approach for a responsible management of ... documents...current esg approach and offer a capital...

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APPROACH FOR A RESPONSIBLE MANAGEMENT OF ESG ISSUES AND

SUSTAINABLE DEVELOPMENT GOALSn

Updated May 2020

INTRODUCTION P.3

INFORMATION ABOUT MERIDIAM P.3General ESG approach P.3

Investor information P.5

INFORMATION ABOUT MERIDIAM P.7List of funds P.7

ESG/SDG charter, code and label P.7

ISO 9001 certification, version 2015 P.8

External ESG Audits P.8

PRI Signatory P.8

Certification within the project companies P.8

MERIDIAM’S ESG AND SDG ANALYSIS PROCEDURES P.9Main ESG criteria P.9

SDG Positive Screening P.10

Internal ESG and SDG analysis and monitoring P.11

Analysis methodology P.12

Integration in the investment process P.13

TABLE OF CONTENTS

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INTRODUCTIONResponsible investment is an essential part of the strategic positioning and management of Meri-diam funds. Since its creation in 2005 and the launch of its first fund, Meridiam has ensured that its investments achieve the highest environmental, social and governance (ESG) objectives. More recently, Meridiam positioned itself as one of the first French company to change its by-Laws to become a French Benefit Corporation within the meaning of the French law, and by doing so, reaf-firmed its commitment to balancing profit with achieving positive impact. In this context, Meridiam updated its ESG risk classification procedures to evaluate projects’ impacts using the internatio-nally agreed, referential framework of the United Nations Sustainable Development Goals (UN-SDGs). This document outlines how ESG criteria and relevant performance measures are conside-red in Meridiam’s investment and asset management process.

More specifically, this document demonstrates how the Meridiam funds also comply with the regu-latory requirements for the application of ESG criteria in France1.

1 Decree No. 2015-1850 of December 29, 2015 applying Article 173 (paragraph VI) of the LTECV of August 17, 2015.

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Meridiam’s General PolicyMeridiam places consideration of environmental, social and governance quality issues at the heart of its activities, due to the very nature of its investments, and their sustainability. As rigorous risk identification is a fundamental step in the project evaluation process, Meridiam commits itself only when these are in line with its commitments and the general interest of the communities for which they are intended.

Since its creation, Meridiam has therefore placed the consideration of ESG issues at the heart of its priorities by adopting a Charter on Sustainable Development focused on these issues. In particular, the Charter on Sustainable Development commits Meridiam to:

• Protect the environment• Respect fundamental rights and develop human

capital• Meet the expectations of the community• Value the human capital of Meridiam• Apply the rules of good governance

The Sustainable Development Charter is available on Meridiam’s website.

Following its change of status to a French Benefit Corporation, Meridiam has reinforced its sustainability strategy by defining 5 pillars based on the SDGs most relevant to its role as a long-term infrastructure asset developer, investor and manager. These 5 pillars, presented in the table below, set the long-term key measurable objectives of Meridiam’s long-term sustainability strategy. In order to work towards achieving these 5 objectives, Meridiam is equipped with a variety of tools, notably its tailor-made ESG/SDG questionnaire and a set of climate stress test and carbon-related methodologies including the carbon footprint evaluation tool and the 2-Infra Challenge tool. All of these are detailed latter in this document.

This global responsibility is also central to Meridiam’s commitment to policy makers and public institutions to promote and encourage long-term investment and foster communities’ sustainable development.

INFORMATION ABOUT MERIDIAM

General ESG/SDG approach

“Provide resilient infrastructure and

develop sustainable cities”Infra

“Accelerate energy transition”

“Avoid emissions and reduce them”

“Promote good work conditions, inclusion, diversity and gender

equality”

“Protect and enhance biodiversity”

Resilient infrastructure and Sustainable Cities

Clean and affordable energy

Climate strategy

Decent work, inclusion

and genderBiodiversity

Meridiam’s StrategyThese ESG and SDG priorities are translated into operational terms by an internally developed ESG/SDG approach to analyze and monitor all investment opportunities. This strategy applies to all funds and throughout the lifecycle of projects. It is based on a selective filtering ahead of investments, via exclusion and restriction lists, followed by a positive selection of resilient infrastructure projects that answer the needs of local communities. This approach is based on international standards, such as the UN Principles for Responsible Investment (UNPRI), and the Equator Principles, and takes into account the ESG criteria of major financial development institutions such as the International Finance Corporation (IFC), the World Bank, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). By integrating the UN-SDGs to its procedures, Meridiam has reinforced the rigorous impact evaluation assessment and monitoring of projects, ensured consistency with its development objectives and captured the positive contribution of projects on issues such as health, education, water, sanitation, energy, urbanization, environment and social justice.

Meridiam’s approach to managing ESG and SDG issues is operationalized using tailor-made procedures and tools. This approach is part of Meridiam’s ISO 9001 system.

Mission CommitteeA specific Mission Committee was established to monitor a rigorous and genuine evaluation of the impact of our investments against our pillar goals and set new targets for improvement. This committee of 6 includes representatives of the Supervisory Board, management, staff and one independent member from the industry. The Mission Committee will regularly engage with the Supervisory Board and the employee

representative body called the Comité Social et Économique (CSE).

ESG Analysis MethodologyMeridiam’s ESG approach to selecting, analyzing and monitoring investments enables public authorities to better carry out and manage their infrastructure projects. This approach includes the following major steps:

• Identification of infrastructure projects according to immediate and long-term needs;

• Global analysis of risks, whether financial, operational, social or environmental, including the exclusion of investments that do not meet the requirements and performance criteria established in the investment procedures (working standards, ESG laws and regulations, ESG capacity, environmental issues, social issues and energy carbon and climate are the main risk criteria evaluated). The level of risk is detailed for each criteria allowing every project to be rated according to its overall risk level;

• Development and implementation of ESG risk management plans;

• Creation and management of companies created specifically to manage projects called project companies;

• Coordination of the development and construction phases of projects;

• Long-term management of infrastructures with and on behalf of the public authorities.

In addition, Meridiam applies strict compliance and the principle of professional integrity to the conduct of all projects, in accordance with regulatory requirements. To this end, each employee of Meridiam subscribes to the Code of Ethics which includes strict reservations/clauses on the issue of conflicts of interest.

In addition, Meridiam ensures that all partners apply zero tolerance to corruption issues, in line with its anti-corruption policy.

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SDG Analysis MethodologyMeridiam has updated its investments assessment and monitoring procedures to systematically incorporate the SDG referential framework and to ensure a rigorous alignment to global priorities. This approach includes the following major steps:

• Preliminary assessment of the core and direct goals material to Meridiam’s activities;

• Systematic identification of the relevant pre-selected indicators during project assessment and validation of related performance measures and objectives;

• Use of a tailor-made SDG proprietary tool to evaluate and enhance projects’ positive im-pacts during their lifecycle. Meridiam’s tool was designed to focus on the pre-assessed core and direct impacts of its sectors of activities while being adaptable to the different stages of a project’s development thanks to contex-tualized benchmarks that calibrate a carefully designed scoring system. It uses data and KPIs available at the project company level to rigo-rously monitor and identify each investments’ relevant contribution to the UN-SDGs;

• Continuous improvement of performance indicators and identification of transversal best practices throughout assets’ management to improve and enhance impacts’ contributions.

This process drives each investment team members to proactively incorporate rigorous performance objectives to their decision-making and ensure Meridiam’s commitment to achieving positive impacts.

Climate Analysis MethodologyMeridiam specializes in the development, finan-cing and long-term management of sustainable public infrastructure in three core sectors: mobi-lity, energy transition and environment, and social infrastructure. Projects that can provide critical solutions to the collective needs of communities. Consequently, the investment strategy is more representative of Meridiam’s mission than of the accomplishment of predetermined objectives. For example, all investments in energy production are in renewable energy projects, thus the establi-shment of fossil fuel reduction objectives in our portfolio is irrelevant.

Nonetheless, Meridiam contributes with other investors and with Carbone 4 to the elaboration of a methodology to firstly measure the alignment of infrastructure portfolios with a 2°C trajectory and

secondly, evaluate the associated climate risks, notably physical and transition risks. The metho-dology has been designed to initially cover the Eu-ropean and Mediterranean rim geographies before future coverage of the African, American and Asian continents. The methodological approach, called the 2-Infra Challenge methodology, and results are validated by a scientific committee, based on reliable and contextualized data.

Meridiam has also collaborated with Carbone 4 in order to develop a risk analysis methodology related to energy, carbon and climate change. Based on the French Development Agency’s approach, this methodology applies to Meridiam’s various project categories. Therefore, as part of our investment process, we integrate this Energy/Carbon/Climate risk evaluation to the project or Project Company. Based on the results of this evaluation, the development team will be able to follow up and prepare the impact in-depth analysis.

Finally, Meridiam carries out the carbon footprint evaluation of projects at financial close by using a tool developed by Carbone 4.

ResourcesMeridiam has a team of full time ESG/SDG specialists but holds each member of personnel responsible for the integration of ESG and SDG themes within investment process, relationship with investors or asset management. Ongoing trainings and support enable a skill improvement of employees. If necessary, Meridiam partners with technical experts for ESG evaluations as part of due diligences, to evaluate the carbon footprint of projects but also to measure the positive impact of projects within the SDG framework.

PerspectivesThanks to the implementation of its SDG-based proprietary tool, Meridiam has reinforced its evaluation of the positive impact of projects in the investment and monitoring phases. Another impro-vement in the short-term has been the develop-ment of a tool to measure the alignment of our in-frastructure portfolios with a 2°C trajectory and the associated climate risks. As mentioned previously, this work has been initiated in 2018, and matured in 2019. In addition to these innovations to its internal procedures, Meridiam also works constantly to improve its evaluation and monitoring instruments through better trainings and a progressive increase of its quality requirements.

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Investor information

Investors are aware of Meridiam’s ESG/SDG procedures for the conduct of all its activities, as well as key ESG issues related to the investments themselves. In addition, Meridiam’s ESG and SDG commitments are public and accessible on the website www.meridiam.com.

Meridiam considers investor concerns in determining ESG criteria for its investment and asset management process as well as their increasing commitments to contribute materially to international development goals. Meridiam ensures compliance with their requirements to produce follow-up reports, whether it be through documented ESG indicators or the frequency with which information is disseminated.

In general, Meridiam issues a number of reports at predefined frequencies, by which investors are

informed of the ESG and SDG indicators that are monitored:

• A quarterly report is sent to investors, which includes a specific note on ESG issues for each asset.

• An annual ESG/SDG report is produced called the «Impact Report», which includes a presenta-tion of Meridiam’s approach and policy on these aspects and an analysis of selected qualitative and quantitative ESG/SDG indicators with a monitoring of performance over time.

Other ESG/SDG monitoring reports are prepared according to the requirements of certain investors and for specific funds, as is the case for the Meridiam Infrastructure Africa Fund. The ESG performance of each project is presented, as well as the ESG performance of the fund as a whole. n

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INFORMATION ABOUT THE MERIDIAM FUNDS

List of funds

ESG/SDG charter, code and labelMeridiam does not manage specific labelled funds. However, all investments have a dimension that contributes to achieving ESG and SDG objectives. Therefore, all Meridiam’s funds take simultaneously into account the environmental, social and governance quality criteria of Meridiam. This represents 100% of our assets under management in 7 funds that integrate ESG criteria and SDG assessment. The Meridiam Transition fund was created for the sole purpose of financing energy transition projects. Additionally, Meridiam systematically applies the French Article 173 (paragraph VI) of the LTECV of August 17, 2015, regardless of whether the fund is subjected to foreign legislation. However, Meridiam’s funds valuated above 500 M € are not under French regulation and thus are not subjected to “investors reporting” publications.

Meridiam’s approach to the environmental and social responsibility and corporate governance consists in involving all members of the development and asset management teams in the process of evaluating, developing and managing the projects in which the organization invests. Each employee receives training on ESG and SDG topics on an ongoing basis, so that he or she takes ownership of the procedure put in place for the responsible consideration of ESG and SDG issues in all projects.

Some of the project companies in which Meridiam invests also have a dedicated ESG team.In addition, there is a procedure in place for sharing knowledge and good practices with project companies on various topics including ESG and SDG-related impacts.

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2 Fund subject to Decree No. 2015-1850 of December 29, 2015 applying Article 173 (paragraph VI) of the LTECV of August 17, 2015.3 Ibid.4 Ibid.

The funds are managed by either Meridiam SAS (MSAS) or Meridiam Infrastructure North America (MINA). MSAS is regulated by the French Autorité des Marchés Financiers (AMF) while MINA is regulated by the Security and Exchange Commission (SEC).

Asset class Infra Infra Infra Infra Infra Infra Infra

Meridiam Infrastructure

SICAR

MeridiamInfrastructure

Europe II

Meridiam Infrastructure Africa Fund2


Europe III3

Meridiam Transition4


North America II


North America III

Year of creation 2008 2012 2015 2016 2016 2012 2017

Duration of the funds 25 25 15 25 20 25 25

Geographical area

OECD countries in Europe and North America

Europe, including Central and

Eastern EuropeAfrica

Europe, including Central and

Eastern EuropeEurope

OECD countries in North America

and South America

OECD countries in North America

and South America

Types of projects

• Transport infrastructures

• Social infrastructures



• Energy infrastructures

• Public utility services and networks






• Public buildings• Energy

infrastructures

• Public utility services and networks




• Public buildings



• Public buildings

Amount of Meridiam’s

assets followingits ESGpolicy

(as a share of funds, in %)

100 100 100 100 100 100 100

AMF SEC

MERIDIAM CURRENTLY MANAGES 7 FUNDS, THE DETAILS OF WHICH ARE PRESENTED BELOW

ISO 9001 certification, version 2015The importance of ESG and SDG issues is also reflected in the continuous improvement of Meridiam’s operational methodology, as illustrated by the ISO 9001 certification obtained in January 2012, the first of its kind to be awarded to an investment company. This certification is renewed regularly; the last renewal was in January 2020.

As a reminder, the ISO 9001 certification is an international standard for quality management and provides guarantees in terms of organizational quality within the company.

External ESG AuditsMeridiam conducts audits on Corporate Social Responsibility (CSR) and calls on specialized external consultants such as Vigeo Eiris, an independent international research and ESG agency offering services to private, public and associative organizations and investors.

Vigeo Eiris has carried out several audits, the last of which was conducted end of 2017, on the basis of the ISO 26000 standard. The «Advanced» rating awarded to Meridiam in 2017 reflects the maturity of its organization. A Sustainability Performance Review is currently being carried out, which results will be made available to Meridiam in the course of 2020. This evaluation will provide a rated analysis of our visions, commitments and management of our sustainability risks, impacts and performances.

PRI SignatoryMeridiam has been a signatory of the United Nations Principles for Responsible Investment

(PRI) since January 5, 2011. In 2019, Meridiam’s ESG approach received ratings of:

• A+ (29/30) for the overall ESG approach • A+ (30/30) on topics specific to infrastructures

Certifications within the project companiesMeridiam ensures that ESG issues are taken into account by all companies created to manage the infrastructures in which the organization invests. The achievement of performance objectives often results in obtaining labels or certifications of national or international scope as is the case for the following examples:

• The project company for the A66 motorway in Spain, i.e. the 49 km section between Benavente and Zamora, received the Green Energy certification for the use of renewable energy for all of its energy needs;

• The research Centre of the University Hospital of Montreal (CRCHUM) in Canada obtained the LEED Gold certification;

• The Long Beach Courthouse in California has been LEED Gold certified;

• The student residence complex at the University of Hertfordshire in England, which includes 3000 housing units, common rooms, a gymnasium and sports fields, obtained the BREEAM Excellent certification.

Many project companies have put in place an environmental management system that meets the ISO 14001 standard. n

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MERIDIAM’S ESG AND SDG ANALYSIS PROCEDURES

Meridiam’s ESG and SDG analysis consists in an integrated approach to responsible investment; it covers all activities related to investment in infrastructure projects, from identifying investment opportunities to the long-term management of assets. The analysis is based on an increasingly complete control of the ESG and SDG components of a given project as the investment process progresses. In the initial phase of projects, the approach developed by Meridiam focuses on ESG risk management and SDG assessment. It then makes it possible to optimize the positive effects of the projects and improve their ESG and SDG performance once the assets are in operation. The main elements of Meridiam’s ESG and SDG approach are described below. This approach is applied both in Meridiam’s investment process and

in monitoring the funds it manages. Meridiam’s ESG approach also meets regulatory requirements for the application of ESG criteria in France5.

Main ESG criteriaA set of more than 45 ESG conditions and criteria are used to analyze all investments, without distinction by sector of activity or asset class. This ESG analysis framework is used to identify the ESG issues and risks that are associated with investments and to determine the risk level of each criteria and the implementation modalities for projects that will allow these issues to be effectively taken into account. Each condition/criterion must be documented during the different analysis phases. Here are some examples of analysis criteria.

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5 Decree No. 2015-1850 of December 29, 2015 applying Article 173 (paragraph VI) of the LTECV of August 17, 2015.

ESG THEMES

WORKING STANDARDS

LAWS AND REGULATIONS

ESG CAPACITY

ENVIRONMENTAL ISSUES

SOCIAL ISSUES

ENERGY, CARBON AND CLIMATE

Examples of criteria for the evaluation of investments

Free from exploitation of child laborFree from forced or compulsory labor practicesGood working conditions, in terms of health / safety and equality

Legal context and compliance Procurement procedure

Client’s ESG policy and proceduresESG policy and procedures of Meridiam’s Partners

Impacts on the physical components of the environmentImpacts on nature protection areas and biodiversityImpacts on fauna, flora and habitatsEnvironmental measures

Social impactsCultural heritageInterests of stakeholdersLand acquisition and resettlement

Vulnerability to climate changeContribution to the fight against climate change

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In the asset management phase, i.e. during the construction and operation of the infrastructures, the ESG and SDG analysis is carried out based on detailed criteria whose scope is adjusted accor-ding to the type of infrastructure and the issues

it generates. More than 200 criteria are used to monitor the implementation of ESG measures and to evaluate the ESG and SDG performance of projects. The following table shows some of the ESG criteria.

ESG ESG THEMES Examples of criteria to analyze the performance of assets

Environmental

Social

Governance

GENERAL ENVIRONMENTAL

POLICY

CONTROL OF POLLUTION AND WASTE

MANAGEMENT

SUSTAINABLE USE OF RESOURCES

BIODIVERSITY

EMPLOYMENT

TRAINING

SAFETY

ECONOMIC AND SOCIAL IMPACT

ARCHAEOLOGY AND CULTURAL HERITAGE

MANAGEMENT

COMPLIANCE

Environmental policyTrainingEnvironmental protection expenditureClimate change risk management approach

Air quality / emissionsWaterSoilNoiseWasteDischarges

Energy consumptionWater consumptionResource consumption

Protected areas and speciesMinimization and compensationDeforestation

Job creationDiversityRepresentation of workersWorking conditionsManagement of complaints and grievances

Training policyTraining resultsPercentage of employees trained

Safety procedures and programsResults in terms of safety for workers and users

Impact on local employment and the economyQuestions from stakeholders (employees, unions, suppliers, neighboring populations, etc.)Relations with local development and support actors

Archaeological discoveries and presence of heritage sitesCommunication to the public

Stakeholder involvement

Certifications / labelsSanctions / penalties

In addition to the above mentioned ESG criteria, the analysis framework also includes a preliminary assessment of material SDG’s core and direct indicators determined for each type of infrastructure; the general approach is summarized in the following figure. This enables for the systematic identification of the investment’s associated positive impacts and resulting performance indicators that are to be considered during the development of the project. Thus, the indicators selected by the investment team during the projects’ origination will have to be carefully monitored, and when possible, documented for later validation during the analysis phase.

SDG Positive Screening

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A rigorous and demanding approach to ESG standards and responsible investment is embedded in Meridiam’s investment process. This is reflected in the resources that Meridiam allocates to the implementation of its responsible investment policy as defined by the Sustainable Development Charter and illustrated by the development of its SDG-based proprietary tool.

A team of ESG/SDG specialists is involved full-time in the implementation of Meridiam’s ESG/SDG policy and procedures. In addition, all staff are engaged and proactive in integrating ESG and SDG elements into projects and investment opportu-nities that are controlled under Meridiam’s ISO 9001 system. In order to ensure ownership of ESG procedures and SDG assessment by the teams and their commitment, training sessions are organized on ESG and SDG topics and on the mechanisms for integrating these issues into the conduct of their activities. The participation of all team members in official training sessions with the Meridiam ESG/SDG Compliance Team is mandatory.

The ESG/SDG requirements, including all procedures, tools and details on the distribution of responsibilities, are included in Meridiam’s ISO 9001 procedures.

In addition, all project development teams carry out «due diligence» during the opportunity as-sessment phase and the planning and finalization phase of projects then during the asset manage-ment phase. The ESG/SDG Compliance Officer is involved in development strategies and monito-ring before decisions are finally made for projects where the ESG risk is considered medium or high. The teams are empowered and are involved in the preparation of the quarterly and annual reports.

Meridiam is an involved investor and asset monitoring is done on three complementary levels:

• Representation on the Board of Directors: Meridiam is represented on the Board of Directors of each of the project companies;

• Staff of the project company: Meridiam appoints full-time members to the management team of each asset or provides seconded staff;

• Active/involved management of assets according to a local approach.

The proximity with its assets ensures that Meridiam’s investments are managed transparently in all areas, including for ESG and SDG aspects. Each project company contributes to Meridiam’s ESG/SDG reports via a tool using standard surveys to be completed once a year. These surveys were developed by Meridiam with the assistance of experts in the field, compiling industry best practices and additional components more specific to its business. It also integrates the United Nations Sustainable Development Goals (UN-SDGs) framework and exploits data and KPIs available at the project company level to rigorously monitor and identify each investments’ relevant positive impacts through a calibrated scoring system

Meridiam is also supported by external specialists on certain ESG/SDG themes in order to benefit from their expertise and to equip themselves with powerful and evolving tools.

External audits of the certification processes take place annually or every two years, led by external certification or rating bodies, whereby Meridiam’s ESG/SDG approach is evaluated. Thus, the organization seeks to maintain a certain standard in the quality of its management and more generally in its procedures.

Internal audits on compliance and ESG topics are also organized on a recurring basis, for example on an entire portfolio of Meridiam funds or a part of it.

Internal ESG and SDG analysis and monitoring

MERIDIAM’S IMPACT METHODOLOGY BASED ON THE UN-SDGS REFERENTIAL

SUSTAINABLE DEVELOPMENT GOALS (SDG) FRAMEWORK

17 goals to be achieved by 2030, declined into 169 targets.

RELEVANT SCOPE FOR MERIDIAM

For each infrastructure, according to its local context and mission, identification of relevant SDGs and targets by following the most material parameters.

CORE IMPACT DIRECT IMPACT

INDICATORS AND RELATED SCORING

Definition of relevant and robust indicators to assess each infrastructure’s impact on its relevant SDGs and targets. For each indicator, definition of a robust benchmark for assessment, taking into account regional context. Transparent and robust all-in-one tool to monitor each infrastructure’s impact and resiliency over time.

The ESG/SDG approach is generalized and syste-matically integrated into Meridiam’s ISO 9001-certi-fied investment and asset management processes.

The ESG/SDG assessment and the establishment of avenues for ESG and SDG improvement take place as soon as investment opportunities are identified using the criteria mentioned above.

In practice, each project is thoroughly assessed through an initial due diligence analysis prior to investment. When ESG concerns are highlighted during this process, risk mitigation procedures are included in the project documentation and specific risk indicators are identified for the implementation of continuous monitoring. Similarly, relevant SDG targets are identified in order to determine areas of value creation throughout the development processes and establish performance indicators to enhance projects’ positive impacts.

In general, the methodology used in the ESG and SDG analysis process for investment opportunities is built around the following steps:

1. Verification of the eligibility of the project against the exclusion list established by Meridiam for its various funds 2. ESG framing of the project in regulatory terms and SDG preliminary assessment for performance indicators3. Detailed analysis of ESG issues and SDG contribution

4. Determination of ESG risks and SDG opportunities5. Identification of the ESG mitigation and monitoring strategy as well as SDG enhancement strategy.

Four levels of risk can be identified for each ESG element that will be assessed; the level of risk will vary from «low» to «constraint». The risk assessment itself takes into account criteria such as the intrinsic value of the component affected by the proposed project, the possibility of implementing measures to control and limit the impacts of the project on this component, the social acceptability of the project, etc. The application of this methodology not only makes it possible to evaluate all the ESG risks of a project but also to understand the context in which it is to take place. In addition, by providing details of the issues related to the project, the methodology allows for an efficient transition to the implementation phase of the project, namely the construction and operation of the infrastructure.

Meridiam also conducts regular audits of the project companies and, where appropriate, will require audits on the ESG aspects to be carried out.

The ESG and SDG analysis and evaluation methodology is based on the approach presented in the following diagram. n

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Analysis methodology

ESG/SDG ANALYSIS AND RISK EVALUATION

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All of Meridiam’s investment opportunities are reviewed based on Meridiam’s ESG and SDG policy including on the lack of controversial elements and the opportunity to engage positively with local stakeholders and authorities to develop a sustainable project.

Indeed, when analyzing the market and/or the origination of projects, the prerequisite for the decision to develop a project is based on a typology of activity criterion. Meridiam has a list common to all funds presenting the typology of activities in which the organization will not invest, whether for reasons of environmental or social impacts, or moral reasons. In addition, for certain geographic regions and depending on the type of investment funds, additional lists of excluded activities are established. These exclusion lists contain all the activities in which Meridiam undertakes not to invest and are part of the ESG/SDG procedures, which are themselves integrated into the ISO: 9001 system that governs the conduct of business activities.

Meridiam’s eligible investment universe is defined after this first filter.

Regarding ESG risks, all funds managed by Meridiam integrate all ESG criteria due to the

nature of the investment process. Nevertheless, no specific weighting is defined for one category of ESG issues compared to another. The relative weight of the categories of ESG criteria, some examples of which are given above, is therefore the same for each of them. The decision to pursue the development of a potential investment is based on the overall assessment of ESG issues and risks; Meridiam must be confident that it can effectively manage ESG issues to move forward with a project.In addition, at the end of COP 21, the Meridiam Transition Fund was created; it is dedicated to the development and implementation of projects in the field of energy transition in Europe. The portfolio of this fund is therefore based exclusively on ESG criteria.Furthermore, the SDG common evaluation framework has been exploited and systematically integrated within the procedures of Meridiam’s ESG investments in order to strengthen Meridiam’s current ESG approach and offer a capital allocating guide to attract new sustainable investment opportunities. By doing so, Meridiam creates a holistic approach to its investment strategy through the elaboration of a resilience and impact policy that incorporates considerations such as socio-economic development, biodiversity protection, fight against climate change and energy transition.

Integration in the investment process

Preliminary ESG and SDG Assessment

Environment and Market Analysis /

Origination

Initial ESG/SDG evaluation based on Meridiam’s ESG/SDG requirements• List of excluded and restricted activities• More than 45 ESG conditions and criteria• Identification of E&S permitting and reporting requirements• Initial evaluation of ESG risk level and contribution to SDGs

Detailed ESG Risk Evaluation and SDG

Validation

Initial Project Development

Systemic assessment of ESG risks and negative impacts of the project and validation of contribution to SDGs, wich include:• Site visits• Details E&S studies such as E&S Gap Analysis, detailed E&S Impact

Assessments (ESIA)• Review and optimization of the project design and at the E&S measures

including the overall E&S management Pan and Strategy to optimize contributuin to SDGs

Detailed ESG and SDG Implementation Plan

Tender / Active Development

Definition of detailed ESG risk management plans and SDG optimization measures

Investment Process

Asset ESG Reports Asset Management

Monitoring and reporting based on tailor-made ESG-SDG performance assessment

Construction and Operation

Process

PROCESS

ESG/SDG RISK & IMPACT MANAGEMENT

INVESTMENT PROCESS PHASE

SCOPE OF THE DUE DILIGENCE

Once a project is eligible, each stage of the investment process includes an analysis of ESG issues and SDG assessment as well as the analysis of other criteria, including financial criteria. In practice, since the initial phase of eligibility of the investment, the investment process integrates the ESG/SDG analysis as follows:

• An initial classification of the risk for each type of criteria (working standards, ESG laws and regulations, ESG capacity, environmental issues, social issues and energy carbon and climate are the main risk criteria evaluated). The evaluation of the level of risk regarding Energy/Carbon/Climate themes is done by using a specific document attached to the initial risk classification document. This classification will determine the ESG risk management process to be put in place;

• At the same time, an initial pre-SDG assessment is done taking into account the project’s specificities in order to identify areas of interest for future value creation and performance indicators;

• The risk classification will be reassessed throughout the process, as shown in the section describing the analysis methodology, the process is also carried out for the SDG targets previously selected as material to the project. These reassessments will follow a series of actions that development teams must undertake to understand the detailed characteristics of the project, the components of the environment in which it is located

and the environmental and social impacts it generates.

• The definition of a strategy for managing ESG issues and risks and enhancing positive impacts to achieve the SDGs set for the project.

Specifically, as needed, the project development team could conduct an additional due diligence study to establish an environmental and social action plan, or even initiate an environmental and social impact assessment (or a study of the deviations between an existing impact study and international performance standards) or any other required study. Depending on the scope of the studies to be carried out, Meridiam will call on external consultants specializing in environmental and social studies. In the context of a climate risk evaluation, every project financed will also be evaluated in terms of its carbon footprint following a methodology integrating Scopes 1, 2 and 3 and comparing the reference situation of this project with the situation once in operation. This carbon footprint evaluation allows for technical modifications of this project but also to optimize its management in the long run by favoring less emissive ways of functioning.

It is also necessary to obtain confirmation that a project complies with Meridiam ESG criteria for validation. If the ESG issues are too significant and/or unmanageable, or if the compensatory measures prove to be insufficient, the investment process is not continued. n

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