Pensions Infrastructure Platform

ESG Policy

The purpose of this document is to outline the basis on which PiP will consider ESG issues in both the operation of its business and as part of its investment and asset management processes.

Introduction

PiP takes the ESG issues associated with its operations very seriously.  It recognises the importance of adopting good standards in all areas of ESG and understands that ESG issues can and will have a material impact on the long-term performance of the infrastructure assets that it manages.  As a result, PiP has adopted certain corporate ESG policies and also embedded the assessment of ESG issues into its investment and asset management processes to ensure that any issues are identified prior to the final approval of any investment, and the ongoing monitoring of ESG issues within our investments post-completion is carried out effectively.

Corporate ESG Policies

Environmental

Office Space – PiP occupies a single office space in central London so, unlike many other asset management firms, has no need for employees to be travelling between offices.

The office space is primarily leased by the PLSA and the PiP board do not have significant control over the environmental performance of the space.  The following outlines the principal arrangements in place for the management of the environmental and social impact of the office.

Recycling – the company operates a paper recycling scheme that ensures that waste production is limited.

Heating/Cooling systems – the heating and air conditioning systems are maintained to ensure that they work efficiently and at optimum temperatures in order to limit energy wastage

Lighting – the lights in the building are energy efficient and all lighting operates on a timer so that they automatically switch off if there is no movement for 30 minutes

Printing – print settings will default to double sided printing and the use of recycled paper.  External printers are also used

Travel – PiP employees do travel to see potential investors but at this stage all travel is limited to the UK.  Trains and other forms of environmentally friendly transport are always preferred and meetings are scheduled where possible so that long distance trips incorporate multiple meetings

Third Party providers – before engaging with third party providers PiP will often undertake an RfP process and where practicable this will involve an assessment of their approach to ESG.

Social

Health and Safety – PiP takes health and safety in the workplace very seriously.  All employees undergo a health and safety assessment of their workplace when joining the organisation.

Governance

Board structure and independence – The PiP board is structured so that there is equal representation from our key stakeholders, PLSA and Founding Investors.  We have ensured that all Board members bring sufficient expertise in board governance and/or infrastructure.  In addition to Executive Board members and representatives of key stakeholders there is an independent Chairman who oversees the board.

Remuneration structures – PiP has established remuneration structures that are competitive, transparent and do not promote risk taking.

Auditor selection/independence of auditors – PiP’s auditors are BDO LLP who were selected in 2016 after an RfP process involving three top 10 auditing firms.  The decision was made by a panel of PLSA and PiP board members and neither BDO nor the individuals that work on the PiP account have any other involvement with PiP’s business.

 

Investment ESG Policies

The PiP investment team is committed to responsible investment and considers ESG issues carefully when analysing potential investments.

In the first instance the investment team places an emphasis on investments that have a positive environmental and social impact such as;

  • – Renewable energy projects or low carbon and climate resilient projects that develop the efficient use of natural resources
  • – Waste projects that promote the responsible and efficient waste management
  • – PPP projects that ensure the continued development of vital social infrastructure such as schools and hospitals
  • – Projects that encourage and promote staff welfare and wellbeing

Over and above the selection of investments that are by their very nature socially and environmentally responsible, the assessment of specific ESG factors is an integral part of the investment process.

Each investment must go through a rigorous review and obtain approval by the investment committee.  There are two significant steps in this process where ESG issues will be identified;

1. Initial approval prior to detailed due diligence – at this stage a ‘Deal Summary Paper’ is produced and presented to the investment committee for approval. Any ESG concerns and/or known potential deal breakers will be identified in this paper.

2. Final approval before investment – the final ‘Investment Approval Paper’ will provide the output of detailed due diligence. This paper will include any and all ESG issues that have been identified during due diligence.  ESG issues will be risk rated and where it is considered a high risk there will be an explanation of how the issue is being addressed as well as outline any ongoing monitoring arrangements where necessary.  Some of the ESG issues that may be reviewed as part of a deal are in the table below with examples of what would constitute a deal breaker;

 

ESG area Issue Deal breaker
Environmental Pollution Environmental report has identified unacceptable levels of pollution that have not been addressed
Fossil Fuels Total reliance on power sources that require the ongoing burning of fossil fuels and no clear plan for a reduction in use of those power sources.
Waste Any known prosecution for irresponsible waste disposal
Social Community impact Any accepted negative impact to immediate surrounding community
Health & Safety Previous prosecutions for health and safety issues without clear evidence that the issued has been addressed
Human rights Evidence of child labour during the manufacture and operation of an asset
Governance Conflicts of Interest A member of the PiP Board or investment team has a financial interest in asset to be purchased

The investment process is documented in detail and all members of the investment are required to adhere to it.  In addition, each investment team member has an agreed set of objectives which includes the requirement to carefully consider ESG matters in all the deals that they are assigned as ‘lead’ on.

Post-acquisition, PiP continually monitors, manages and records ESG issues as part of its active asset management procedures, and ESG monitoring forms part of each quarterly asset report to PiP’s Asset Management Committee. PiP also expects all infrastructure investees to make appropriate ESG disclosures, and where relevant implement their own ESG policy.

ESG factors are also included in performance targets and objectives where appropriate for PiP employees.

United Nations Principles for Responsible Investment

The UNPRI is an international network of investors working collectively to implement the six Principles for Responsible Investment, defined by the PRI as “an approach to investing that aims to incorporate environmental, social and governance (ESG) factors into investment decisions, to better manage risk and generate sustainable, long-term returns”. These Principles illustrate the growing importance and relevance of environmental, societal and corporate governance issues in investment practice. PiP, as a signatory to the PRI, is publicly committed to adopting these principles and incorporating them into our investment and ownership activities. PiP is required to report annually on our adherence to these principles, and from late 2018 our report will be publicly available from the UNPRI, and on the PiP website.