This statement is based on the requirements of the EU Regulation on Sustainable Finance Disclosure Regulation (“SFDR”) which requires financial market participants to provide information to investors on how sustainability risks are integrated into the investment decision-making process. The objectives of SFDR include integrating sustainability into the financial system and helping steer the flow of capital towards sustainable investments.
Our Funds (defined below) will be classified under Article 9 of SFDR as they have sustainable investments (as defined in SFDR) as their objective. For more information about these Funds, please see their corresponding pre-investment disclosure document available on the website for the relevant Fund.
This SFDR statement is supported by our Environmental Social and Governance (“ESG”) policy (referenced below) and published on the ESG section of our website (https://www.schrodersgreencoat.com/about-us/esg).
Greencoat’s approach to sustainable investment
Schroders Greencoat LLP (“Greencoat”) is one of the largest specialist renewable infrastructure managers in Europe, with over GBP 9 billion under management across a range of publicly listed vehicles, private market pooled funds and separately managed accounts (the “Funds” and each a “Fund”). We aim to generate stable, long-term returns through investments that help accelerate the transition to a net-zero carbon economy. Greencoat is supportive of any regulation that promotes sustainable investing, including SFDR, which is in complete alignment with our investment philosophy.
Our Funds invest in assets that have lifespans of over 25 years and invest on a buy and hold basis, meaning long-term sustainability is at the heart of our approach. All of our Funds invest in renewable power projects that generate clean energy, thereby contributing directly to global climate change targets. In 2020, the assets held by our Funds generated 5,954 GWh of clean energy, equivalent to 2.4 million tonnes of CO2 savings.
Integration of sustainability risk into Investment Process
At Greencoat we incorporate material sustainability factors throughout the investment process in the same balanced way we do with other key risks beginning from due diligence during acquisition, the ongoing operation of the assets, and to sustainably disposing of assets at the end of their lives. Our investment decision-making and asset management practices seek to identify areas of potential risk (including sustainability risk (as defined in SFDR) and opportunity that will impact the value of investments over the long term. The aim of ESG integration is to improve the risk/return profile of the Company by integrating sustainability aspects into the traditional investment analysis process. This enables us to focus on maximizing the positive effects of our investments, which includes production of electricity and heat from renewable sources and thereby reducing CO2 emissions).
Greencoat’s ESG policies at the Fund level and as investment manager enable different material factors to be considered according to what is appropriate to different markets (e.g., wind, solar and bioenergy) and the needs of each Fund. Greencoat’s policy is reviewed at least annually and approved by Greencoat's Risk Management Committee. It outlines specific areas of focus given the real asset nature of the investments, namely: environment, workplace standards, health and safety practices, governance including compliance with applicable laws and regulations, and local community engagements.
Prior to investment, ESG factors (e.g., environment, workplace standards, health and safety practices, governance including compliance with applicable laws and regulations, and local community engagements) are documented, considered in due diligence, and reported, along with any mitigation plans, to the Funds’ Investment Committees.
More specifically, the Investment Committee Papers include a dedicated ESG section which seeks to cover the key sustainability risks and sustainability-related opportunities by reporting on, for example:
The Investment Committees then determine whether the risk/reward profile is acceptable and assesses any recommended post-acquisition mitigation plans.
Where potential sustainability risks are identified as part of the due diligence process, these are either i) mitigated to an acceptable extent, ii) considered within the purchase value respectively, or iii) rejected, where the sustainability factors are sufficiently material that they cannot easily be remediated once acquired or they exceed risk tolerances.
Operating the Assets
Once an asset has been acquired by a Fund, Greencoat works with the third-party operators responsible for the day-to-day physical management of the assets to manage sustainability risks and opportunities. Working together with the third-part operators, Greencoat is committed to the following goals:
Principal Adverse Impacts
Identifying and Prioritising Principal Adverse Impacts
Greencoat seeks to monitor and to report on a comparable set of Key Performance Indicators (KPIs) across all our Funds. These are included in annual ESG reports of the Funds and Greencoat. These reports help identity and monitor any principal adverse impacts (PAIs), being impacts of investment decisions and advice that result in negative effects on sustainability factors.
These KPIs include, among others:
ESG reporting incorporates the KPIs described above and is prepared in compliance with the relevant ESG Policy for the reporting entity. ESG related information will be reported to investors at least annually in a dedicated ESG report for the Fund or business area. A firm-level an ESG report is published annually and is publicly available under the ESG section of our website. You can also find Fund level ESG reports on the website.
Description of the principal adverse impacts ('PAIs') and action taken or planned
As the investment vehicles managed by Greencoat invest exclusively in renewable energy infrastructure, the PAIs that we focus on include (but are not limited to): greenhouse gas emissions and biodiversity.
These PAIs (amongst others) have been used to inform our long-term investment stewardship and engagement policies set out in the remainder of this disclosure document. In terms of actions planned, Greencoat may engage directly with the management of portfolio companies and/or third-party service providers to better understand these impacts and/or take additional steps.
Greencoat recognises that engagement is critical to long term sustainable investment. We seek to build strong, long-term relationships with high-quality, experienced counterparties to give consistency of service and standards, allow for learnings across the varies businesses we manage and drive efficiency.
Where ownership rights permit, we aim to implement Greencoat's own policies, practices, responsible business management, and regular reporting and monitoring of ESG KPIs across all assets of the Funds we manage and with the third-party providers who we engage to manage the assets on our behalf. These include:
Where Greencoat Funds cannot implement their own policies (e.g., in a large wind joint venture with a utility), it will assess the policies in existence at investment and use its governance rights to the extent possible to ensure that appropriate policies are maintained.
None of the asset SPVs have employees or management teams and therefore any employee related social factors are focussed on the third-party service providers.
Adherence to responsible business codes and other relevant international standards
Greencoat believes that both investors and businesses have an important part to play in supporting the long-term development of the sustainable economy of the future.
Greencoat has been a signatory to United Nations Principles for Responsible Investment ("PRI") since 2016 and recently scored ‘A+’ in the ‘Infrastructure’ reporting module and ‘A’ in the ‘Strategy’ reporting module.
Greencoat has adopted the Task Force on Climate-Related Financial Disclosures (“TCFD”) framework across all Funds with many providing a TCFD statement in their report and accounts for 2020.
Greencoat Solar II adopted the Global Real Estate Sustainability Benchmark (“GRESB”) and the private markets team have been actively engaged with GRESB to refine its framework to fit the specific aspects of the renewable energy infrastructure before looking at rolling it out to other funds.
Greencoat’s remuneration policy is aligned with the business strategy, objectives, values and interests of each Fund managed by Greencoat. It promotes sound and effective risk management and discourages excessive risk taking. In accordance with SFDR, these remuneration policies have also been updated to integrate sustainability risk.