Our funds favour infrastructure assets that are making a positive environmental contribution, whether this be by reducing emissions, waste or by other means.
During the acquisition phase we consider multiple environmental factors, including but not limited to:
- Contamination and pollution risks. These are considered for both existing and potential future contamination. This will include a physical assessment where possible, as well as an appropriately robust mechanism (legal and otherwise) to deal with the potential impacts of contamination.
- The market impacts of climate change. For example, considering the global transition to low emission energy generation has helped inform new bids for renewable generation as well as examining possible impacts on businesses such as gas distribution networks.
- The physical impacts of climate change. These are vitally important to investment in real assets. Examples include the consideration of climate change induced rising sea levels and heightened flood risks in the development projects of a new low lying coastal airport runway, or in the replacement and maintenance program for our network utilities, or the undergrounding of transmission cables and backup plans for emergency recovery in response to increased storm frequencies and increased flooding. Due to the nature of our investments, we are convinced that contribution to Sustainable Development Goal #13 "Climate Action" is one where we can have significant impact.
- Building and construction works impact. New build and maintenance capex are 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. When investing in growth project extensions or replacement of assets, we challenge our management teams to assess alternative solutions with respect to their environmental impact.
Following acquisition, we encourage all our portfolio companies to actively manage and reduce the impact they have on the environment. For example:
- A gas network increasing the proportion of biogas that is transported via their pipelines
- Two ferry companies converting their vessels to be hybrid or fully battery-powered
- A district heating business increasing the proportion of renewable feedstock (e.g. biomass or geothermal wells) to generate heat
- An Australian water utility investing in additional treatment plant to deal with hotter, drier weather and increased demand for recycled water.
The consideration of the conditions of our workforce and labour relations is another important part of our investment process. This is particularly true for infrastructure businesses as many were previously under government/public ownership and many of the front line jobs are done by engineers that need a lot of training and continuous refreshing of their qualifications.
Health and Safety is always on the top of our agenda; it is a vital consideration for investment in infrastructure assets, due to the often risky nature of the work involved. Our focus will include the health and safety of direct staff, sub-contractors (as many activities are often outsourced), as well as health and safety of users and stakeholders of our public-access infrastructure.
Our investment assessments include an analysis of the company's current safety performance as well as areas for improvement as relevant. This is also consistent with another of our SDG priorities, Sustainable Development Goal #3 "Good Health and Wellbeing" and Sustainable Development Goal #8, “Decent Work”.
Furthermore, well balanced social plans, fair agreement with unions and growth potential which gives everybody an opportunity are a frequent consideration in the development of a business plan when acquiring a company. We support diversity, equality and representation throughout the organisation, this includes Board, executive management and operational levels. Frequently our companies provide apprenticeship programmes, schools for technicians and courses for engineers. We clearly see how our efforts can make contributions to two further SDGs which are Sustainable Development Goal #4 "Quality Education" where our businesses can contribute by encouraging staff development and continuous training and development; and Sustainable Development #5 "Gender Equality" where our businesses can contribute toward equality of remuneration and representation.
The social license to operate is invaluable for long-term custodians of infrastructure assets. As we like to say, 'infrastructure businesses are owned by investors but belong to the community'. For example, a new runway is about to open at one of our airport investments; managing the community engagement around issues like aircraft noise and airport access, as well as community and economic benefit, are being carefully managed.
Optimal Board composition, including independence of selected non-executive Board members (for example, we have a preference for an independent chair) is important for good governance. For example, one of our small parking businesses has experienced growth recently which allowed the appointment of a new director; we used this opportunity to appoint an independent director with complimentary Board skills. Wherever possible we also seek to increase the number of female executives and other non-executives in our management teams and company Boards.
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 implement and review compensation packages to ensure proper alignment of interest between executive management, external Board members and shareholders, using independent specialised advisors and we implement governance rules and codes according to good corporate governance guidelines, such as UK corporate governance code or other relevant codes, such as the ASX Corporate Governance Principles and Recommendations in Australia. We also include our own governance check list as part of our regular asset management reviews.
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.