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

PRI reporting framework 2017

Export Public Responses

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Pre-investment (selection)

INF 08. Incorporating ESG issues when selecting investments

08.1. Indicate if your organisation typically incorporates ESG issues when selecting infrastructure investments.

08.2. Describe your organisation's approach to incorporating ESG issues in infrastructure investment selection.

Our pre-investment ESG assessment approach incorporates the following elements:

  1. All new investment opportunities are subject to an initial assessment process. This process determines the potential suitability of an investment according to our investment strategy. Part of this initial process will be to screen for high level risks and opportunities. This risk assessment will include ESG issues. For example, upon its initial assessment, we declined to pursue an investment opportunity in a particular sea port that had a large exposure to coal trading; and similarly we have rated highly in this initial assessment certain investment opportunities in the renewable energy sub-sector, noting the industry's strong prospects in the energy market's future generation fleet.
  2. Costs and benefits are attributed to ESG issues over the life cycle of an investment (value attribution). This enables the net benefit (either quantitatively or qualitatively) to be monitored over the life of the investment. This information will assist in maximising portfolio returns over time by capturing a full spectrum of risks and opportunities in the investment. A broad risk assessment framework is used to identify the potential issues and opportunities for each infrastructure investment. Our approach to valuing new investment opportunities includes a long-term forecast period, often exceeding 20 years.  The long-term forecast inevitably captures ESG considerations in the valuation of each investment opportunity. 
  3. A risk and opportunity assessment based approach is embedded in the responsibilities of a number of individuals across the internal infrastructure investment team to ensure a broad and continuous focus on the ESG issues. This also facilitates a sharing of knowledge and ideas across the broader group and across asset responsibilities.
  4. We ensure that we are aware of potential regulatory or industry requirements with ESG implications (e.g. the introduction of a carbon tax/market scheme in a particular jurisdiction) via industry contacts and industry participation. Having our investment professionals up-to-speed on a broad range of industry-specific issues, including ESG issues, helps to perform initial investment opportunity selection on an industry level.
  5. To incorporate learnings from existing investments on ESG issues into new investment assessments; “experience is the best education”. These include learnings from the impact of issues such as global warming (rising sea levels, drought, etc.), changes in social behaviour (consumption patterns, population growth, ageing demographics, technological change, new policies etc.), and also provides opportunity to add value by identifying opportunities and taking steps to mitigate potential risks at the portfolio and infrastructure business level. 

INF 09. ESG advice and research when selecting investments

09.1. Indicate whether your organisation typically uses ESG advice and research sourced internally and/or externally when incorporating ESG issues into the infrastructure investment selection process.

          Asset Managers - accredited ISCA IS
          Global Head of Responsible Investment
          Head of Responsible Investment Asia

09.2. Additional information.

Internal staff have the ultimate responsibility to make the final recommendation to the relevant investment committee on investments but will take a range of advice in forming that recommendation including external advice on ESG issues associated with an investment opportunity. Our commitment to Responsible Investment means maintaining internal capability with the highest quality investment professionals across asset classes and across other specialisations. Our internal investment team staff are trained in ESG issue identification to ensure appropriate ownership of ESG issues is embedded in the internal investment teams.

A risk-and-opportunity based approach is part of the responsibilities of the investment team to ensure a broad and continuous focus on ESG issues. While the Unlisted Infrastructure team is responsible for providing robust ESG assessment of investment opportunities and existing businesses, the team also draws on the specialist Responsible Investment team within the broader organisation.

We maintain a dedicated Responsible Investment team, with global and local leadership. The resources from the Responsible Investment team are drawn on to enhance the inherent capability of the Unlisted Infrastructure investment team. The business also maintains an ESG Committee, with members drawn from both the Responsible Investment team as well as various investment teams including Unlisted Infrastructure. The ESG Committee has previously, for example, published papers on stranded asset risks, particularly in relation to fossil fuel related infrastructure.  The committee currently has established working groups on: remuneration; human rights; and the physical impacts of climate change.

Our internal team members also draw on external resources and publications. For example, for the evaluation of ESG issues we also frequently refer to guidelines and recommendations given by the IFC / World Bank with respect to the relevant sectors.

External resources are also used to supplement the skill base of the Unlisted Infrastructure team and the dedicated Responsible Investment team. These external resources are employed on a project-by-project basis as required. The typical due diligence process associated with a large infrastructure investment will involve environmental and technical advisors on environment impacts and asset condition. Additional advice may be sought on legal liability issues or on social licence to operate issues should they be relevant to the particular asset. Also corporate governance will be reviewed and compliance with good corporate governance codes assessed. For example, we employed specialist external environmental advisors for our detailed due diligence and bidding for a sea port where environmental risk and contamination was a significant factor. More recently, we engaged specific regulatory advisors as part of our successful bid for and acquisition of a regulated gas network business. In our due diligence of an investment opportunity in a district heating business, our technical advisors assisted with the consideration of the long-term impact of climate change on the heating requirements of community users.  The specific advice supplements the knowledge of the investment team and ensures that we submit fully considered bids, which ultimately drive value for investors.

Our investment strategy is to manage a large, in many cases 100%, interest in each individual business to enable value added contribution via board and board committee representations. Our team members have a variety of backgrounds and expertise. Some members have a financial or legal background, while others have first-hand operational experience. The background and experience of the team members is reflected in the allocation of board membership and support tasks, thus allowing for active involvement and support of the management teams where ESG is concerned.

INF 10. Examples of ESG issues in investment selection process

10.1. Indicate which E, S and/or G issues are typically considered by your organisation in the investment selection process and list up to three typical examples per issue.

ESG issues

List up to three typical examples of environmental issues

          Emissions, pollution and contamination
          Physical impacts of climate change
          Resource use and availability

List up to three typical examples of social issues

          Social licence to operate and stakeholder engagement
          Labour relations
          Health and safety

List up to three typical examples of governance issues

          Board structure and composition
          Executive remuneration and incentives
          Regulation and compliance

10.2. Additional information. [Optional]


  • Contamination and pollution risks are considered in terms of both existing and future potential contamination. This will include a physical assessment where possible, as well as appropriately robust mechanism (legal and otherwise) to deal with the potential impacts of contamination.
  • As an example of our consideration of CO2e emissions, we were recently assessing an investment opportunity in a renewable energy project and as part of that assessment had to consider the emissions intensity of the entire generation fleet in the region and assess the renewable generators’ favourable position within that market.
  • The environmental impacts of building and construction works (new build and maintenance capex) including lifecycle carbon cost are often considered. This is a vital part of any investment consideration in "real assets" such as infrastructure, whether it be a new greenfield development, or maintenance capital works on existing assets. Other examples of the consideration of resource use and availability includes our recent assessment of renewable bio fuel fired energy generation and our assessment of the availability of the resource, both in the immediate term but also for the long term. 
  • The physical impacts of climate change are also vitally important to investment in real assets. For example, for a new runway project at one of our airports that is located next to a bay, we considered the likelihood and impact of severe events like storm surges, combined with sea level rises in order the determine the parameters of the project (e.g. runway height, seawall construction etc.). And for our recent consideration of an investment opportunity in a sea port, we had to consider the long-term increased likelihood of cyclonic activity and its potential impact on the port infrastructure. 


  • The consideration of labour relations is another important part of our investment process. This is particularly true for infrastructure businesses, many of which were previously under government/public ownership. In one example of a recent investment, we were able to arrange funding of the underfunded deficit of the company’s defined benefit pension scheme, which not only reduces the risk to employees but also created an opportunity for the business to implement a more sustainable and stable pension scheme. 
  • The Social License to Operate is invaluable for an infrastructure business owner. As we like to say, 'infrastructure businesses are owned by investors but belong to the community'. For example, at one of our airport businesses, we opened an 'experience centre' for members of the community to experience the impacts of aircraft noise projected under a new project.  As another example, in the initial assessment one of our recent pipeline investments, we considered the public information sharing on emergency response procedures
  • Health and safety is a vital consideration, particularly for investment in infrastructure assets.  Our investment assessments include an analysis of the company’s current safety performance as well as areas for improvement as relevant. 


  • Optimal board composition, including independence (for example, we have a preference for an independent chair) is important for good governance.
  • As part of our strategy to acquire significant or controlling stakes in portfolio companies we also review the existing corporate governance and either seek relevant influence through the shareholders' agreement, which will give us rights with respect to board composition or even full control over corporate governance.
  • We review compensation packages using independent specialised advisors and we implement governance rules and codes according to good corporate governance guidelines.
  • We also seek to maintain good quality interactions with the relevant regulators and public bodies, compliance with all laws and regulations and adoption of voluntary best practice standards.

INF 11. Types of ESG information considered in investment selection

11.1. Indicate what type of ESG information your organisation typically considers during your infrastructure investment selection process.

          Our own comparative data

11.2. Additional information.

As part of our regular investment selection and assessment process, we consider the full range of ESG issues and this usually commences with an assessment of the target business’ available data.  This data can then be supplemented by additional due diligence and research.  This is also combined with the wealth of stored information from many and varied due diligence undertakings as an investor in unlisted infrastructure since 1994. Our specialist external advisors will often provide additional asset or sector-level specific information.  All of this combines for a robust benchmarking assessment, which is a very useful component of judging investment performance and ultimately success. Our internal RI experts can often provide country level benchmarking and assessment, and combined with the investment team, benchmarking and compliance against standards (e.g. ISO, IFC).  Engagement with relevant stakeholders, even in the early stages of a potential acquisition opportunity, is important; and for example, in our consideration of a recent pipeline investment, we personally met with the relevant regulator to discuss the asset, the business, and the sector. 

We aim for all our portfolio companies to be leaders in ESG practices. We seek to implement as a minimum standards, such as ISO 9001, ISO 14001, ISO 50001, ISO 55001 and OHSAS 18001 or similar accreditations across our assets. Depending on the asset and where appropriate we also implement ISO 17025, ISO 22301 and ISO 27001.


INF 12. ESG issues impact in selection process

12.1. Indicate if ESG issues impacted your infrastructure investment selection processes during the reporting year.

12.2. Indicate how ESG issues impacted your infrastructure investment deal structuring processes during the reporting year.

12.3. Additional information.

As a long term investor it is imperative that we invest into infrastructure businesses that have regard to their environmental impact, improve health and safety, engage with community and follow best practise governance. These are the key principles followed when we invest into a new infrastructure businesses. In the last twelve months we participated in various transactional processes where ESG issues played an important role in our decision whether to invest or not.

Review of required industry standards and codes of conduct is common practise during our due diligence process. We aim for our portfolio companies to be leaders and encourage the implementation of best practice procedures and standards.

In a recent example, we were considering the acquisition of a district heating business, Here the consideration of ESG issues highlighted significant benefits and opportunities of the investment proposal.  In this case, the company demonstrated a market-leading position in renewable fuel sources for heat/energy generation across its portfolio.  Combined with an awareness of the local and regional regulatory environment, this particular issue provides an opportunity for value-enhancing expansion.  Consideration of these ESG issues provided one of the compelling investment highlights. 

In another example of the consideration of ESG issues leading to opportunities for value creation, we evaluated a potential investment in gas distribution infrastructure where changes in the energy mix of the broader market over time (specifically transitioning from coal-fired energy sources to gas) leads to tangible value-creation opportunities for this business. 

In another example, we were evaluating investment selection with a developer of renewable energy generation assets.  In this instance, the community engagement strategy and track record of the management team in community engagement was vital in assessing the risk of targeted future developments. 

We have also had recent examples of where consideration of ESG issues contributes to the abandonment of an investment opportunity. In one example, the infrastructure business provided some support to coal-based industry.  We quantified the risk through sensitivity analysis of the non-renewal of contracts associated with coal industries, and ultimately decided not to pursue the investment.