

Establishment of effective incident response programs. 

Active engagement with communities and regulators.  

ESG issue
          Renewable energy policies
        
Types of infrastructure affected
          Energy production and distribution infrastructure 
Infrastructure with energy requirements and/or exposure to emissions
        
Impact (or potential impact) on investment

Policy-specific impacts on generation facilities, by way of mechanisms such as carbon price, feed-in-tariffs, or renewable energy targets. 

Operational impacts for distribution networks. 

Opportunities for diversification of energy supply.  

Activities undertaken to influence the investment and the outcomes

Acquisition of renewable energy generation facilities (including utility-scale, as well as small-scale embedded energy).

Capex to improve network resilience. 

Capital investments for embedded solar PV generation facilities.  

ESG issue
          Health and safety
        
Types of infrastructure affected
          All infrastructure assets
        
Impact (or potential impact) on investment

Safety of staff, contractors, users, and the community.  

Activities undertaken to influence the investment and the outcomes

Review and updates to ensure best practice safety policies and procedures are in place across all portfolio companies.  

Implementation of safety standards, where appropriate.  

ESG issue
          Governance
        
Types of infrastructure affected
          All infrastructure businesses
        
Impact (or potential impact) on investment

Appropriate running and management of the company in a long term, sustainable way. 

Activities undertaken to influence the investment and the outcomes

Implement appropriate governance protocols and structures etc. e.g. board sub-committees. 

Appropriate Board composition and engagement of independent directors.

21.2. Additional information.


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