Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Carbon emissions decreased by 8% year on year.
• Northwest Parkway delivered an LED lighting initiative forecast to save 10,360 tCO2e (HICL share 3,450 tCO2e) over the concession lifetime.
• 100% of non-hazardous demolition waste was crushed and reused on-site at the Allenby & Connaught Project.

Social Achievements

• Reconfigured wards at Pinderfields Hospital to increase intensive care beds from 18 to 47.
• Brentwood Community Hospital transitioned into a Covid-19 hub with six new wards.
• InfraRed raised over £28,000 for a CineGym at Queen Alexandra Hospital to promote patient well-being.

Governance Achievements

• Appointed an eighth director to increase board diversity, meeting Hampton-Alexander and Parker Review expectations.
• 37% of directors were women, and 12% were from ethnic minorities as of 31 March 2020.
• 97% of portfolio companies reported using a risk register.

Climate Goals & Targets

Environmental Challenges

• Increasing pressure on water infrastructure in South East England from population growth and extreme weather.
• Competitiveness impacted by including forecast costs associated with the transition to a net zero carbon economy in investment valuations.
• Resistance from co-shareholders to implement policies and initiatives in some portfolio companies.

Mitigation Strategies

• Affinity Water investing £59m in water meters to reduce demand.
• Affinity Water investing in additional water treatment capabilities.
• InfraRed's systematic approach to incorporating climate change considerations in investment processes.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather
• Drought

Transition Risks

• Government policies associated with the transition to a net zero carbon economy

Opportunities

• Investment in water infrastructure to respond to climate change impacts
• Repurposing existing infrastructure

Reporting Standards

Frameworks Used: PRI, TCFD

Certifications: ISO 14001 (printer and paper mill)

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• SDG 3
• SDG 4
• SDG 9
• SDG 11
• SDG 13

HICL's investments contribute to these goals through infrastructure projects that support healthcare, education, industry, sustainable cities, and climate action.

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Climate Change
• Social Impact
• Governance

Environmental Achievements

• Completed a portfolio-wide climate change impact assessment.
• 96% of portfolio companies have energy reduction initiatives.
• 84% of portfolio companies have water reduction initiatives.
• Companies voluntarily included in HICL’s Scope 3 SECR disclosure delivered initiatives forecast to save over 16,000 tonnes of CO2 emissions over the life of the concessions.
• Companies voluntarily included in HICL’s Scope 3 SECR disclosure used over 23,000MWh of renewable energy in the year ended 31 December 2020.

Social Achievements

• Launched InfraRed Charitable Foundation.
• Donated furniture worth approximately £100,000 to various organizations.
• Launched Lifecycle bike refurbishment initiative.
• Raised over £150,000 for charities.
• Maintained focus on diversity and expertise at Board level (37% women, 12% ethnic minority).

Governance Achievements

• Signed an ESG-linked revolving credit facility.
• Expanded annual ESG survey with 20 new questions.
• Introduced a suite of dedicated sustainability metrics and targets.
• Voluntarily reported against all 11 TCFD recommendations.
• Became a TCFD Supporter.

Climate Goals & Targets

Environmental Challenges

• Climate change impacts on infrastructure assets (physical and transition risks).
• Data collection and standardization across the portfolio for closer alignment with SFDR Level 2 provisions.

Mitigation Strategies

• Climate change impact assessment to identify and assess risks and opportunities.
• Development of Climate Risk Mitigation Guidance and IRCP Knowledge Centre.
• Implementation of risk mitigation strategies at asset level.
• ESG-linked revolving credit facility.
• Improved data collection and processes at asset level to align with SFDR.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Annual ESG survey to ensure appropriate sustainability policies are in place and followed by portfolio companies and subcontractors.

Climate-Related Risks & Opportunities

Physical Risks

• Flooding
• Winter storms
• Heat stress
• Drought

Transition Risks

• Rapid, unexpected changes to government policy
• Market shifts

Opportunities

• Asset repurposing
• Additional investment linked to energy transition

Reporting Standards

Frameworks Used: TCFD

Certifications: CarbonNeutral® (InfraRed)

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• SDG 9 (Industry, Innovation, and Infrastructure)
• SDG 11 (Sustainable Cities and Communities)
• SDG 13 (Climate Action)

HICL’s investments in essential infrastructure contribute to economic development, human wellbeing, and climate action.

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• InfraRed’s infrastructure business awarded A+ rating by PRI for six consecutive years.
• Various awards for portfolio companies (e.g., A63 Motorway, Affinity Water).

Environmental Metrics

ESG Focus Areas

• Climate change
• Social impact
• Governance

Environmental Achievements

• 60% reduction in food waste at Romford Hospital (equivalent to over 5,500 meals)
• Peak water savings of over 17m litres per day through Affinity Water's Save Our Streams initiative
• 91% of portfolio companies discussed climate risks and opportunities at board level
• InfraRed became a signatory to the Net Zero Asset Manager initiative, committing to net-zero emissions across HICL's portfolio by 2050 or sooner.

Social Achievements

• Northwest Parkway created a $100,000 toll-relief fund for those impacted by the Marshall Fire
• Affinity Water offered payment breaks to over 7,300 customers and another 84,000 customers are on its Low-Income Tariff
• InfraRed Charitable Foundation pledged £130,000 to three charities (Magic Breakfast, Working Chance, Switchback) and £100,000 to organizations aiding Ukraine.
• Launched Recirculate initiative, renovating and donating bicycles to NHS workers.

Governance Achievements

• Reported in compliance with all 11 recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for the second consecutive year.
• Enhanced investment process and exclusions list.
• Updated sustainability metrics and targets.
• InfraRed improved its understanding and assessment of human rights issues.

Climate Goals & Targets

Environmental Challenges

• Data availability and reliability for Scope 3 emissions related to the project supply chain.
• Slight increase in RIDDORs (or equivalent non-UK measure) per project.
• Fall in the percentage of female InfraRed-appointed portfolio company directors (attributed to team evolution).

Mitigation Strategies

• Engaged Mott MacDonald to measure Scope 1, 2, and 3 greenhouse gas emissions.
• Introduced a new metric to reflect HICL’s focus on upholding the highest standards of health & safety.
• Implemented measures to improve diversity within InfraRed’s talent pool.

Supply Chain Management

Responsible Procurement

• ESG survey verifies sustainability policies of portfolio companies and subcontractors.

Climate-Related Risks & Opportunities

Physical Risks

• Winter storms
• River flooding
• Coastal flooding

Transition Risks

• Changes in public transport use, reduced journeys, car sharing

Opportunities

• Asset repurposing
• Investment in energy efficiency solutions
• Investment in assets linked to the energy transition

Reporting Standards

Frameworks Used: TCFD, SFDR, SASB, UN SDGs

Certifications: CarbonNeutral®

UN Sustainable Development Goals

• SDG 9: Industry, Innovation and Infrastructure
• SDG 11: Sustainable Cities and Communities

HICL's investments in essential infrastructure contribute to economic development and human wellbeing.

Awards & Recognition

• The Drum Social Purpose Award for Best Integrated Campaign (Affinity Water)

Environmental Metrics

ESG Focus Areas

• Environment
• Communities
• People
• Governance

Environmental Achievements

• HICL’s attributable emissions have decreased by 39% compared to last year. This reduction is largely due to the use of an updated database used by InfraRed to estimate Scope 3 emissions
• Creation of a detailed net zero transition plan for HICL’s portfolio, including specific asset transition plans for the next three years

Social Achievements

• InfraRed Portfolio Impact initiatives were rolled out across several HICL assets to address client challenges raised in InfraRed’s latest Client Insights Survey
• Seven HICL projects obtained a ‘gold standard’ award in InfraRed’s annual Creating Better Futures awards
• 200+ Community initiatives implemented across the portfolio during the period

Governance Achievements

• Disclosed HICL’s first set of year-on-year comparisons of SFDR PAIs and GHG emissions
• ESG-specific investor perception survey carried out with c.25% of HICL’s shareholder register
• Code of conduct forms were introduced for completion by HICL’s main service providers, allowing the Company to formally monitor compliance with key policies and standards
• Developed, implemented and rolled out DEI guidance for portfolio companies that directly employ staff and monitored performance against this via the annual ESG survey

Climate Goals & Targets

Environmental Challenges

• Data availability remains a challenge faced by the industry
• Implementing net zero within the bounds of strict contractual requirements
• Staffing constraints within client teams
• Lack of IT equipment and facility capacity constraints

Mitigation Strategies

• Adoption of the Infrastructure and Project’s Authority (IPA) PFI Operational Decarbonisation document
• InfraRed tracks the net zero alignment of HICL’s suppliers
• Fund level transition plans taking into account separate strategies required for underlying portfolio companies
• Pilot programme to work directly with projects in different sectors to implement IPA guidance
• Improve accuracy of Scope 3 emissions. Roll out supplier engagement programme to encourage suppliers of repairs and spares, operations and maintenance to decarbonise
• Support and monitor the implementation of net zero alignment criteria in line with requirements set. Bespoke workshops with management teams on net zero
• Adoption of net zero integration framework developed by InfraRed’s Net Zero Working Group

Supply Chain Management

Responsible Procurement

• Code of conduct forms for key service providers
• Assessment of potential exposure to modern slavery, human trafficking, and substandard working conditions

Climate-Related Risks & Opportunities

Physical Risks

• Flooding
• Winter storms
• Drought
• Subsidence
• Coastal flooding

Transition Risks

• Increased public transport use
• Reduction in overall journeys
• Move towards electric vehicles and trains
• Increased need for renewable energy
• Remote working

Opportunities

• Retrofitting of energy efficiency solutions
• Variation contracts awarded for existing PPP assets
• Co-located EV charging at HICL’s toll road projects
• Long-term use case for XLT
• Long-term use case for OFTO

Reporting Standards

Frameworks Used: SFDR, TCFD, UNGC, EU Taxonomy, PCAF, GHG Protocol, SBTi, NZIF, PRI

Certifications: Cyber Essentials Plus

UN Sustainable Development Goals

• Goal 3
• Goal 4
• Goal 6
• Goal 7
• Goal 9
• Goal 11
• Goal 16

HICL’s assets contribute to several UN SDGs by providing essential services such as healthcare, education, water, energy, transport, and justice.

Awards & Recognition

• Creating Better Futures Awards

Environmental Metrics

ESG Focus Areas

• Environment
• Communities
• People
• Governance

Environmental Achievements

• 20% leakage reduction by 2025 (Affinity Water)
• 100% of the portfolio covered in newly published emissions data
• 7% reduction in electricity consumption and 4% reduction in carbon emissions at Cross London Trains

Social Achievements

• Over 35 million people worldwide use HICL’s assets in their daily lives
• HICL’s assets employ over 2,300 people directly and thousands more through their supply chains
• Seven HICL projects obtained a ‘gold standard’ award in InfraRed’s annual Creating Better Futures awards
• 1,000 trees planted at Pinderfields Hospital grounds
• 30 additional patient beds created at Southmead Hospital

Governance Achievements

• Improved ESG disclosures and metrics based on investor survey (average rating of 7.8/10 for disclosures and 7.6/10 for metrics and targets)
• Introduction of code of conduct forms for HICL’s main service providers
• Developed, implemented and rolled out DEI guidance for portfolio companies

Climate Goals & Targets

Environmental Challenges

• Uncertain macroeconomic backdrop, shares traded at a significant discount to NAV
• Increased discount rates reflecting increased long-term government bond yields
• Lower than forecast inflation in the second half of the year
• Increased lifecycle costs in the UK PPP sector
• Heightened political and regulatory scrutiny of the water sector
• Acceleration of PPP projects returning to public control
• High interest rate environment limiting opportunities to raise new equity capital
• Potential for downward pressure on cash generation and dividend cover if inflation falls faster than projected
• Construction-related defects requiring remediation works
• Adverse behaviour from public sector clients
• Supply chain disruption and inflation
• Border congestion restricting growth in international services

Mitigation Strategies

• Accelerated strategic asset disposal programme generating over £500m of proceeds
• Complete repayment of HICL’s Revolving Credit Facility
• Launch of a £50m share buyback programme
• Proactive balance sheet management at Affinity Water
• Systematic programme to review preparedness for future project handbacks
• Proactive management of lifecycle spending
• Active engagement with stakeholders
• Formation of The Association of Infrastructure Investors in Public Private Partnerships (AIIP)
• Contractual pass-through mechanisms mitigating risks
• Highly selective accretive investments
• Disciplined approach to capital allocation
• Issuance of long-term debt via a £150m Private Placement
• Active treasury management
• Introduction of diversity, equity, and inclusion guidelines across portfolio companies
• Working proactively with partners to ensure continuity of service

Supply Chain Management

Responsible Procurement

• Introduction of code of conduct forms for HICL’s main service providers
• Diversity, equity, and inclusion guidelines across portfolio companies

Climate-Related Risks & Opportunities

Physical Risks

• Winter storms
• Subsidence
• River flooding
• Coastal flooding

Transition Risks

• Increased public transport use
• Reduction in overall journeys and car sharing
• Move towards electric vehicles and trains
• Increased need for renewable energy
• Remote working

Opportunities

• Retrofitting of energy efficiency solutions
• Variation contracts awarded for existing PPP assets
• Co-located EV charging at HICL’s toll road projects
• Long-term use case for XLT
• Long-term use case for OFTO

Reporting Standards

Frameworks Used: TCFD

Third-party Assurance: KPMG LLP

UN Sustainable Development Goals

• 3: Good health and well-being
• 4: Quality education
• 6: Clean water and sanitation
• 7: Affordable and clean energy
• 9: Industry, innovation and infrastructure
• 11: Sustainable cities and communities
• 16: Peace, justice and strong institutions

HICL invests in assets that contribute to these SDGs through the provision of essential services.

Awards & Recognition

• Seven HICL projects obtained a ‘gold standard’ award in InfraRed’s annual Creating Better Futures awards