esg and responsible investment policy · 2019-06-28 · pip’s esg impact review derives from a...

ESG and Responsible Investment Policy

PiP ESG and Responsible Investment Policy

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PiP ESG and Responsible Investment Policy PiP takes ESG issues associated with its operations very seriously, and we are proud of the role we

play across the UK in providing both a secure and sustainable retirement income for workers and

vital infrastructure for communities. Our buy-and-hold investment strategy requires a focus on

sustainability to deliver stable returns, and we firmly believe that ESG issues can and will have a

material impact on the long-term sustainability, and therefore the financial performance, of the

infrastructure assets that we manage. These assets provide key services to a range of people, and we

take pride in being well-positioned to make a positive impact on the societies and local economies

where we invest.

This Policy sets out our approach to ESG both in our pre-investment and post-investment processes.

We recognise that the diverse range of assets in which we invest will result in a unique range of ESG

factors to be taken into consideration. PiP analyses and manages each asset with a flexible and

proactive approach to ensure we are able to effectively integrate ESG across all our assets.

Whilst we are proactive in ensuring we integrate ESG, it is important that as we grow, we continue

to assess our approach and reaffirm that what we are doing is in line with our beliefs and principles.

To this end, this ESG Policy and the processes within it are reviewed and updated on a yearly basis.

PiP’s approach to ESG can be summed up by our ESG statement:

“ESG issues can and do have an impact on infrastructure investment performance, and we have a

fiduciary duty to our investors to act responsibly, to integrate Environmental, Social, and Governance

factors into our investment analysis and asset management, and to leverage the position we have as

a specialist infrastructure investment manager to have a positive impact on our society, our

prosperity and our environment.”

PiP defines ESG issues as “numerous and ever-changing factors that impact upon our environment,

our society and effective asset governance”.


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PiP ESG Approach PiP’s approach to implementing this statement is based on three fundamental pillars that guide our

activities and approach as a specialist infrastructure asset manager: Policy, Process, and Proactivity.

Policy

PiP’s ESG stance and approach to responsible investment is outlined in this

ESG Policy. We maintain a collective responsibility for its implementation,

and we are committed to maintaining its effectiveness and relevancy by

reviewing the policy on an annual basis. We are also committed to

transparency and disclosure by publishing the policy on our website. This

policy applies across PiP as an investment manager and all of the funds we

manage.

Process

The second facet is the maintenance and implementation of a robust and

effective process of evaluating infrastructure investment opportunities and

integrating ESG into our active asset management. This manifests in two

distinct processes: PiP’s Investment Procedures, where material ESG risks are

considered in any potential investment, and our ESG Impact Review. Our

processes are fundamental to our effectiveness as responsible investors and

ESG integration.

Proactivity

PiP’s approach to ESG is centred on proactivity. Policy and Process enable

PiP and its employees to integrate ESG into investment and asset

management activities, however in order to fully carry out our belief,

these two pillars alone are not enough. We believe that we are in a unique

position as an infrastructure investment manager to be difference makers

for our investors, for those whom our infrastructure provides a vital

service on a daily basis, and for our environment. PiP does not seek to

avoid assets with ESG exposure but fosters a proactive culture in managing

ESG issues and identifying opportunities to make a positive ESG impact.


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Pre-Investment In the first instance, PiP does not seek to avoid assets with ESG exposure, but rather integrate the

analysis of ESG factors and risks into our investment analysis. This approach to ESG in pre-

investment is carried out through our investment procedures.

Responsibility for considering ESG risks in the pre-investment process is socialised amongst the PiP

team, and each investment team member is required to carefully consider ESG matters in every deal

they are assigned to lead.

The PiP Investment Committee has oversight of the integration of ESG into our investment analysis

and, where material, ESG matters are considered in investment decisions.

PiP Responsible Investment

Beyond the proactive selection of investments that are socially and environmentally positive with

suitable governance arrangements, every investment opportunity considers ESG risks alongside the

traditional financial and operational risks.

Our experienced investment team systematically and explicitly integrate ESG issues into investment

analysis and the PiP Investment Committee integrates ESG issues into investment decisions. As part

of PiP’s assessment of an investment opportunity the material ESG risks identified in due diligence

will be highlighted, along with any mitigating factors. At this stage any potential ESG upside is also

considered.

This ESG Policy stipulates deal breakers: factors which are considered unacceptable and are superior

in the decision-making process to all other factors. If a deal breaker is identified and cannot be

satisfactorily resolved the investment process is terminated. Example deal breakers are included in

appendix A. This is not intended to be an exhaustive list, and where the investment team or the

Investment Committee feel an ESG risk is too significant with no prospect of effective mitigation, this

should be considered and recorded as a deal breaker.

The consideration of material ESG issues consists of 4 stages which result in one of three scenarios:

Continuation, Adjustment, or Termination:

A non-exhaustive list of environmental, societal and governance issues that may be considered in

during PiP’s investment approval process are included in appendix B.


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Post-Investment PiP’s approach to post-investment ESG integration is two-fold. Across the entire portfolio, PiP

monitors, manages and records specific ESG items across all assets on a quarterly basis, where ESG is

a standing item at PiP’s Asset Management Committee. The second aspect of our approach is based

on our “ESG Impact Review”, which is outlined below.

Unlike listed equities and infrastructure, unlisted infrastructure has relatively fewer benchmarks and

comparators in terms of ESG performance, and we recognise that the diverse nature of the assets

we invest in means that direct comparisons may not always be appropriate. To this end, PiP seeks to

take a holistic view of the performance of our portfolio as a whole, with any asset-specific issues

being identified and rectified on a case-by-case basis. We aim to leverage the diversity of our

portfolio and the broad spectrum of ESG issues we encounter by proactively sharing best practice

within our team and aiding cross-learning. PiP’s buy-and-hold approach enables us to take a long-

term view of ESG issues and focus on the long-term sustainability of the assets we manage.

PiP’s Asset Management Committee has ongoing oversight of post-investment ESG integration.

ESG Impact Review

The second aspect of PiP’s approach to ESG in asset management is PiP’s ESG Impact Review. This

Review recognises that the nature of some assets may change over the course of its life, and, with

new ESG standards and influences, the investing environment may also change. The importance of

this review stems from our belief that ESG will have an impact on long-term sustainability and the

recognition that ESG is an ongoing and ever-evolving topic.

PiP’s ESG Impact Review derives from a number of different sources, including the 17 United Nation

Development Goals, the six Principles for Responsible Investment, our own internal view on which

ESG factors are most relevant to our active asset management and the deal breakers that are

considered in PiP’s investment process. In 2019, we chose five key factors from the UN SDGs that

will act as Key Performance Indicators, against which we can measure the performance of our

portfolio.


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Principles for Responsible Investment PiP is proud to have been a signatory to the

UN-backed Principles for Responsible

Investment since 2016. The PRI 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 as part of our commitment to transparency in our ESG

activities, we proactively publish our assessment report on the PiP website.

In the most recent reporting cycle PiP achieved scores of ‘A’ in both Strategy and Governance and

Infrastructure.

The Six Principles:

1. We will incorporate ESG issues into

investment analysis and decision-making.

2. We will be active owners and incorporate ESG

issues into our ownership policies and

practices.

3. We will seek appropriate disclosure on ESG

issues by the entities in which we invest.

4. We will promote acceptance and

implementation of the Principles within the

investment industry.

5. We will work together to enhance our

effectiveness in implementing the Principles.

6. We will each report on our activities and

progress towards implementing the

Principles.


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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 provided by a serviced office provider 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 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 and investments but at this stage all travel is

limited to the UK. Trains and other forms of environmentally friendly transport are always

preferred, and journeys are scheduled where possible so that long distance trips incorporate

multiple meetings or appointments.

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.


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Remuneration structures

PiP has established remuneration structures that are competitive, transparent and do not promote

risk taking.

Auditor selection and 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.


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Appendix A:

ESG area Issue Deal breaker

Environmental Pollution Environmental report has

identified unacceptable levels

of pollution that have not been

addressed with no plan in

place to do so.

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 with no prospect

of mitigation.

Health & Safety Previous prosecutions for

health and safety issues

without clear evidence that

the issues have 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.

Anti-competitive practices Any known prosecution for

anti-competitive practices.


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Appendix B:

Environmental

Climate Change

• Carbon Emissions

• Carbon Footprint

• Climate Change Vulnerability

Natural Resources

• Water Stress

• Biodiversity and Land Use

• Raw Material Sourcing

Pollution & Waste

• Toxic Emissions and Waste

• Packaging Material and Waste

• Electronic Waste

Environmental Opportunities

• Renewable energy generation

• Green Buildings

• Clean technology

Social

Human Capital

• Workforce management

• Human capital development

• Health and Safety

• Supply Chain Labour Standards

Product Liability

• Product Safety and Quality

• Privacy and Data Security

• Health and Demographic Risk

Stakeholder Opposition

• Controversial Sourcing

• Deal Structuring

• Relationship with Public Sector

Social Opportunities

• Access to communications

• Access to finance

• Access to healthcare


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• Freedom of movement

• Access to affordable housing

Governance

Corporate Governance

• Ownership and Control

• Co-Shareholders

• Investor Protections

Corporate Behaviour

• Business ethics

• Anti-competitive practices

• Corruption and Instability

esg and responsible investment policy · 2019-06-28 · pip’s esg impact review derives from a...

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