Sustainability Related Disclosures

Sustainable Finance Disclosure Regulation (SFDR) Website Disclosure: Octopus Renewables Infrastructure Trust PLC

Summary

This disclosure relates to Octopus Renewables Infrastructure Trust PLC (the “Company”), and is provided for the purposes of Article 10 of Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (“SFDR”) as amended by Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (the “EU Taxonomy”), as supplemented by regulatory technical standards (“RTS”).

The core sustainable investment objective of the Company is to accelerate the transition to net zero through its investments, building and operating a diversified portfolio of Renewable Energy Assets to help facilitate the transition to a more sustainable future. Consistent with the long-term temperature goal of the Paris Agreement through the avoidance of greenhouse gas emissions, the investment objective of the company substantially contributes to climate change mitigation.

The Company considers principal adverse impacts (“PAIs”) of its investment decisions on sustainability factors as part of its investment due diligence processes, ensuring that investments do no significant harm to any environmental or social objectives by screening them through the Investment Managers’ ESG matrix. This includes those relating to

1. Environmental damage (carbon, biodiversity, water, and waste) and the mitigation measures in place (environmental impact assessments, habitat management plans, resource minimisation strategies, carbon reduction and measuring, alongside assessing counterparties); and
2. Investee company policies (or the counterparties managing the renewable assets) for social and employee matters (anti-bribery, corruption, human slavery, equality, diversity, and opportunity), unfair advantage and community relations (engagement and community benefit initiatives).

Core policies to ensure the Company adheres to its sustainable investment objective include the Company’s Investment Policy, ESG Policy, and the Investment Managers’ Responsible Investment Policy and Stewardship and Engagement Policy. All investments are expected to be aligned to the EU taxonomy.

Data provided in support of monitoring the ongoing achievement of the sustainable investment objective include

- £ capital invested into renewable energy assets
- ESG Matrix scores
- EU Taxonomy qualifying %
- GWh of renewable energy produced
- Number of homes powered by clean energy
- Tonnes of Carbon avoided alongside carbon avoided equivalents (number of trees required to avoid same carbon, number of cars off the road to avoid the same carbon)
- CO2e per MW estimated carbon intensity

The data sources used include investment committee papers, due diligence questionnaires, ESG matrix, technical information from developers, asset managers and construction managers, SCADA and wind management systems, Transparency International (for the corruption index) and Climate Scale (for climate change risk assessments).

(a) No significant harm to the sustainable investment objective


The Company considers principal adverse impacts of its investment decisions on sustainability factors as part of its investment due diligence processes, ensuring that investments do no significant harm to any environmental or social objective.

The Company considers that for renewable energy investments, the following principle adverse impacts on sustainability factors are the most material.

Table 1: Identification of Environmental and Social principle adverse impacts
Environmental factors Most material PAI 
Carbon Emissions: Whilst renewable energy investments enable a clean energy future and avoid many tonnes of carbon, the construction phase of renewable infrastructure development can be carbon intensive so measurement and mitigation policies should be assessed. The Investment Manager will review contracted outsourcers’ environmental policies and ways of working and will consider opportunities for carbon reduction initiatives and, where possible, build these into ongoing site management strategies. GHG Emissions 
Carbon footprint 
GHG intensity of investee companies 
Biodiversity: The Company recognises that although renewable energy plants aim to reduce greenhouse gas emissions and air pollution, they often depend on ecosystem services and can adversely impact biodiversity and ecosystems. Therefore, in selecting and managing investments, the Investment Manager considers the impact of any operations on the environment, mitigating potential adverse effects and enhancing biodiversity value where possible. Activities negatively affecting biodiversity-sensitive areas
 
Additional indicator:
Investments in companies without sustainable land/agriculture practices
Social and employee matters, respect for human rights, anti-corruption and anti-bribery Most material PAI 
Health and Safety of Workforce: Working on renewable infrastructure can be hazardous and keeping people safe is a priority of the Company. A H&S management system has been established and the Investment Manager takes action when needed to mitigate safety risks. The Investment Manager collates, manages and tracks to close out all safety, environmental and significant quality issues as part of the KPI Management process. Whistleblowing is encouraged and the Investment Manager maintains open communication channels between employees/contractors and management. A Whistleblowing Policy has been put in place. Action will be taken to remove counterparties who are not competent. Rate of accidents 
Human Rights in Supply Chain: The renewables sector (like every other sector) is subject to human rights abuse that needs to be mitigated. Heightened risk exists within supply chains for solar panels and batteries. The Investment Manager promotes fair treatment of all employees, irrespective of matters such as race, gender, nationality, disability, political, or religious beliefs. The Investment Manager works with suppliers to align to the Investment Manager’s supplier code of conduct. The Investment Manager will take action to exclude suppliers who do not meet the required standards. Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises
 
Lack of a supplier code of conduct
Bribery and Corruption: There are risks associated with a renewable project or asset achieving any permit, license, or authorisation through undue process, for example bribery and/or corruption. All appropriate due diligence is carried out to ensure that these risks are considered throughout the investment process. The Investment Manager does not directly or indirectly offer, pay, solicit, or accept bribes in any form and have put in place an anti-bribery policy and annual staff training. The Investment Manager adheres to the robust conflicts management process as laid out in their Conflicts Policy.Lack of anti-corruption and anti-bribery policies
Community Relations: Renewable energy projects can have impact on the local community around them. Positive engagement with communities and efforts to address community impact can mitigate these risks as the Investment Manager seeks a ‘just transition’ for workers and communities as the world’s economy responds to climate change.Number of community complaints 

Investments are screened as part of the ESG Risk Matrix assessment against areas that could do significant harm. The ESG Risk Matrix contains sections on Planet (environmental factors, such as biodiversity, water, and waste) and People (social and employee matters, human rights, anti-corruption, and anti-bribery matters) and aims to ensure that any potential adverse impacts are mitigated.

The renewables sector (like every other sector) could be subject to human rights abuse that needs to be mitigated and the Investment Manager ensures appropriate due diligence is performed, and that human rights, equality and anti-bribery and corruption policies are in place for service providers alongside the Investment Manager’s own policies. This ensures that investments are aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights. This is primarily achieved by only working with suppliers who align to a supplier code of conduct. In particular, the Investment Manager has a solar panel procurement policy to minimise the forced labour risks associated with the supply chain.

All proposed investments must meet the minimum sustainability criteria, as determined by the ESG Risk Matrix, completed during the investment process. The ESG Risk Matrix has a total score of 15. A minimum score of 9 must be achieved and is equivalent to “do not significantly harm” with a target score of 10.

(b) Sustainable investment objective of the financial product

The core sustainable investment objective of the Company is to accelerate the transition to net zero through its investments, building and operating a diversified portfolio of Renewable Energy Assets to help facilitate the transition to a more sustainable future, consistent with the long-term temperature goal of the Paris Agreement through the avoidance of greenhouse gas emissions, thereby substantially contributing to climate change mitigation.

(c) Investment strategy

a. Investment strategy used to attain the sustainable investment objective

The Company will achieve its sustainable investment objective through its Investment Policy and ESG Policy by investing in a diversified portfolio of Renewable Energy Assets in Europe and Australia.

The Company will predominately invest in assets that generate electricity from renewable energy sources together with non-generation renewable energy-related assets and businesses. The Company aims to achieve diversification through investing in a range of portfolio assets across a number of distinct geographies, with a mix of technologies.

As an impact fund, the Company ensures that social and environmental benefits are considered and maximised alongside financial returns, both at the time of initial investment and throughout the ongoing management of the portfolio.

b. Policy to assess good governance practices of the investee companies, including with respect to sound management structures, employee relations, remuneration of staff and tax compliance

Governance practices are assessed at the time of investment through the ESG Matrix which assesses indicators that would indicate material environmental, social or governance issues. The matrix assesses counterparty and investee company policies (or the counterparties managing the renewable assets) for social and employee matters (anti-bribery, corruption, human slavery, equality, diversity, and opportunity). Further information can be found in the Investment Managers’ Stewardship and Engagement Policy.

(d) Proportion of investments

a. Investment strategy used to attain the sustainable investment objective

The Company will achieve its sustainable investment objective through its Investment Policy and ESG Policy by investing in a diversified portfolio of Renewable Energy Assets in Europe and Australia.The Company will predominately invest in assets that generate electricity from renewable energy sources together with non-generation renewable energy-related assets and businesses. The Company aims to achieve diversification through investing in a range of portfolio assets across a number of distinct geographies, with a mix of technologies.As an impact fund, the Company ensures that social and environmental benefits are considered and maximised alongside financial returns, both at the time of initial investment and throughout the ongoing management of the portfolio.

*100% of investments EU Taxonomy-aligned



b. Policy to assess good governance practices of the investee companies, including with respect to sound management structures, employee relations, remuneration of staff and tax compliance

Governance practices are assessed at the time of investment through the ESG Matrix which assesses indicators that would indicate material environmental, social or governance issues. The matrix assesses counterparty and investee company policies (or the counterparties managing the renewable assets) for social and employee matters (anti-bribery, corruption, human slavery, equality, diversity, and opportunity). Further information can be found in the Investment Managers’ Stewardship and Engagement Policy.

(e) Monitoring of sustainable investment objective

The primary mechanism to monitor achievement of the sustainable investment objective is ‘£ Capital invested into Renewable Energy Assets’ and ESG Matrix scores for investment opportunities.

The Investment Committee and Board have the responsibility that no investments are made outside of the investment strategy and that the minimum ESG score is met. This ensures the sustainable investment objective is met.  

Other indicators reported and monitored are

- EU Taxonomy qualifying %
- GWh of renewable energy produced
- Number of homes powered by clean energyTonnes of Carbon avoided alongside carbon avoided equivalents (number of trees required to avoid same carbon, number of cars off the road to avoid the same carbon)
- CO2e per MW estimated carbon intensity

(f) Methodologies

The majority of data is collected during the investment process and then stored in the Investment Managers systems.

Ongoing data collection  for carbon intensity metrics and EU Taxonomy qualifying % is requested either directly from investee companies or as part of counterparty contracts from operations and maintenance providers, HSE providers, developers and/or external asset managers. External data is also utilised for example the corruption index from https://www.transparency.org/. . All data is consolidated, reviewed and signed off by the ESG team.

Renewable energy produced (GWh) is obtained directly form the Company’s portfolio of renewable assets.

To calculate the number of homes powered, the Investment Manager uses the potential annual production (MWh) based on our current portfolio, and the average annual energy consumption specific to the country of the asset; baselined using Ofgem’s average UK household energy consumption (MWh).

The International Financial Institution’s approach for harmonised GHG accounting is used to calculate tonnes of carbon avoided. This uses a common set of combined margin grid emission factors that are specific to the technology and the country of the energy asset to calculate tonnes of carbon avoided per MWh. To calculate the equivalent number of trees planted, the Investment Manager uses a conversion factor based on Forest carbon’s UK Woodland and Peatland carbon statistics. The conversion factor is based on a mix of different tree species, each with different carbon sequestration abilities in the ratios that they plant in the UK. The equivalent number of cars is calculated by using a factor for displaced cars derived from the UK government GHG Conversion Factors for Company Reporting.

(g) Data sources and processing

a. Data sources used to attain the sustainable investment objective of the financial product

Data sources include investment committee papers, due diligence questionnaires, ESG matrix, corruption index, technical information from developers, asset managers and construction managers, SCADA and wind management systems. Transparency International (corruption index), Climate Scale (climate change risk assessments)

b. Measures taken to ensure data quality

The Investment Manager reviews and challenges all data received from third parties, sense checking to similar assets. Third party sources are used where appropriate.We also use a partner organisations to support due diligence on investments including legal and technical advisors.

c. How data are processed

Data is usually received through spreadsheet submissions and consolidated or through online forms and platforms.

d. Proportion of data estimated

The proportion of data estimated depends on types of data. Estimations are used where data is unable to be collected from the underlying portfolio investments. No estimation is used for

- £ Capital invested into Renewable Energy Assets
- ESG scores for investment opportunities
- GWh of renewable energy produced
- Number of homes powered by clean energy
- Tonnes of Carbon avoided alongside carbon avoided equivalents (number of trees required to avoid same carbon, number of cars off the road to avoid the same carbon)

Some data estimation is required for

- CO2e per MW estimated carbon intensity
-
The estimated carbon intensity (%) is disclosed in the annual report for ORIT.

(h) Limitations to methodologies and data

a. Limitations to methodologies

With regard to EU Taxonomy compliance, the EU Taxonomy technical screening criteria is still evolving. The economic activities performed by the investments are expected to be Taxonomy-eligible through the technical screening criteria for Climate Change Mitigation. However, to be Taxonomy-aligned, assets would also need to meet the DNSH criteria set out in the EU Taxonomy. One of these, Climate Change Adaptation, requires “performing a robust climate risk and vulnerability assessment” taking into account “state of the art science for vulnerability and risk analysis and related methodologies in line with the most recent IPCC reports, scientific peer-reviewed publication and open source or paying models”.

As part of our due diligence, we evaluate alignment to the EU Taxonomy, conducting climate change risk assessments on all our investments. This is performed either by technical advisors, or through utilising Climate Scale, which provides high resolution climate data in a 2oC and 4oC scenario for climate change risk assessments. However, we are reliant on the quality of the tool as a data platform.

ORIT recognises the challenges in measuring its GHG emissions for all sites and activities. Quality and availability of data collected for conversion calculations can significantly impact accuracy of final emissions output. The specificity of the emission factors used to convert data into related emissions can also impact validity of final emissions output. The Investment Manager discloses the different categories of data points used to calculate the Company’s carbon footprint to transparently convey both the quality and accuracy of the carbon footprint reported. Best efforts are used to obtain as much information as possible from the investee companies. Where data is not immediately available, the Investment Manager carries out additional research, cooperates with third party data providers and external experts or makes reasonable assumptions.

b. Why limitations do not affect the attainment of the sustainable investment objective

The sustainable investment objective is to accelerate the transition to net zero through its investments, building and operating a diversified portfolio of Renewable Energy Assets, which limitations do not impact.

The limitations outlined above are in relation to the DNSH criteria. The Investment Manager believes that there are adequate processes and validation in place such that this risk is mitigated.

(i) Due diligence

It is the responsibility of the Investment Committee to ensure that principle adverse impacts on sustainability factors are considered in the investment process and mitigated before that investment is approved. The methodology of assessment includes an ESG Matrix which has a minimum threshold score. The materiality of risks identified in the ESG Risk Matrix are determined using guidance from the Sustainability Accounting Standards Board (SASB) framework, which identifies financially material ESG risks by asset class.  To enable completion, the Investment team commissions technical and legal due diligence, as well as having material counterparties complete ESG due diligence questionnaires. Once completed, this is then reviewed by the ESG team and “signed off” by the Fund Management and Operations Director, who is independent of the Investment team.

During the investment cycle, the ESG Risk Matrix assesses indicators that would indicate presence or absence of a principal adverse impact. These indicators include those relating to

- Environmental damage (carbon, biodiversity, water, and waste) and the mitigation measures in place (environmental impact assessments, habitat management plans, resource minimisation strategies, carbon reduction and measuring, alongside assessing counterparties), and;
- Investee company policies (or the counterparties managing the renewable assets) for social and employee matters (anti-bribery, corruption, human slavery, equality, diversity, and opportunity), unfair advantage and community relations (engagement and community benefit initiatives).

(j) Engagement policies

The Investment Manager has published its Engagement and Stewardship Policy and this can be viewed on the website here.

(a) ‘Attainment of the sustainable investment objective’.

Due to the nature of the investment policy, no specific index is designated as a reference benchmark to determine attainment of the sustainable investment objective.

Key performance indicators for the Fund are ‘£ Capital invested into Renewable Energy Assets’ and ‘Tonnes of CO2e avoided.’ The only appropriate EU Climate Transition Benchmark or EU Paris aligned Benchmark in accordance with Regulation (EU) 2016/1011 is Carbon Intensity which is calculated in line with methodological requirements set out in Delegated Regulation (EU) 2020/1818.