Foresight : Sustainable Investing In Infrastructure September 2021

SUSTAINABLE

INVESTING IN INFRASTRUCTURE

September 2021

Contents

Executive Summary

1: Approach to Sustainable Infrastructure	04
Sustainability, Sustainable Development and Sustainable Investing
Sustainable Investment Principles
Sustainable Infrastructure
Climate Change Risk and Resilience
2: Assessing Sustainability in Infrastructure	08
Investment Lifecycle and Process
Sustainability Evaluation Tool
Implementation of Sustainability Evaluation Tool
3: Commitment to Sustainability	12
External Affiliations
Internal Structure
4: Investment Programmes	18
Renewable Energy Generation
Sustainable Land and Food
Emerging Themes
Exclusions

Foresight Group

Since its establishment in 1984, Foresight Group ("Foresight") has grown from its origins as a technology focused venture capital firm to become a leading sustainability-led listed infrastructure and private equity investment manager with over £7.2 billion of assets under management.

Important Information

Foresight Group LLP is authorised and regulated by the Financial Conduct Authority and is also regulated by the Securities and Exchange Commission as an investment adviser since May 2021. This paper includes information obtained by Foresight Group from the companies referred to herein, publicly available material and from third party sources considered by Foresight Group to be reliable. Except as required by law, Foresight Group and its representative affiliates, partners, officers, employees, agents and consultants make no representation or warranty as to the accuracy or completeness of the contents of this review and take no responsibility for any loss or damage suffered as

a result of any omission, inadequacy or inaccuracy therein. Statements or assumptions in this review as to future matters may prove to be incorrect. Foresight Group makes no representation or warranty as to the accuracy of such statements or assumptions. Recipients acknowledge that circumstances and prospects may change, and the contents of this review will become outdated as a result.

Confidentiality

The information contained herein may be commercially sensitive. As such, recipients should treat this information in confidence as disclosure to third parties. The information in this review may not be reproduced in whole or in part, nor may its contents be divulged to any third party, without the prior consent in writing of Foresight Group. We would further request that after receiving any request for the provision of any such information under the Freedom of Information Act 2000 or any other statutory or regulatory provision you would consult with us as soon as possible.

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Executive Summary

'Investing for a smarter future' is the mission that underpins everything we do at Foresight. To us, this means creating a better world and accelerating the transition to a sustainable society. This mission is set at the highest level by the Group's Board, and case studies reflecting this strategy are available publicly on the `Investing for a smarter future' page of our website.

A smarter future means thinking about the impact of the ways in which our clients' capital is invested: constructing solar plants and wind turbines to power industry using renewable energy; acquiring battery storage assets; facilitating the rollout of clean transport and fibre broadband networks; supporting small businesses with growth capital and providing attractive investment opportunities for some of the World's largest and most sophisticated institutional investors. This paper sets out our approach to Sustainable Infrastructure and explains how sustainability is integrated throughout our investment, asset management and reporting processes.

The Foresight infrastructure team's purpose is to create a sustainable legacy for future generations through the pursuit of infrastructure investment opportunities that deliver

attractive risk-adjusted returns for investors alongside measurable sustainable impact. Sustainability sets the context for our investment strategies, which are aligned to international initiatives such as the Paris Climate Agreement and the United Nations Sustainable Development Goals. We believe that measuring ourselves against leading industry standards is crucial to ensuring we uphold our position in a global network of companies focused on addressing the sustainability challenge.

At a strategic level, our investment programmes are shaped around the long-term trends defining society and our relationship with the planet. We focus on resilient infrastructure and real asset sectors which contribute meaningfully to global sustainability targets. At an investment level, we evaluate our assets in accordance with our proprietary Sustainability Evaluation Tool (SET). The SET is an in-house tool that enables us to integrate sustainability and environmental, social and governance (ESG) factors across the investment lifecycle by identifying and evaluating a project's performance, and subsequently managing the risks and opportunities that are identified, to make improvements where possible.

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1	Approach to Sustainable Infrastructure
Set out below are the ways in which Foresight defines key sustainability-related terms. We note
that these terms are, by their nature, subjective. The following represents our interpretation

and approach.

Sustainability, Sustainable Development and Sustainable Investing

Foresight believes that Sustainability is a mode of

thinking that is applied by making viable and quantifiable

decisions that will offer continued, long-term societal and

environmental benefits. Sustainable Development applies

this concept to economic development that is conducted without the depletion of natural resources. The Brundtland

definition of Sustainable Development is useful in this regard:

"Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs".

Sustainable Investing entails both working within environmental and social limits, while also ensuring financial

sustainability. We must be able to invest in an asset or a company for the long-term in order to be able to provide for future generations' needs. For Foresight, sustainability goes beyond the simple consideration of ESG factors, and instead

we use the management of ESG factors as part of the toolkit

to achieve sustainability.

A useful way of understanding how sustainable investing

fits into the broader investment universe is through the 'Spectrum of Capital' framework. This framework maps out

the wide range of investment strategies that exist between

traditional "financial-only" investing and philanthropy. As a sustainable investor with a keen focus on delivering

measurable impacts, we are positioned on this spectrum as shown below:

Financial-only	Responsible	Sustainable	Impact	Impact-only

Delivering competitive financial returns

Mitigating Environmental, Social and Governance (ESG) risks

Pursuing Environmental, Social and Governance opportunities

Focusing or measurable high-impact solution

Limited or	Mitigate risky	Adopt	Address	Address	Address	Address
no regard for	ESG practices	progressive	societal	societal	societal	societal
environmental,	in order to	ESG practices	challenges	challenges	challenges	challenges
social or	protect value	that may	that generate	where returns	that require a	that cannot
governance		enhance value	competitive	are as yet	below-market	generate a
(ESG) practices			financial returns	unproven	financial return	financial return
			for investors		for investors	for investors

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Source: The Bridges Spectrum of Capital, 2015

1. Brundtland Commission, "Our Common Future", 1987

Sustainable infrastructure can be defined as assets that have inherently strong sustainability credentials due to the products and services they provide. At a strategic level Foresight specifically targets sustainable infrastructure, and then applies a sustainable investment approach through

the integrated consideration of ESG risks and opportunities at an investment level. This is referred to as "Sustainability Squared" investing, as shown in the top right quadrant below.

Strength of assets' sustainability credentials

Sustainability Squared

Sustainable Investing in Sustainable Infrastructure

Investment Level:

Sustainable Investing

			Sustainability Squared:
		Infrastructure that is	Infrastructure that is
		inherently sustainable	inherently sustainable and
		but does not benefit from	benefits from responsible
		responsible management	management of
		of ESG factors	ESG factors
		Infrastructure that is not	Infrastructure that is not
		inherently sustainable	inherently sustainable
		and does not benefit from	but benefits from some
		responsible management	responsible management
		of ESG factors	of ESG factors

Greater integration of sustainability & ESG considerations across the investment lifecycle

Forestry	Solar	Wind	Battery Shipping Aviation Oil & Gas	Coal
			Storage

Strategic Level:

Sustainable

Infrastructure

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