As noted above, we conduct an annual ESG Questionnaire for every one of our investee companies, and we also conduct regular quarterly asset management reviews for each business in the portfolio. These two mechanisms provide a broad reaching platform to monitor ESG metrics and targets. For example, our questionnaire includes data on staff diversity, workplace safety and emissions. Also captured are statistics on alignment with our Five minimum standards as well as UN PRI aspects. There is also scope within the questionnaire for monitoring and reporting against specific ESG metrics that are uniquely relevant to that particular business. The questionnaire, as well as the asset management reviews, also provide a ‘check-in’ on specific initiatives and targets, as well as assessment of compliance with a variety of governance touch points and items, such as Board composition and necessary policy setting.
A further area for monitoring ESG metrics, KPIs and targets is at Board level. Typically, Board meetings are held monthly or quarterly. Board reporting includes scorecards with ESG components. The scorecards include a mix of industry-based standards, which are fairly well developed in the OECD markets in which we operate, and internally generated standards or KPIs, which may be applied to the management team by investors. These standards and scorecards are tracked by management and monitored by the Board (and the independent bodies or certifying associations, as relevant). Our businesses monitor and report against safety metrics and have zero accident targets, in accordance with our Minimum standards. Others have social and governance targets around things like response and repair times in the event of a fault – these are all monitored and reported as necessary.
Other metrics are developed over time, such as gender balance within the workforce. Issues such as these are typically reported on to the Board of each business annually. Other ESG topics can play out more slowly, but are nonetheless monitored closely. For example, considering Board composition with an in-depth Board and governance review may only occur when there is significant change at the Board or otherwise typically annually or every two years.
We aim for all of our portfolio companies to be industry leaders and to implement best practice standards and procedures into their operations. Many of our businesses have ambitious ESG targets. For example, Anglian Water Group has significant carbon reduction targets over time, and Brisbane Airport has recently announced new public targets across emissions, energy, water and waste, including a 50% reduction in scope 1 and 2 emissions by 2030. Nordion, our gas networks in Sweden promote and support the national roadmap to become carbon neutral and to replace natural gas in the system by green gas.
Ongoing management of ESG issues, as with all risks and opportunities that go to value, are considered by our investment team on an ongoing basis. Where changes are required, this can involve action plans for exploiting an opportunity, remedial work to mitigate a risk, or ultimately a divestment if exit is considered the most valuable option.
Finally, our investee companies themselves often take to specific monitoring and reporting of ESG issues, either to the public or relevant stakeholders, such as regulators. For example, many of our investee companies produce and publish standalone sustainability reports, some (such as Adelaide Airport) address sustainability report by way of an Integrated Report. Others, like our Australian airports, produced cyclical Master Planning documents, which include several ESG topics such as environmental sustainability integrated into the master plan, which is then subject to public review and comment.