GLI 2024
Sustainability
ReportContents
Introduction

4

ESG Focus Areas

6

Our progress

8

Case Studies

10

Energy transition

12

Climate risk

16

Modern slavery

20

Corporate governance

24

Emerging area of focus

26

Our Approach

28

Appendices

33

Energy transition

33

Climate risk

36

Modern slavery

38

Corporate governance40

Proxy voting

43

Through company engagement we seek tobetter understand risk in our portfolio, suggest
areas for improvement, increase transparency
on ESG issues, and support companies that are
making progress in this area. We typically engage
companies on material issues to achieve specificoutcomes. More broadly, we participate in industry
groups such as Climate Action 100+ to pushfor change on complex issues such as energy
transition and the pathway towards net zero.

Introduction
Countries across the world are grappling withissues such as climate change mitigation, climatechange adaption, energy security, reliability, andaffordability. Utilities are seeing a significant increasein energy demand driven by the rapid expansionof data centers, which serve as the backbone for
AI applications and cloud computing. These arecomplex issues requiring a wide range of financial
and technology solutions. Global listed infrastructurecompanies will be at the forefront of the global energy
transition and will play an integral part in achieving net
zero emissions.
This report intends to provide transparency on how
the First Sentier Investors Global Listed Infrastructure
team assesses the environmental social andgovernance (ESG) performance of companies weinvest in, how we engage with leadership, and theinsights from our research. By sharing our approachto ESG, we want to illustrate how responsible
investment principles are embedded within ourinvestment approach.

Investors are demanding more transparency andaccountability as to how their capital is being used
to generate strong returns and contribute to solving
the world’s long-term challenges. We believe thatincorporating ESG considerations into our investment
approach can lead to better decision-making,which can lead to stronger long-term investment
performance for our clients.

4Good companies solve problems.
The energy transition and physicalimpacts from climate change are criticalproblems that require infrastructure
solutions. The challenge of providing
clean, affordable and reliable energy
is made greater by cost of livingpressures and partisan politics. In
our opinion, Infrastructure companies
that understand and embrace these
ESG risks are more likely to deliver
sustainable returns for investors
Peter Meany
Head of Global Listed Infrastructure Securities

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

Aligning with First Sentier Investors’ firm-widecommitment, we are committed to building
investment portfolios with an ambition of net zeroby 2050 and are pursuing interim targets by 2030
to reduce the Weighted Average Carbon Intensity(WACI) of our investment portfolios. We will seek
to prioritise the direction of capital to infrastructurecompanies that are aligned or aligning with apathway to net zero by 2050 and encourage theinvestment of this capital into real assets that
reduce absolute emissions. As stewards of ourclients’ capital, we will continue to engage withcompanies on these issues with a view todelivering more sustainable risk adjusted returns.

Global listed infrastructure companies
will play a crucial role in addressing
climate change by developing energy
systems that enhance security, reliability
and affordability. The shift to a low
carbon economy requires massive
investment and our companies will be at
the forefront of the energy transition
Trent Koch
Portfolio Manager, Global Listed InfrastructureFirst Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report5

ESG Focus Areas
The Global Listed Infrastructure team focuses on assessing ESG risk and performance in four key areas –Energy Transition, Climate Risk, Modern Slavery and Corporate Governance.
The team’s strategies include the Global Listed Infrastructure “GLI” strategy (established in 2007) and the
Responsible Listed Infrastructure “RLI” strategy (established in 2017).
Energy Transition

Climate Risk

Energy transition is at the forefront of our engagement withcompanies. Transition risk represents the single largest
climate-related risk for listed infrastructure companies, as theworld moves away from fossil fuels and towards lower-carbon
sources of energy.
However, energy transition also represents a substantial
opportunity. Attempts to reduce carbon emissions are having
significant implications for the way in which electricity is
generated, transmitted and distributed.

Physical impact risk from climate change and global warming
poses risks to society and the global economy. It affects
the availability of resources, the price and structure of theenergy market, the vulnerability of infrastructure assets andthe valuation of companies. As investors in infrastructure
assets, we understand that climate change poses a complex
problem which has already impacted, and will continue toimpact different assets in different ways. We believe it is our
responsibility to understand and mitigate these risks within ourinvestment portfolios.

Modern Slavery

Corporate GovernanceAs stewards of our clients’ assets, we believe we have a
responsibility to identify and act to eliminate human rights
abuses, including, but not limited to, modern slavery. Thisis part of a wider societal responsibility that impacts theperformance of our investments. Companies have legal, moral
and commercial responsibilities to respect human rights andto manage the impacts of modern slavery on their operations.
If these responsibilities are not met, a company may face
regulatory, financial, reputational and legal risks.

Infrastructure companies provide essential services such asenergy, transportation, water and telecommunications that arevital to the functioning of societies and economies. They areoften large scale projects with significant capital expenditure
requirements. Effective corporate governance means
companies are managed in a manner that considers theinterests of all the stakeholders I.e. shareholders, employees,
customers, suppliers,
the environment and the broader community.

Emerging areas of focus
We acknowledge the growing significance of systemic issues, including biodiversity and natural capital, water scarcity
and quality, and the importance of a circular economy to minimise waste and optimise resource allocation. As thesechallenges gain prominence, we remain dedicated to actively engaging with our portfolio companies. Our objective
is to stay well-informed about key trends, emerging risks, and opportunities. By doing so, we strive to maintain acompetitive edge and effectively address these evolving issues in a proactive manner.

6

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

7

714
24
10

1,160

meetings
heldresolutions voted on

countries

8%

subsectors2

Net Zerotargets
made by85

voted against
management3

32

%

%

reduction in weighted
average portfolio carbon
intensity over last 5 years5of our portfolio companies4

34%

An average 34% female
representation on our portfolio
company boards (23% 5 years ago)6Interim 2030
WACI targets:

-35%
-50

for GLI
strategy%

for RLI
strategy

Graded 4 stars
or above in
7 out of 10
categories

UN PRI
Ranking7

Our progress

Leader
RIAA ranking

2. Company meetings held during the 12 months to 31 December 2023
3. Proxy voting for the 12 months to 31 December 2023
4. Portfolio holdings as at 30 June 2024
5. Represents portfolio holdings as at 30 June 2024 for the five year period December 2018 to December 2023
6. Represents portfolio holdings as at 30 June 2024 for the five year period December 2018 to December 2023
7.

8First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

Information sourced from FSI as at 31 December 2023

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

9EMERGING AREAS
OF FOCUSCORPORATE GOVERNANCE

MODERN SLAVERY

Case Studies

CLIMATE RISKENERGY TRANSITION

Engagements examples in this report

10First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

Name

SectorRegionPrimary engagement objectives

Xcel Energy

Utilities/
Renewables

United States••

Just transition
Impact of coal closures on
employees

12

Targa
Resources

EnergyMidstream

United States•

Absence of quantifiable carbon
reduction goals
Poor disclosure on ESG targets
Board tenure and independence

14

EdisonInternational

Utilities/
Renewables

United States

Impact of climate change andwildfiresWildfire mitigation plans,
undergrounding assets
Regulatory changes, wildfire funds

16

Prioritise investment in resilience
spend
Further investment in climatechange modelling

18

Understanding response to Modern
Slavery risks
Deep dive into workforce contractor
arrangements

20

•
•
•
•
•

Entergy

Utilities/
Renewables

United States

Utilities/
Renewables

Australia/NZ

CCR

Toll Roads

Latin America•

Improve modern slavery policy andprocedures

22

PinnacleWest

Utilities/
Renewables

United States•

Separation of Chair and CEO
responsibilities
Improvement in REM targets
Establish targets for scope 2
emissions

24

AmericanTower

Towers/DCs

United States•••

Capital allocation plans
Board tenure and experience
Implementing board tenure andcarbon reduction targets

25

OrstedUtilities/
Renewables

Europe/xUK•

Environmental impact of offshore
wind projects
Approach to biodiversity
Circular economy

26

APA Group

•

Page

•

•
•

•
•

•
•

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report11Case study | Energy Transition | Xcel Energy

Xcel Energy (Xcel) has made significant
strides in transitioning to renewables
and closing coal-fired power stations,however the cascading impacts toemployee livelihoods and the initiatives
to support a just transition were lessclear.
Xcel is a regulated utility company operating ineight US states, providing electricity and natural
gas services to approximately 3.7 million electric
customers and 2.1 million natural gas customers.
The company has made strong progress towards
decarbonising its operations with the closureof coal-fired power stations and a shift towards
renewables. Its coal-fired generation capacity
has decreased from over 8,000 megawatts in2006 to a forecast of 4,100 megawatts in 2025,with a target of zero by 2030. Renewables are
expected to increase from 9% in 2006 to 67%
in 2030.
Xcel’s efforts to mitigate climate change havebeen successful, resulting in steady, low-risk
earnings growth. However, it is important toconsider the cost of shifting to a healthiereconomy and more sustainable production.
The Paris Agreement requires a “just transition”,
ensuring that transition measures consider
the rights of employees whose roles change
or are no longer needed. In this context, wesought to evaluate the extent to which Xcel wasincorporating a just transition strategy into its
program of replacing coal with renewables.

which is scheduled to occur in two stages: Unit
2 in 2023 and Unit 1 in 2026. This would see
the workforce reduced from 187 employees
to around 88 employees by 2030. During themeeting, we discussed how Xcel plans toincorporate the concept of just transition into
the closure process including how the justtransition plan was developed, who the mainstakeholders were, what KPIs would be set, andwhat regulatory considerations were taken into
account.
Based on our research and engagement, Xcel
appears to have taken meaningful steps toreach key stakeholders involved in shutting
down the coal plant. These stakeholders
include employees, community colleges andclean energy groups. Xcel has also worked
with the regulator to provide regular updates
on the progress of community and employee
conversations as the closure unfolds. Thistransition plan is further supported by detailed
metrics, targets and KPIs, which were provided
during our meeting.

Coal-fired power plant closures
Xcel Energy target to be out of coal by 2030 (MW)

Renewables % Energy Mix
8,000

80%

6,000

60%

4,000

40%

2,000

20%

0

0%
2006

2022

2025f

% renewables

Xcel’s coal-fired plant closuresraise questions about a justtransition for employees

MW

Case study | Energy Transition | Xcel Energy

2030f

Source: Xcel Energy, First Sentier Investors as at 31 December 202311

We would like to see Xcel’s KPIs relating to ajust transition for Sherco be published. This
would enable investors to undertake their own
assessments and further engage with thecompany. We shared this feedback with Xcel andwill continue to ask for further information overtime.

In July 2023, we met with Xcel to discuss theupcoming closure of the Sherburne County
Generating Station (“Sherco”) in Minnesota,
11. 2025f and 2030f represent Xcel forecast numbers

12First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report13Case study | Energy Transition | Targa Resources

Case study | Energy Transition | Targa Resources

Opportunity to drive
improvements to carbon
reduction metrics andgovernance with Targa
Targa is a leading US energy midstream
company but still needs to address
ESG issues such as the absence ofquantifiable carbon reduction goals andseveral governance-related risks.
Targa Resources Corp (Targa) is a fully integrated
energy midstream company that primarily
operates in the US. The company’s corebusiness includes the gathering, processing,storage, and transportation of natural gas, natural
gas liquids (NGLs), and refined products. It has
a strong balance sheet and is well positioned tobenefit from increased export demand for US
natural gas and NGLs. However, there appear
to be opportunities to improve the managing of
ESG issues such as setting quantifiable carbon
reduction goals, and improving disclosure on
sustainability targets as well as how these relate
to remuneration. We believe there is also an
opportunity to re-evaluate existing governancestructures by reducing board tenure and rotatingboard membership.

14

We engaged with Targa management in May
2023. We highlighted our concerns about
the company’s lack of quantifiable carbon
reduction goals, including a Net Zero target
by 2050, and the ambiguity surrounding its
Scope 1 and 2 emissions. In response, thecompany stated that it is still considering whattargets to follow internally and what to disclose
externally. Additionally, it was waiting for SEC
rules and guidelines that will be required for ESG
disclosures in the future.
Targa acknowledged that “investors want us
to show progress” and shared that they have2025 greenhouse gas intensity targets in place.
We emphasised the importance of continuing
to work on scope 1 and scope 2 emissions,as well as methane emissions, and setting
and publishing quantitative targets, KPIs, andmeasures to address these. We also suggested
that the company should include these targets
in their remuneration packages to further
incentivize progress.

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

We also raised concerns about
management short-term incentives(STI), which are 60% financial,
30% operational, and only 10%
sustainable. We recommended that
Targa increase transparency anddisclosure around sustainability targets.
Targa acknowledged the difficultyof identifying such goals in a tightlabour market given the potential oflosing operational employees, but
we emphasised the importance ofincorporating sustainability into their
incentive structure for long-term value
creation and risk management.
Additionally, we questioned Targa’s
rationale for not including Return on
Invested Capital (ROIC) targets in its
management remuneration plans.
Targa’s view is that ROIC cannot be partof STI targets as projects take 2-3 years
to come to fruition. It also believes that
ROIC outcomes are already reflected inshare price performance, and therefore
captured in Performance Share Units.
We debated the pros and cons of both
approaches, and the company agreed
to consider the issue further.
Furthermore, we discussed a possible
policy on board tenure, given four
directors have been on the board forover nine years. We provided feedback
that, in our view, it was not appropriate
to have three former executives on theboard (two former CEOs and one former
General Counsel). We emphasised
the merits of have a diverse andindependent board to ensure Targa
could make well-informed decisions
that consider the best interests of all
stakeholders.

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report15

Case study | Climate Risk | Edison International

Case study | Climate Risk | Edison International

Wildfire-related liabilities:
A risk for investors in
Californian utilities

Edison has taken several steps to address
this risk, including the implementation of acomprehensive wildfire mitigation plan. This
includes equipment inspections, vegetation
management, and infrastructure hardening.
It is also undergrounding 600 miles ofpower lines, costing between US$1-1.5bn
from 2025-28, as outlined in it 2023-2025
wildfire mitigation plan.

Wildfire risks remain a significant
challenge for all Californian utilities.
Although Edison International invests
in technology and infrastructure to
mitigate this risk, investors should
monitor wildfire risk and liability
developments.

The California state government is also
taking steps to address the issue of climatechange and increased wildfire risk for
utilities. Californian legislation AB-1054,
which passed in 2019, aims to address
inverse condemnation. This is the legal
principle that holds utilities strictly liablefor damages caused by their equipment,even if they were not negligent. This
principle has been a significant factor
in the wildfire-related liabilities faced byutilities in California, including Edison and its
subsidiary Southern California Edison.

Edison International (Edison) is one of thelargest electric utilities in the US, serving over
15 million people in California. Investing in
Californian utilities such as Edison and PacificGas and Electric Company (PG&E) carries therisk of wildfire-related liabilities which includes
utility companies being held liable for damages
resulting from fires caused by their equipment.
In 2017 and 2018, PG&E was held accountable
for several wildfires that caused extensive
damage and loss of life, and the company filed
for bankruptcy as a result of these liabilities.
Similarly, Edison has faced wildfire-related
liabilities although on a smaller scale than PG&E.
In May 2023, we engaged with Edison to delve
into the potential ramifications of climate change
and wildfires on their business operations.
Our objective was to gain deeper insights into
the measures undertaken by the company tomitigate this risk, as well as to ascertain thegovernment’s response to this pressing issue.

Equipment inspections for overhead transmission,
distribution and generation equipment in high firerisk areas from both the ground and air using drones
and/or helicopters13

AB-1054 established a California
Wildfire Fund, which provides funding toreimburse eligible claims from a utility.
This protects utility companies frombankruptcy by covering wildfire damages
that exceed $1 billion. The law incentivizes
utility companies to invest in safety
and reduce wildfire risks while offering
financial protection. As long as the utility
company obtains a safety certificationfrom the state, they are presumed to haveacted responsibly. Overall, Edison has
demonstrated a commitment to addressing
wildfire risk and investing in technologies
and infrastructure that can help mitigate thisrisk. However, the risk of wildfires remains asignificant challenge for California utilities,
and it is important for investors to remain
vigilant and monitor developments related
to wildfire risk and liability. consider the bestinterests of all stakeholders.

13. Source: https://www.sce.com/wildfire/wildfire-mitigation-efforts
16

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report17

Case study | Climate Risk | Entergy

Case study | Climate Risk | Entergy

Understanding Entergy’s
climate risks and regulatory
cost recovery expectations
Entergy is a leader among US utilities
in the transition to net zero, however,
the heightened frequency of extreme
weather events increases the riskof asset damage and costly repairs.
We engaged with the company tounderstand their response.

18Entergy uses concrete and steel for
new and replacement high-voltage
transmission structures14

The company has updated its performancestandards based on recent storm history and isactively addressing key risks such as storm surges
and wind loading due to hurricanes. It has increased
substation elevation standards, with some being
raised to 30ft, to address the risk of storm surges.
The company has also prioritised the improvementof its distribution network, as 80% of major storm
costs are related to this area.

Entergy Corporation (Entergy) is a US-regulated
electric and gas utility that serves 2.9 million
customers across Arkansas, Louisiana,
Mississippi and Texas. The majority of its
assets are located in southern US statesthat are susceptible to severe hurricanes,
thunderstorms, and tornadoes. Climate change
can exacerbate these events, leading to
infrastructure damage, service disruptions, andcostly repairs.

Entergy confirmed that undergrounding
infrastructure is not feasible in most states thatit operates in due to unsuitable soil conditions inthe swamp-like land of their region. In contrast,
California has different incentives that makeundergrounding a more viable option. It estimatesthat undergrounding would cost 5-10 times morethan traditional above-ground infrastructure, further
justifying their prioritisation of above-groundinfrastructure.

In recent years, we have engaged with Entergy
to better understand the climate risks they
face. This included how it protects its assets,
expectations for regulatory cost recovery, andpotential benefits of climate change modellingfor system hardening. In 2023, we followed
up with further inquiries on Entergy’s efforts toimprove grid resilience, cost implications ofinfrastructure, state allocation of modernization
spending, and investments in climate change
modelling.

The business has allocated one third of
its US$33bn capex program towards gridmodernization, with Louisiana receiving 50%, Texas
receiving 30%, and other states receiving 20%.
While there has been some investment in climatechange modelling, the company has been cautious
in its messaging due to increased scepticism
towards climate change in some of the states
where it operates.

Entergy has proposed a 12-year, US$15 billion
resiliency plan that includes replacing working
infrastructure as a proactive measure to mitigate
potential storm damage.

14.

By doing so, it aims to reduce the costs associatedwith storm damage by 60%. This proactive
approach is expected to be more cost-effective
than replacing storm-damaged equipment asneeded in the long run.

Entergy is a leader among US utilities in thetransition to a net zero future, balancing its targets
with mitigating climate risks. We’d like to see further
investment in climate change modelling to help
identify areas that are at higher risk of damage
from extreme weather events. We will continue toengage with them on this matter.

Source: Energy Resiliency Plan https://www.entergy.com/transmission/resiliency/

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report19Case study | Modern Slavery | APA Group

Case study | Modern Slavery | APA Group

APA makes progress inunderstanding modern slavery
risks across its supply chains
The largest natural gas pipeline inAustralia, APA, has complex supply
chains that involve procuring materials,
equipment, and services from various
suppliers. We engaged with them tobetter understand how they manage
these risks.
APA is the largest natural gas infrastructurebusiness in Australia, owning and operating over
15,000 km of natural gas pipelines, processing,and storage. It also has a growing portfolio of
gas-fired power, renewable power (wind, solar,
battery), and power transmission infrastructure.
However, infrastructure companies have complex
supply chains that involve procuring materials,
equipment, and services from various suppliers.
This can make it difficult to obtain reliable andcomprehensive information given upstream anddownstream firms in a supply chain may not be
fully transparent.
In 2023, we engaged with APA to gain anunderstanding of its policies regarding modern
slavery. We sought clarity on multiple aspects,
such as the identification of instances of modern
slavery within their operations or supply chains,
as well as the processes they have in place toeffectively address and combat this risk. We also
raised modern slavery with management at theirannual investor day.

14.

20

APA considers the risk of modern slavery in its
operations to be low given its Australian-based
workforce are covered by enterprise agreements
and individual employment contracts. It has
implemented recruitment and on-boarding
processes, mandatory employee training, healthand safety policies, remuneration policies, andcode of conduct policies. The company uses
the UN Guiding Principles on Business andHuman Rights to manage modern slavery risks.
It published its Modern Slavery Statement Reportin 2023 and have a working group to address
this issue. To date, it has not identified any casesof modern slavery in its supply chain, and noreports or concerns have been received.
The company has also taken measures toaddress the risk of modern slavery in its supply
chain, requiring new suppliers to commit torespecting fundamental human rights andassess existing suppliers using APA’s Modern
Slavery Risk Management Approach. It has
introduced modern slavery clauses in relevant
procurement agreements and is increasing its
visibility of its indirect supply chain.

APA has been working with an ESG data
vendor and human rights consultancy
group to map high-risk suppliers beyond
Tier 1. While 98% of APA’s spend in FY23
was with direct suppliers in Australia, these
suppliers may rely on overseas operations
and supply chains, particularly in high-risk
regions like China. The company estimatesthat more than 95% of solar panels arestill sourced from China. It has minimised
modern slavery risks by introducing clauses
into all contracts, with suppliers required
to acknowledge modern slavery has
been considered and to not source fromparticular regions in China. It recently had to
remove a supplier who declined to sign thiscontract.
APA is making progress in understanding
modern slavery risks within its operations
and supply chains and we see thepublication of its Modern Slavery Reportin 2023 as a positive step. Its FY24
roadmap includes an initiative to conduct
a deep dive into their workforce contractor
arrangements. This will help to further
assess the risk in their operations. We
will continue to monitor the company’s
progress on this issue.

Source: Energy Resiliency Plan https://www.entergy.com/transmission/resiliency/

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report21

Case study | Modern Slavery | CCR

Case study | Modern Slavery | CCR

Investigating CCR’s policies andprocedures on modern slavery
We enquired about CCR’s assessment ofmodern slavery risks beyond its Tier 1 supply
chain, employment of migrant workers or
minorities, and its audit process for suppliers.
CCR is a diversified concession company that owns
toll road, urban mobility, and airport assets locatedthroughout Brazil. Its most significant assets include atoll road connecting Sao Paulo and Rio de Janeiro, five
metro lines in Sao Paulo, and a growing collection ofBrazilian airports. CCR’s business involves significant
construction works across all its divisions, which canincrease the risk of modern slavery due to complex
supply chains, short-term contracts, sub-contracting
arrangements, wage theft, and reliance on low-skilled
and migrant workers.
We have been engaging with CCR in recent years
to better understand its modern slavery policies andprocedures. In 2023, our letter to management asked ifthey had identified modern slavery in CCR’s operations
or supply chains, the processes for addressing it, andif staff were offered training to increase awareness.
We also enquired about the business’ assessment ofmodern slavery risks, employment of migrant workers
or minorities, and audit process for suppliers beyond
Tier 1. Our aim was to gain insight into CCR’s approachto managing modern slavery risks.
CCR noted that they maintain compliance with relevantlaws related to human rights through legal drafts withspecific clauses, regardless of the form of hiring labour
from their suppliers. The company also conducts
regular audits of eligible suppliers through the use of an
independent sustainability ratings agency, EcoVadis.

22

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

CCR’s ‘Sustainability Program’ monitors
the environmental, social, and ethicalperformance of its supply chain. Formal
assessments are carried out annually to
produce improvement plans that are sent to
suppliers for actioning.
CCR’s supply chain team conducts onsite audits of its best-evaluated suppliers,
strategic suppliers, and those with thelowest scores. These audits serve thepurpose of assessing whether supplier
responses provided to the regular audits
are being applied in practice; and support
the development of supplier policies andpractices. The contract manager participatesin these audits to ensure the independenceof the evaluation.
In 2022, CCR noted it was in the processof developing a policy that specificallyaddresses modern slavery risks. However,in our 2023 follow-up with the company,
it confirmed that this was no longer thecase. We have emphasized the importanceof developing a formal policy to manage
modern slavery risks and will continue toengage with the company on this matter.
We remain committed to working with CCR
to ensure that it has robust policies andprocedures in place to address modern
slavery in its operations and supply chain.

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report23Case study | Corporate Governance | Pinnacle West Corporation

Case study | Corporate Governance | American Tower

PNW engages with investors
on important corporate
governance matters

AMT capital allocation plans
put additional pressure on
the balance sheet

Shareholder resolutions on the
AGM agenda offer an opportunity toengage with a leading Arizona utility
on key issues like board composition,
remuneration packages,
and corporate governance.
Pinnacle West Corporation (PNW) is the largest
utility in Arizona, with a ~US$112 billion rate baseand representing ~50% of the state’s electricrate base. It also operates and co-owns the Palo
Verde Generating Station, the largest nuclear
plant and the single-largest generator of carbonfree electricity in the US.
In May 2023, we engaged with PNW’s Chief
Financial Officer, Company Secretary, andInvestor Relations representative to discussvarious topics related to its upcoming AGM.
These issues included a shareholder proposal
for an Independent Chair, remuneration targets
that required improvement, and ESG targets thatfell below industry best practice standards.
The shareholder proposal was for an
independent director to serve as chair of theboard. While PNW opposed the proposal,
arguing that it wanted to retain flexibility
to choose an individual that would serve
shareholders’ interests, we indicated we would
likely vote in favour of an independent chair.
Our view is that an independent director would
provide more objective oversight, increaseaccountability and reduce conflicts of interest.
We did acknowledge that a joint Chairman / CEO
could bring alignment if there is a clear strategy

AMT is one of the world’s largest
telecommunication infrastructure
operators but acquisitions in recent
years has put pressure on its balance
sheet. We engaged with the company on
capital allocation plans, board renewal
and carbon reduction targets.

however our view is that this arrangement
is typically limited to successful founder-led
businesses.
We recommended that Short Term Incentives(STI’s) be based on Earnings Per Share (EPS)
rather than Net Profit After Tax (NPAT) targets.
In our view, EPS is a more appropriate metricbecause it considers the number of outstanding
shares and provides a more accurate measureof profitability. In contrast, NPAT does not take
into account the number of outstanding shares,
making it a less reliable measure. As a result, we
believe EPS is a better metric for determining
short term incentives as it rewards executives foractions that increase shareholder value.

American Tower (AMT) is one of the world’s
largest global telecommunications infrastructure
operators, with over 224,000 sites in the
US, Latin America, Europe, Asia and Africa. It
generates revenue through long-term leases for
tower space with wireless telecommunicationcompanies. We have been actively engaging
with AMT on important issues such as capital
allocation, board renewal, and carbon reduction
targets. To address these issues, we arranged
a one-on-one meeting with AMT’s sustainability
team in March 2023, followed by anothermeeting in November 2023 to continue thediscussion.

Furthermore, we highlighted that the ESG targetsof the company fell below industry best practice.
Specifically, we noted that the company only
considers Scope 1 emissions as part of their
GHG reduction targets. We suggested thatthe company should broaden its consideration
to include Scope 2 emission targets as well
as setting a net zero commitment. Although
we are in favour of adding clean megawatts
and recognize that Scope 1 emissions are thecompany’s largest contributor, we believe that it
is now best practice to expand this and have it
independently verified.

In our capital management discussion with
AMT, we agreed with their plan to sell their
Indian assets with consideration to regulatory
and competitive challenges in that market. We
also advised that AMT’s reputation for effective
capital management could be harmed if it wereto acquire European tower company Cellnex’s
assets at a high multiple, especially as AMT had
previous opportunities to buy Cellnex at a lower
multiple over the past five years.

We voted in favour of the shareholder proposal
for an Independent Chair. We intend to maintainan open line of communication with the company
to collaborate on enhancing its remuneration and
ESG targets.

14.

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First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

We believe the AMT balance sheet has become
stretched in the past decade, mainly due to large
deals such as the acquisition of European tower
portfolio Telxius in 2021 and a premium takeoverof data center company CoreSite in 2021. We
recommended the Board incorporate newperspectives, rigorously evaluate management
decisions and explore succession planning forlong-serving directors. AMT acknowledged thatit does not have tenure limits for directors, but
believe it considers director tenure, exposureand experience when reviewing its Board
composition annually.
AMT has set a goal of reducing its Scope 1 and2 emissions by 40% between 2019 and 2035,
with the majority of its emissions stemming fromoperations in Africa and India. One of the major
sources of these emissions is the use of diesel
generators to power towers in these countries,
creating a challenge for AMT to achieve a targetof net zero. AMT is looking into using bio-diesel
to reduce emissions, and we discussed thechallenges they face. Providing power to its
African towers is crucial due to the unreliabilityof some electricity grids, and it is using more
solar and battery solutions to decrease generator
usage. We commended AMT for its efforts to
reduce emissions, but recognize that this is acomplex issue that requires ongoing attention
and innovation.

Source: Energy Resiliency Plan https://www.entergy.com/transmission/resiliency/

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report25Case study | Emerging Area of Focus | Orsted

Case study | Emerging Area of Focus | Orsted

Environmental impact
assessment for Orsted
offshore wind projects

Air bubble curtains being used during
construction of offshore wind farms15

Orsted confirmed that it has never had awhale beach in any of its projects. It also
noted that in the US, where there is limited
piling, it is highly unlikely that noise activity
from piling would cause whales to bebeached. While it is true that some birds die
every year by flying into turbine towers or
blades, the actual numbers are negligible.
Statistics show that in the US, wind energy
facilities cause less than one in 4,000
documented bird deaths from industrial
activities^.

Orsted is a global leader in the development
offshore wind, however questions remainaround the environmental impact of suchprojects, with specific concerns regarding an
increase in beached whales, risks to birds,
and plans for handling end-of-useful life
blades.
Orsted, a global leader in offshore wind energy, hasbuilt more offshore wind farms than any other company
worldwide. In January 2023, we engaged with thecompany to better understand the environmental
impact of its offshore wind projects, with specific focus
on concerns of an increase in beached whales as aresult of construction, the risk that wind blades pose
to birds, and its plans for handling damaged or end-ofuseful-life blades in the context of a circular economy.

When asked about their plans for dealing
with damaged or end-of-life blades, Orsted
acknowledged that this area is still being
developed. However, since their fleet isrelatively young, they do not anticipate many
blades needing to be disposed or recycled
for the next 7-8 years. Any damaged blades
are currently being stored until a recycling
solution is found. Orsted has an internalteam dedicated to finding solutions for blade
recycling and is exploring partnerships withvarious European companies. Additionally,
its innovation team is actively seeking new
solutions as they emerge in the market.

Before construction of any project, Orsted undertakes
a thorough environmental impact assessment,
considering the possible and potential effects on
biodiversity, including birdlife. The findings of theassessment are submitted to the relevant planning
authority, and if required, necessary actions are taken
to mitigate any predicted impacts on the environment.
The company were keen to emphasise its commitment
to preserving biodiversity, and that it has implemented
several practices to achieve this goal. These practices
include conducting aerial surveys, noise profiling,using soft start piling to reduce disturbance to marine
mammals during construction, deploying marine
mammal observers, and using bubble curtains as noise
shields.

15.

26

Source: bubble-curtains-are-being-used-to-protect-marine-life-from-noisy-wind-farm-construction

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

Orsted has set a target to deliver a net
positive impact on biodiversity across theirrenewable assets by 2030.

As biodiversity and the circular economy
increasingly gain attention, we will maintainour active engagement with companies todeepen our understanding of these risks andopportunities for our investors.

^ Source: Orsted renewable energy solutions website

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report27

statistics, including absolute carbon emissions, carbon
footprint and carbon intensity. It includes key safety
metrics like total recordable incident rates and lost time
injury rates. We look at diversity measures including
the number of independent directors and percentageof women directors, to track progress over time.
We encourage companies to report climate-related
statistics in a way that is consistent with the frameworkprovided by the Task Force on Climate-Related
Financial Disclosures (TCFD). TCFD compliant carbon
footprint reports can be generated for each of ourunderlying portfolios, and for the strategy overall, basedon ISS ESG data.

Our approach
ESG issues are fundamental to infrastructurecompanies, given they have significant service
obligations and moral accountability to the communities
in which they operate. We assess infrastructurecompanies on a broad range of ESG-related factors,
including but not limited to, energy transition, climate
risk, modern slavery and corporate governance. We
are conservative investors of our clients’ capital,
recognising that capital preservation is critical toachieving long-term capital growth. We focus on
fundamental value and conduct thorough due diligenceto minimise risk. We place strong emphasis on
proprietary research and direct contact with companies
and regulators.
At a group level, FSI has identified four main investment
stewardship priorities: climate change, human rights
and modern slavery, nature and biodiversity anddiversity. These priorities address the ESG issues thatpose the most significant long-term financial risks to
our investments, while also presenting the greatest
opportunities.
Engage with management and board on ESG
issues and performance
The most important source of research for the FSI
Global Listed Infrastructure (GLI) team is internallygenerated analysis based on regular meetings wehold with senior management and other stakeholders
including suppliers, competitors, regulators and industry
bodies. When the GLI team engages with companies

Principle Adverse Impacts

on ESG issues, we use meetings with management tobetter understand the situation from their perspective,
and to openly raise concerns where we see a potential
gap in ESG performance. If we don’t see performance
improvement, we will escalate the issue to thecompany’s board of directors to outline our concerns.
Ultimately, we will consider divestment if we do not see
a willingness to change or address the issue.
ESG assessment integrated into investment
process
The assessment of ESG issues, strategy andperformance represents an essential part of ourinvestment process. We seek to understand the risks
for each company and assess them in our proprietary
quality ranking which consists of 25 criteria that
influence stock returns for infrastructure securities. A
score is assigned to each criteria; a lower quality score
makes it harder for a stock to be included within theoverall portfolio. ESG assessment is both a scienceand an art that blends data points and qualitative
engagements. We then build on those findings byconducting asset tours, and spending time withcompany management and board directors. We havebeen doing this for over 15 years.
ESG Metrics
The GLI team maintains a database of key ESG metrics
across the strategy’s entire investible universe (focus
list)16. These metrics include a range of climate-related

16. GLI investment universe includes ~140 listed companies, which meet the GLI teams’ strict definition of core infrastructure

28

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

The Principal Adverse Impact (PAIs) are part of the EU’s
Sustainable Finance Disclosure Regulation (SFDR).
They seek to improve disclosure on how adverse
impacts and sustainability risks are considered andmanaged by investors. While many of the metrics thatfall under the PAIs were already being assessed by ourteam as part of our ESG assessment outlined above,
the new framework provides a consistent way to meetthe strategy’s obligations under SFDR. As part of ourapproach to PAIs, we commit to assess every active
equity investment for relevant adverse impacts anddocumenting the results. Where adverse sustainability
impacts are identified, we seek to engage with thecompany in accordance with the commitments madeunder FSI’s Responsible Investment and Stewardship
Policy and Principles.
Proxy voting and reporting
The GLI team seeks to vote on all eligible resolutions
where we have the authority to do so. Voting rights
are a valuable asset and are executed with care anddiligence. We take this responsibility seriously andthe research we gather ensures we make informed
decisions. If we believe that our concerns andperformance gaps are still not being addressed, we
may vote against resolutions put forward at the annual
shareholder meeting. During the 2023 calendar year,
we invested in 73 infrastructure companies across
13 subsectors and in 13 countries around the world.
We voted on 1,160 resolutions, of which we voted
against management on 89 occasions (8%) on issues
including lack of board independence, poor alignmentof interests and inadequate climate-related targets.
Our voting record is included for transparency on our
website17 and in the proxy voting section of this report.

17.

United Nations Sustainable Development Goals(SDGs)
Within our team’s suite of products, the Responsible
Listed Infrastructure (RLI) Strategy has an additional
mandate; namely, to invest in companies that cancontribute to or benefit from sustainable development,
as guided by the UN Sustainable Development Goals.
Given its importance to any functioning modern
economy, infrastructure has a central role to playin addressing global challenges that need to be
overcome in order to deliver a sustainable future.
Key areas that investment in infrastructure can havea meaningful effect on include:• SDG 6 - Clean Water and Sanitation• SDG 7 – Affordable and Clean Energy• SDG 9 – Industry, Innovation and Infrastructure• SDG 11 – Sustainable Cities and Communities• SDG 12 – Responsible Production and Consumption• SDG 13 – Climate Action
Each of these main categories contains several more
specific secondary or “sub” goals that infrastructure
investment can have a direct influence on. As part ofthe investment process for the RLI strategy, we monitor
how much capital expenditure (capex) is being spent by
each company on activities that correspond directly tothe sub-goals of each of the six SDGs outlined above.
Given infrastructure’s capital intensive nature, we
believe this represents a sensible and consistent way
to monitor a company’s contribution to sustainable
development. Reflecting the importance of taking abalanced approach, all capex is taken into account. We
then categorise it as positive, neutral or negative.
For example, Italian-listed utility company andrenewables leader Enel Group is forecast to spend
50% of its capex on the buildout of renewable energy
generation (such as wind farms and solar power)
between 2023 and 202518. Over the same period, 40%
of its capex will be spent on networks, predominantly
distribution grids. This will help to bring clean energy tothe end-user19.
A further 4% of capex is forecast to be invested by the
Enel X division in areas that support the transition to aclean economy (such as EV charging infrastructure andenergy efficiency initiatives)20. The remaining 6% of
the company’s capex is forecast to be spent on theirenergy retail business. We deem this capex to neither
positively or negatively affect any of the SDG sub goals,
and therefore assign it to the neutral category.

FSI Proxy voting

18. This is directly supportive of SDG 7.2 (By 2030, increase the share of renewable energy in the global energy mix)
19.

This is directly supportive of SDG 9.1 (Rural access)20. This is directly supportive of SDG 7.1 (Access to electricity), 7.2 (Share of renewable energy), 7.3 (Energy efficiency)

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report29Overall, we are of the view that the current holdings of the Responsible Listed Infrastructure Strategy make positive
contributions to SDG 7 (Affordable and Clean Energy) and SDG 9 (Industry, Innovation and Infrastructure).
This reflects the portfolio’s high weighting in utility stocks. Many utilities are investing substantial amounts of capex
both into renewable energy generation, such as wind and solar; and into the new or upgraded transmission anddistribution networks that are needed to connect these clean energy sources with population centres where thedemand is.
Responsible Listed Infrastructure Strategy’ capex supporting sustainable development21

79

Our climate change targets
First Sentier Investors and the Global Listed
Infrastructure team are targeting a reduction ingreenhouse gas emissions across our investment
portfolios22 consistent with an ambition to reach net
zero emissions by 2050.

%
SDG 7

of net capital investment
contributing towards the SDGs

Decarbonisation is happening in our asset class,particularly by utilities who are responsible for the vast
majority of the emissions in our opportunity set. Our
target reflects the developments that we are alreadyseeing in this space and enables us to engage with andencourage companies to make greater efforts on thisfront.

14%
SDG 11

20%
SDG 9

35 %

OTHER

12 %
SDG 6

SDG 135%

5%

Reflecting the best available science on the impactsof climate change, we acknowledge there is anurgent need to accelerate the transition towards net
zero emissions and support global efforts to limit
global warming to 1.5 degrees Celsius. Infrastructurecompanies will play a vital role in achieving thisoutcome given electric power and transportation are
significant contributors to global emissions.

• Take account of portfolio Scope 1&2 emissions to
consider material Scope 3 emissions26• Prioritise the direction of capital to infrastructurecompanies that are aligned or aligning to net zero, as
per the Paris Aligned Investment Initiative and Net
Zero Investment Framework• Encourage the investment of this capital into real
assets that reduce absolute emissions, rather thaninto offsets• Engage with companies to improve disclosures (e.g.
TCFD27 reporting) and accelerate change (eg. coal
power closures by 203028), with a focus on thosecompanies that produce the most carbon emissions• Implement an escalation and voting strategy
consistent with achieving net zero
• Provide information and analysis on net zero progressand climate risks and opportunities• Collaborate with industry stakeholders (e.g. PRI29,
IIGCC30, NZAM31, CA100+32) to provide a consistentand collective voice
The GLI team’s climate statement can be found on our
website33:

As a responsible and active manager of capital on
behalf of our clients, we seek to23:• Build investment portfolios aligned to net zero by2050• Pursue interim targets to reduce, by 2030, theWeighted Average Carbon Intensity (WACI)24 of ourinvestment portfolios to -35% (Global strategy)
or -50% (Responsible strategy) below the 2019benchmark index25

22. The team’s net zero target applies to all Global Listed Infrastructure and Responsible Listed Infrastructure pooled vehicles, and to separate client accounts that are subject to equivalent
investment guidelines.
23. These commitments and targets are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate),
together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced
future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments and targets depend on the ongoingaccuracy of such information and representations as well as the realisation of such future matters. Any commitments and targets set out in this material are continuously reviewed by therelevant investment teams and subject to change without notice.
24. Intensity being a measure of carbon efficiency, and WACI measures the exposure within a portfolio to carbon-intensive assets compared to the benchmark.
25. 2019 was selected as the base year as it represents the most recent and complete dataset which was not impacted by the pandemic. Benchmark is the FTSE Global Core Infrastructure 50-50
Index
26. Scope 3 includes encompasses emissions that are not produced by the company itself, and are not the result of activities from assets owned or controlled by them, but those that it’s
indirectly responsible for, up and down its value chain. Companies may currently face challenges in reporting accurate and reliable Scope 3 emissions data. Where a company is unable tocalculate its Scope 3 emissions for some or all of the categories outlined in the GHG Protocol’s guidance, it should still identify the relevant upstream and downstream Scope 3 emission
categories relevant to it.
27. Task Force on Climate-Related Financial Disclosures

21. Capex numbers reflect forecast spending levels of current portfolio holdings over the next 12 month period. “Net capital investment” figure of 83% consists of 86% positive contribution and

28. As per International Energy Agency (IEA) guidelines phase out by 2030 in developed markets and 2040 in emerging markets.

3% negative contribution. Positive, neutral and negative labelling represents the opinion of the FSI GLI Team.

29. United National Principles for Responsible Investment

SDG 6: Clean Water and Sanitation. SDG 7: Affordable and Clean Energy. SDG 9: Industry, Innovation and Infrastructure. SDG 11: Sustainable Cities and Communities. SDG 12: Responsible

30. Institutional Investors Group on Climate Change

Consumption and Production, SDG 13: Climate Action. “Other” represents capex spent in areas with a neutral effect on the SDGs. Source: First Sentier Investors and company reports. Data as

31. Net Zero Asset Managers

at 31 March 2024.

32. Climate Action 100+
33. The Securities and Futures Commission has not reviewed the contents of www.firstsentierinvestors.com

30

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report31Interim targets
We commit to pursuing interim targets to reduce the
WACI of our investment portfolios by -35% for our
Global Strategy and -50% for our Responsible strategy,
by 2030 relative to the 2019 benchmark index . Thistarget was developed through a detailed evaluation of
our portfolios emissions, progress achieved to date andtheir likely achievements in the years ahead.
The Paris Agreement calls for a -45% reductionin emissions by 2030 from a 2010 baseline. It is
important to recognise that companies have alreadymade significant progress on this target. US utilities
represent the vast majority of total emissions in our
portfolios and we estimate that from 2010 to 2019
these companies had already reduced emissions by-29%. Therefore to deliver their fair share requires afurther -23% reduction from 2019 to 2030. Adjusting
absolute emissions to emissions intensity we arrive atthe -35% target for our Global Strategy.

APPENDICES

Energy transition

Weighted Average Carbon Strategy

2,000

BenchmarkGlobalTransition risk represents the single largest climaterelated risk for listed infrastructure companies,
as the world moves away from fossil fuels and towards
lower carbon sources of energy. This transition has
implications for freight railways, whose coal haulage
volumes will decline materially over the next ten years.
It will affect the energy midstream space, where oil andrefined product pipelines could face stranded asset riskby 2040. While natural gas is likely to represent a key
transition fuel, a long-term decline in demand is likely
to begin once battery storage technology has
advanced sufficiently.

Responsible

Scope 1+2 tCO2e / $m Sales

1,750
1,500
1,250
1,000
750
500
250

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

0

However, energy transition also represents a
substantial opportunity. Attempts to reduce carbon
emissions are having significant implications for theway in which electricity is generated, transmitted anddistributed. Renewable energy is currently experiencing
a virtuous cycle of falling costs, improving productivity
and growing market share. In contrast, non-renewableenergy is in a vicious cycle of declining market share,
reduced revenues and rising costs.

Portfolio carbon metrics
Across our portfolio companies we have seena -16% reduction in absolute emissions over the last
5 years . This reduction reflects a range of initiatives
including: closing coal power plants and replacing withwind, solar and batteries, signing renewable powerpurchase agreements, reducing transmission line
losses, capturing landfill methane and processing into
renewable natural gas, converting vehicles from diesel
to compressed natural gas or electric, or switchingventilation systems from fixed to variable speed.
The list of initiatives and technologies continues
to grow.
Importantly this reduction in emissions came despite
substantial growth in the underlying businesses andchanges in scope related to acquisitions. As an
indication this -16% decline in absolute emissions
translates to -32% decline in WACI when adjusted
by revenue.

Source: First Sentier Investors, MSCI as at 31 December 2023

32

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report33

Absolute carbon emissions

Carbon intensity
CO2 emissions tonnes per $USD revenue

CO2 emissions (Scope 1+2) thousand tonnes
1,600-32% decline in WACI over 5 years

1,600

1,400

1,400

1,200

1,200

1,000

1,000

800

800

600

600

400

400

200

200
0

0
2017

2018

2019

2020

2021

Source: Bloomberg, First Sentier Investors

2022

2017

2023

99% portfolio coverage

2018

2019

2020

2021

2022

2023

Source: Bloomberg, First Sentier Investors

The vast majority of our portfolio’s emissions come from utilities so naturally this is where we invest the most timeon analysis and engagement. With the main source of emissions being power generation, utilities tend to express
carbon intensity as a function of power produced. This measure of carbon intensity has reduced by -18% over thelast 5 years as utilities have switched from power generation fuelled by coal to natural gas to renewables.
This measure of carbon intensity is also useful to consider pathways towards net zero. All of our portfolio utilities
disclose historic carbon intensity and many provide a pathway forward. We can also analyse information from
integrated resource plans and plant asset lives to project the likely carbon intensity of the generation fleet overtime. Our portfolio utilities have already reduced carbon intensity by close to -40% from 2005 to 2020 and are ona path consistent with net zero by 2050. We recognise our level of confidence in these metrics falls materially after
2030 / 2035 given resource planning and government incentives are typically limited to 10-15 years and networks /storage are untested with 100% renewables at scale.
Carbon intensity

Net Zero Pathway
Tons CO2 emissions per MWh

Tons CO2 emissions per MWh

0.70

0.70

0.60

0.60

0.50

0.50

0.40

0.40

0.30

0.30

0.20

0.20

0.10

0.10

0
2018

2019

2020

2021

2022

2023

Power generated by utilities represents >80% of portfolio emissions

2005

2010

2015

2020

Source: Bloomberg, First Sentier Investors

Commitment to energy transition
100%

80%

% of portfolios

49% have climate-linked compensation (vs 42%
in 2022)

Reporting against the recommendations of the Task
Force on Climate-Related Financial Disclosures (TCFD)
has become the global standard. Disclosures aroundgovernance, strategy, risk management, metrics
and targets should help investors understand how
companies consider and assess climate-related risks
and opportunities. Companies that do not support
TCFD disclosures are generally in emerging markets. A
few do not formally support TCFD but do have credible
disclosures and commitments. For example, Flughafen
Zurich (Zurich Airport) supports the Global Reporting
Initiative (GRI) and Airport Carbon Accreditation (ACA)
and has set a target for net zero without offsetting by
2040. We will continue to engage to achieve 100%
support of TCFD.

Incentives drive behaviours and we believe executionof the pathway towards net zero is more likely tobe successful if management are remunerated
accordingly. Depending on the materiality for thecompany and the responsibilities of the individual, we
recommend 10-30% of variable remuneration is linked
to ESG-related risks. For an example of best practice,
Xcel Energy has linked 100% of short-term incentives
to ESG metrics including safety, reliability, customer,
environment and diversity, with a 50-150% overlay forearnings per share relative to guidance range. It has
also linked 30% of long-term incentives to carbon
reduction with 70% on relative total shareholder return.

85% have set a net zero target (vs 71% in 2022)
Most companies target net zero by 2050. A few haveset more aggressive targets including NextEra Energy
by 2045 and CenterPoint Energy by 2035. Companies
that have not set a net zero target are generally inenergy midstream (not credible), emerging markets(not priority) or wireless towers (not material). Other
sectors like railroads and waste have set strong interim
targets but are not yet ready to commit to net zero. For
example, waste company Republic Services has setan (SBTi approved) interim target for -35% reductionin emissions by 2030 but does not yet see a pathway
to 100% capture of landfill methane gas. We willcontinue to engage with these companies to push for acommitment to net zero.
44% are approved as science based (vs 37% in
2022)

0

2017

95% report against TCFD (no change fromprevious year)

60%

2025

2030

2035

2040

2045

2050

Adding a pathway to achieving net zero includinginterim targets is critical for transparency andaccountability. We will continue to engage withcompanies to align net zero pathways with science andseek external validation. The Science-Based Targets
Initiative (SBTi) is widely used for validation of net zero
pathways. We acknowledge criticisms that it relies
on a single scenario to achieve net zero and does not
capture historic carbon reductions – this is importantfor US utilities given what was achieved between
2005 and 2020. We will also seek further disclosureof specific plans to achieve these outcomes, forexample coal plant closures and renewable / storage /transmission projects.

40%

20%

Challenges
Carbon intensity (measured in TCoe2/Gwh36) is a
key component of our GHG reduction targets. Whilethe longer-term trend of this metric follows a clear
downward trajectory, a utility’s carbon intensity cansometimes increase year-on-year owing to changes
in energy demand levels, utility capacity factors37 andcorporate structure. Whilst longer term targets such as
Net Zero 2050 are important, our immediate priority is
to set medium-term expectations and assess company
performance against those measures. We challengemanagement on where they expect to get to by 2025
and 2030. We need to be forward looking and also
identify the laggards who could be the leaders of the
future.
We recognise the challenges of addressing scope
3 emissions. Many companies do not have thesystems in place to track and report emissions that
occur outside their operation but associated with
their activities. A lack of standardised methodologies
and reporting frameworks also makes it challenging
to compare emissions across different companies.
We will continue to engage with companies to raiseawareness about the importance of Scope 3 emissions.
Future steps
We actively encourage companies to take the energy
transition seriously and provide high quality climaterelated reporting in line with TCFD recommendations.
Across all ESG issues, we need sustainability
reporting that has the same rigour as financial
reporting (i.e. double materiality) and we are aware of
our responsibility as active owners to encourage thisfrom the companies we invest in. We will report on our
progress against our net zero target at an underlying
portfolio level on an annual basis.

0
TCFD Report

Net Zero Target

Science BasedClimate Comp

Source: Bloomberg, First Sentier Investors

34

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

36. Tonnes (t) of carbon dioxide (CO2) equivalent (e) per gigawatt hour (Gwh)
37. How often different power plant types are being run at maximum power

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

35

Climate risk
Climate change and global warming are increasing
the frequency and unpredictability of extreme weather
events like droughts, fires and floods, which poserisks to society and the global economy. It impacts
the availability of resources, the price and structure of
the energy market, the vulnerability of infrastructure
assets and the valuation of companies. As investors
in infrastructure assets, we understand that climatechange poses a complex problem, which has already
impacted, and will continue to impact, different assets
in different ways. We believe it is our responsibility
to understand and mitigate these risks within ourinvestment portfolios.
Examples of climate risk for infrastructure assets
include:• Extreme weather events including hurricanes, storm
surges, floods and high wind events• Droughts and the impact this has on water resources• Increased risk of wildfires causing damage to utility
electricity transmission networks• Rising sea levels causing damage to coastal
infrastructure assets.

36

Challenges

Climate change-related criteria are incorporated into
the quality scores that are assigned to each company
that we research and analyse. Our quality scoresconsider factors including operational risks andthe impact extreme weather events may have on acompany’s cash flows or licence to operate.
We conduct regular meetings with senior management
and other stakeholders including suppliers,
competitors, regulators and industry bodies. Given theinvestment experience across the team, we understandcompanies and markets intimately and believe weare well positioned to form a view on the companies’
approach to climate change and the materiality ofclimate change-related risks and opportunities.
Our engagements on climate risk cover the four pillarsof the TCFD disclosures: governance, strategy, risk
management, and metrics and targets.

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

We recognise that climate change is a longterm challenge and that its impacts unfold
over extended periods. This requires a shift
in mindset and the adoption of new tools andmethodologies to understand its impact overtime. Climate change is also characterised bysignificant uncertainty, making it challenging
to quantify and model risks accurately. Datareliability and availability are an ongoing challenge;
however company disclosure is improving with
the introduction of mandatory climate disclosure
across many of the jurisdictions we invest in.
Future steps
Whilst climate-related reporting is still not
mandatory in many countries, we actively
encourage companies which have not embarked
on this journey yet to start thinking about improved
climate related reporting. We believe that accessto better data will enable companies to set morerobust metrics and targets. This will allow for the
implementation and monitoring of more consistentclimate metrics and targets, and provide greatertransparency and accountability on climaterelated performance.

Modern slavery
At FSI, we understand we must do all that we canto ensure our investment decisions, operations andsupply chains do not have direct or indirect ties
to modern slavery. The GLI team is dedicated toenhancing our systems and processes to identify andcombat various forms of slavery and human trafficking,including forced labour, child labour, domestic
servitude, and workplace abuse. We acknowledge that
suppliers employing lower wage staff may pose higher
risks, and we encourage companies to thoroughly map
out both their direct and indirect suppliers.
In 2020, FSI formed a modern slavery working group,comprising investment team members including the
GLI team and led by the FSI Responsible Investment
team. The group aimed to enhance our efforts in humanrights by integrating risk identification and governanceinto our processes. As part of their work, they
developed and published the Modern Slavery Toolkit.

4. Internal governance: Describing the internal
governance framework in place to monitor modern
slavery risks and the effectiveness of our approach.
5. Reporting: provides a reporting template forinvestment teams to be completed each year.
The GLI team assessed the risk of modern slavery
in our focus list, considering sectors, geographies,
and companies. External data sources, including theTransparency International Corruption Perceptions
Index, helped identify countries associated withmodern slavery risks. Each company in our focus list
was ranked based on the vulnerability index of thecountries where they operate. Our engagement efforts
are prioritised towards companies with higher exposurein countries ranked higher on the index. Two company
engagement examples on this important ESG issue aredescribed below.

The toolkit sets out the steps that investment teams
take at both pre- and post-investment stages:
1. Risk identification: Utilizing various data sources andconsidering factors like complex supply chains to
identify potential risks.
2. Risk mitigation: Providing guidelines and sample
questions for engaging with companies at risk ofmodern slavery. It also highlights other forms ofleverage, such as policy advocacy and partnerships.
3. Escalation: Outlining actions for escalating,remediation, and ongoing monitoring of any
identified instances of modern slavery.
36. World Economic Forum Global Gender Gap Report 2023
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First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

Challenges

Future steps

Infrastructure companies have complex supply chainsthat involve procuring materials, equipment, andservices from various suppliers. Companies may notalways be fully transparent about their supply chain
practises, making it challenging to obtain reliable andcomprehensive information. These risks tend to behigher in developing markets such as parts of Asiaand Latin America, hence our focus on companies
operating in these markets.

We will continue to engage with our focus list
companies to promote the mapping of their complete
supply chain, including direct and indirect suppliers.
In our discussions, we intend to focus on remedies
and preventive measures to address the challenges
mentioned earlier. As we gather more data, casestudies, and best practices, we will contribute to
updating FSI’s Modern Slavery Toolkit, ensuringcontinuous improvement in our investment approach.

Modern slavery laws and regulations vary acrossjurisdictions, creating a lack of consistent global
framework for assessing these risks. The UK andAustralia have existing modern slavery legislation,
New Zealand and Canada in the process of enacting aModern Slavery Act, and Japan is developing guidelines
on Human Rights Due Diligence. To improve data
quality, it will be crucial to translate qualitative social
objectives, such as modern slavery, into quantitative
indicators.

Addressing the sheer scale of modern slavery

The International Labour Organization38 has estimatedthat there are nearly 50 million victims of modern slavery,
including crimes such as forced labour, debt bondage,
human trafficking, child labour and forced marriage. Itmeans there are 5 victims of modern slavery for every
1,000 people in the world today. And sadly, one in four
victims of modern slavery are children.
Modern slavery is a complex and multi-faceted issue.
There is no gold standard for identifying and addressing
the risks associated with modern slavery and how it isaddressed varies between markets and industries.
Generally, we expect leaders to have mapped out their
supply chains and to work on building relationships with
their suppliers, to have a sense of where the key risks lie
and to have robust training and remediation measures inplace. We see red flags in instances where companies
assert that there is no issue, that the issue has been
resolved, no remediation processes are in place and if
no examples or case studies of issues identified andaddressed can be provided.

38. International Labour Organization, “Forced Labour, modern slavery and human trafficking”: https://www.ilo.org/global/topics/forced-labour/lang--en/index.htm
First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report39

In 2023, we focused on two key corporate governance areas: board independence and gender diversity.
Board independenceOver the past six years, board independence has consistently remained robust across our portfolios, withan average of around 80%. This reflects the emphasis on developed markets within our portfolio. Notably,
infrastructure companies in the United States, Canada, and Australia have set a benchmark for best practices,with typically 80-90% of directors being independent. Japan remains a laggard but there has been a noticeable
improvement in recent years, driven by reforms aimed at enhancing corporate governance and attracting foreign
investment. We are committed to fostering further progress in this area and will actively encourage companies toprioritize board independence.
Board independence

Corporate governance

Portfolio holdings as at 30 June 2024

Board independence

Focus list ~140 listed infrastructure companies

100% Independent Directors
100

80

90
80

60

70
40

60
50

20

40
0

30
20

Effective governance and board oversight is critical fortranslating sustainable targets to outcomes. We lookat factors including director independence, board size,
gender diversity and relevant skills and experience
when assessing governance standards. We also lookto ensure that the board of directors meets regularly,
retains control over the business and are clear in thedivision of their responsibilities, as well as maintaininga system of risk management. Alignment of interest
is important because it ensures that decision making
processes are focussed on maximising shareholder
value whilst also promoting accountability, risk
management and long- term sustainability.

What makes a good board?

A board that truly adds value is one with abalanced team of high-performing individuals
that have complementary skill sets and a culturethat allows them to work together to make themost effective decisions for the organisation.
Whilst leadership from the chair is crucial, it is
the participation of every board member that
contributes to the overall effectiveness of aboard.
We believe a good listed infrastructure company
board has the following characteristics:• Board size of between 8-10 directors, with thesignificant majority independent• Diversity by gender (at least 30% female
representation), age and race
• Separation of Chairman and CEO duties, with
the Chair being independent*• Balance of skills and relevant experience, suchas industry, finance, regulation, technology,

customer, and local knowledge. Sustainability
and climate change is a skillset of increased
importance• Regular board refreshment and clear
succession planning.
Good boards set the strategy, appoint the
Executive and oversee the execution of thatstrategy. They delegate effectively, have honest
conversations with management and arecommitted to the organisation particularly whenit comes to problem solving. We also observe thegrowing importance and pressure for Boards toalso focus on sustainable, socially responsible
and environmentally aware business practises.

10
0
2017

2018

2019

Source: First Sentier Investors

2020

2021

2022

2023

2017

2018

CanadaUnited Kingdom
Asia xJP

2019
Australia NZEurope xUK
Japan

2020

2021

2022

2023

United States
Latin America

Source: First Sentier Investors

Gender diversity
For several years, we have been diligently evaluating companies based on their board gender diversity. Thisis due to the fact that gender balance is typically disclosed publicly and forms an integral part of a company’s
assessment of its social and governance performance. We firmly believe that a diverse board and leadershipteam, encompassing a wide range of thoughts, experiences, and perspectives, fosters more comprehensive
and informed decision-making processes. Furthermore, diverse companies tend to be more adept at effectively
managing risks. We believe by having a diverse workplace and leadership team, potential risks that might beoverlooked in a less diverse environment can be identified and addressed proactively.
In recent years, there has been a steady improvement in the percentage of women on boards at the portfolio level,with the figure reaching 34% by the end of the year in 2023. Notably, the United Kingdom has emerged as a leader
in gender diversity, achieving a remarkable 50% representation for utilities companies SSE, Pennon, and Severn
Trent¥. The UK Financial Conduct Authority (FCA) took a significant step forward in April 2022 by introducing newrules that mandate listed companies to report information and disclose their progress towards targets in terms of
the representation of women and ethnic minorities on their boards and executive management teams. This movesignifies a commitment towards promoting diversity and inclusivity in corporate leadership.

*We acknowledge that a joint Chairman/CEO canalso bring alignment if there is a clear strategy
and direction with ‘skin in the game’. We haveseen some successful founder-led examples.

¥ Source: Bloomberg, First Sentier Investors

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report41Diversity

Portfolio holdings as at 30 June 2023

% women on board

Diversity

Focus list ~140 listed infrastructure companies

50

40

40

35
30

30
25

20

20

10

15
0

10
5
0
2017

2018

Source: First Sentier Investors

2019

2020

2021

2022

2023

2017

2018

CanadaUnited Kingdom
Asia xJP

2019
Australia NZEurope xUK
Japan

2020

2021

2022

2023

United States
Latin America

Source: First Sentier Investors

At a firm level, we continue to be involved in industry collaborations designed to boost gender diversity on boards(Australian Institute of Director’s 30% Club) and senior management (40:40 Vision). We are also committed tobringing more women into our own investment teams and continue to work towards our commitment to have
women comprise at least 40% of investment management staff by 2033 (currently 30% for the GLI team).
Challenges

Proxy voting

We tend to be cautious when investing in emerging markets, where poorer corporate governance can impact
investor confidence. Many infrastructure companies in emerging markets are controlled by a single or group of
dominant shareholders, often family-owned or connected to the government. This concentration of power canlead to conflicts of interest, abuse of power, and inadequate checks and balances, resulting in poor governanceoutcomes. Emerging markets often have less stable political environments and weaker regulatory frameworks
compared to developed countries. Frequent changes in government policies, regulations, and laws can create
uncertainty and increase the risk of investing in infrastructure projects.

The GLI team exercises voting rights on all resolutions
where it has the authority to do so. Voting rights are
crucial for upholding corporate governance, risk
management and protecting investor interests. We
believe voting rights are a valuable asset, which should
be managed with the same care and diligence as anyother asset.

Future steps

Engaging with a company provides an opportunity togather information and insights directly from company
management. Through meetings with the company weare able to understand the company’s strategy and gaina deeper understanding of its governance practises. It
enables us to evaluate shareholder proposals, board
nominations, executive compensation plans and othermatters put to a vote.

We continue to actively engage with companies to promote good governance practices. Active ownershipencourages companies to be more accountable, transparent, and responsive to shareholder concerns. By voting
on important governance matters, such as board composition, executive remuneration and shareholder rights, we
can support changes that enhance governance standards and align company practices with shareholder interests.

42

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report

While we seek recommendations from independent
research providers, we maintain full control over our
voting decisions. If we plan to vote against a proposal,
we may engage with the company beforehand for
consultation, with a view to achieving a satisfactory
solution. In the absence of a positive outcome and if
the concerns persist, we may escalate the issue to theboard and/or cast a vote against. Ultimately, divestment
is considered if there is no willingness to change oraddress the issue.
Our team maintains records when we vote against
management or against the recommendations of our
proxy voting advisor, Glass Lewis. Our proxy voting
record, at a strategy level, is available on the First
Sentier Investors website.

First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report43Important information
This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situationor needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio
management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should conduct your own due
diligence and consider your individual investment needs, objectives and financial situation and read the relevant offering documents for details including the risk factors disclosure.
Any person who acts upon, or changes their investment position in reliance on, the information contained in these materials does so entirely at their own risk.
We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. To the extent this material
contains any measurements or data related to environmental, social and governance (ESG) factors, these measurements or data are estimates based on information sourced by the relevant
investment team from third parties including portfolio companies and such information may ultimately prove to be inaccurate. No assurance is given or liability accepted regarding the accuracy,
validity or completeness of this material.

Proxy voting over 2023
During the 2023 calendar year, we invested in 73 infrastructure companies across 13 subsectors and in
13 countries around the world. We voted on 1,160 proposals, of which we voted against management on 89
occasions on issues including lack of board independence, poor alignment of interests and inadequate climaterelated targets.

To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to betrue and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of
everyone at First Sentier Investors.
To the extent this material contains any ESG related commitments or targets, such commitments or targets are current as at the date of publication and have been formulated by the relevant
investment team in accordance with either internally developed proprietary frameworks or are otherwise based on the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned
Investment Initiative framework. The commitments and targets are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately
prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related

Breakdown of votes against management

areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments and targets depend on theongoing accuracy of such information and representations as well as the realisation of such future matters. Any commitments and targets set out in this material are continuously reviewed by the

Board related

46%

relevant investment teams and subject to change without notice.
Past performance is not indicative of future performance. All investment involves risks and the value of investments and the income from them may go down as well as up and you may not

17%Compensation

get back your original investment. Actual outcomes or results may differ materially from those discussed. Readers must not place undue reliance on forward-looking statements as there is nocertainty that conditions current at the time of publication will continue.
References to specific securities (if any) are included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. Any securities referenced may

12%

Audit/Financials

or may not form part of the holdings of First Sentier Investors’ portfolios at a certain point in time, and the holdings may change over time.
References to comparative benchmarks or indices (if any) are for illustrative and comparison purposes only, may not be available for direct investment, are unmanaged, assume reinvestment of

8%

Governanceincome, and have limitations when used for comparison or other purposes because they may have volatility, credit, or other material characteristics (such as number and types of securities) thatare different from the funds managed by First Sentier Investors.

6%

Capital management

Selling restrictions
Not all First Sentier Investors products are available in all jurisdictions.

12%

Other

This material is neither directed at nor intended to be accessed by persons resident in, or citizens of any country, or types or categories of individual where to allow such access would be

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

unlawful or where it would require any registration, filing, application for any licence or approval or other steps to be taken by First Sentier Investors in order to comply with local laws or regulatory
requirements in such country.

Source: Glass Lewis for the 12 months to 31 December 2023

This material is intended for ‘professional clients’ (as defined by the UK Financial Conduct Authority, or under MiFID II), ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) or
Financial Markets Conduct Act 2013 (New Zealand) and ‘professional’ and ‘institutional’ investors as may be defined in the jurisdiction in which the material is received, including Hong Kong,
Singapore, Japan, and the United States, and should not be relied upon by or be passed to other persons.
The First Sentier Investors funds referenced in these materials are not registered for sale in the United States and this document is not an offer for sale of funds to US persons (as such term isused in Regulation S promulgated under the 1933 Act). Fund-specific information has been provided to illustrate First Sentier Investors’ expertise in the strategy. Differences between fund-specificconstraints or fees and those of a similarly managed mandate would affect performance results.

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First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report45About First Sentier Investors
References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group (MUFG). Certain of ourinvestment teams operate under the trading names AlbaCore Capital Group, FSSA Investment Managers, Stewart Investors and RQI Investors all of which are part of the First Sentier Investorsgroup.
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First Sentier Investors | Global Listed Infrastructure 2024 Sustainability Report