14ESG and fund management at CIP

Picture: Bearkat I onshore wind farm, Texas, US

CIP’s objective as a fund manager is to create value for its investors, and high ESG standards are a pre-requisite to maximise this value. In ad-dition, Fund investments can also deliver positive ESG impacts, including reduced greenhouse gas emissions, job creation and wider community investment.

This approach provides both long-term, sustainable value to the Funds’ investors and has a beneficial impact on communities and markets throughout the development, construction and operations phases of Fund assets.

ESG Focus areasCIP’s ESG focus areas are defined by the nature of the large scale, greenfield energy infrastructure projects which fall within the Funds’ in-vestment strategy – long-life assets with stable returns with low correlation to the macroeconomic and capital markets cycles. CIP continually monitors industry developments in this regard through engagement with bodies such as GRESB, and currently focuses on the following material ESG topics.

CIP’s approach to sustainability and ESG topics within fund management

Target 7.2: Increase substantially the share of renewable energy in the global energy mix

Target 8.8: Protect labour rights and pro-mote safe and secure working environments for all

Target 9.4: Make infra-structure and industries sustainable, with increased resource efficiency and use of clean technology

Target 12.4: Environmentally sound man-agement of chemicals and all wastes throughout their life cycle and significantly reduce their release to air, water and soil in order to minimise their adverse impacts on human health and the environment

12.2 Achieve the sustainable management and efficient use of natural resources

Target 13.3: Improve capacity on climate change management

Figure 1: CIP’s ESG focus areasUN Sustainable Development GoalsThe UN Principles for Responsible Investment (PRI) has stated that the UN Sustainable Development Goals (SDGs) best define society’s broad-er sustainable objectives. CIP has updated the list of SDGs and key SDG targets on which the Funds have the most impact.

Environmental Social Governance

Environmental impacts

Environmental compliance

Health and Safety

Labour standards and fair employment practices

Community relations, including local business and labour use

Active and responsible ownership

CIP’s ESG framework

CIP’s framework for integrating ESG topics into its management of the Funds is founded on three basic elements: the Funds’ formal invest-ment policy; CIP’s Ethical Policy, which contains the Funds’ docu-mented ESG principles and standards; and an experienced team with market-leading industrial skills and knowledge.

CIP’s investment process builds on this foundation. This process consists of four stages of ESG integration, with Investment Committee oversight at each stage.

The objectives of the framework are to generate sustainable value, to identify, mitigate and manage ESG risk, and achieve positive ESG impacts.

Sustainable value creationRisk identification, mitigation, management

Positive ESG impacts

Experienced team with industrial skills and knowledge

CIP’s Ethical Policy + ESG standards

Fund’s Investment Policy

Investment selection and targeted due diligence

Outcomes

Means (CIP’s Investment

process)

Foundation

Development and structuring of the potential investment

Expert personnel able to identify and integrate ESG issues at project level

Contain internal ESG principles and standards for all investments to comply with

Investments must be in infrastructure assets, and not in any nuclear or coal generation projects. The Funds’ investment strategy seeks attractive risk-adjusted returns and long term, stable and predictable cash flows with low correlation to the business cycle

Asset management during construction

Asset management during operations

Figure 2: CIP’s framework for fund-level ESG integration

Investment Committee oversightNo investment shall be made by the Fund without receiving approval from the Investment Committee. The key approval point comes after development and structuring of the potential investment, where the Investment Committee is presented with an information pack containing inter alia the key due diligence findings, an overview of the key risks and associated mitigation measures, and a breakdown of the investment structure and the Fund’s governance rights.

Stage 1 Stage 2 Stage 3 Stage 4

Investment

selection and

targeted due

diligence

Initial screening

using criteria in

fund

documentation

and Ethical Policy

Development and

structuring of the

potential

investment

Asset management

during

construction

Targeted due

diligence on

relevant ESG

topics

Investment

committee pre-

approval (for due

diligence)

Further due

diligence on

relevant ESG

topics

Selecting

contractors and

negotiating

governance rights

Investment

committee final

approval

Final

documentation

Monthly reporting

from projects,

including ESG

KPIs

Oversight through

an owner’s

representative

Monitoring

through CIP Asset

Management

Asset management

during operations

Monthly reporting

from projects,

including ESG

KPIs

Optimising

operational

performance,

including ESG risk

Monitoring

through CIP Asset

Management

CIP’s Integration of ESG in the Investment Process

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Picture: Bearkat I onshore wind farm, Texas, US