Aquila European Renewables | ESG

The Aquila European Renewables Income Fund (“Company”) goal is to be a responsible investor, ensuring that environmental, social and governance (“ESG”) criteria are incorporated into the day-to-day investment decisions as well as generating a positive impact for society. This is reflected across the investment philosophy and approach, including the Company’s investment adviser, Aquila Capital Investmentgesellschaft mbH (“Investment Adviser” or “Aquila”), who is dedicated to the green energy transition.

The Company invests in assets the Investment Adviser has identified and recommended as renewable energy infrastructure investments. These are defined as for the purposes of the Company as:

• wind, photovoltaic and hydropower plants that generate electricity through the transformation of the energy of the wind, the sunlight and running water as naturally replenished resources, and/or any portfolio thereof; and
• non-generation renewable energy related infrastructure associated with the storage (such as batteries) and transmission (such as distribution grids and transmission lines) of renewable energy, in each case either already operating or in construction/development.

Further details of the sustainability indicators which may be used in respect of any particular investment and the measures the Investment Adviser may use are set out in its ESG policy, which can be found here:

https://www.aquila-capital.de/en/sustainability/sustainability-related-disclosures

The Investment Adviser performs detailed ESG due diligence for each asset prior to acquisition. The Investment Adviser has a structured screening, due diligence and investment process which is designed to ensure that investments are reviewed and compared on a consistent basis. Execution of this process is facilitated by the Investment Adviser team’s deep experience in energy infrastructure investing. As part of this process, the Investment Adviser will, as relevant for each investment, consider:

• greenhouse gas emissions reduced and/or avoided; and
• total energy production from renewable and non-renewable sources.

As part of this due diligence, various risks are assessed and documented including risk of climate change, risk of harm to local biodiversity and other environmental risks. These risks are all evaluated as part of the technical, legal and insurance due diligence as applicable. In assessing each asset for acquisition, the Investment Adviser takes into account the ability for the acquisition to contribute to the UN Sustainable Development Goals and whether it fits within the Principles for Responsible Investment (“PRI”).

As part of the due diligence undertaken by the Investment Adviser on each asset prior to acquisition by the Company, procedures for anti-bribery, Know Your Client (“KYC”) and anti-corruption are all reviewed and assessed in line with the policy and framework adopted by the Company. Compliance with local laws and requirements are also assessed prior to any recommendation being made to the AERIF Board (“Board”).

The Company’s assets are typically located in remote regions of Europe, where the relevant resource factor is high. In some cases, the Company’s assets are situated in close proximity to local communities, accordingly active engagement with local communities is an important part of the investment philosophy. Local community issues, noise concerns, access considerations and the provision of appropriate channels and forums for local communities to voice any concerns all form part of the Investment Adviser’s due diligence.

Further details of the Company’s ESG responsibilities, reporting and the investment process can be found at https://www.aquila-european-renewables-income-fund.com/responsibility/esg-investment-process.

The Company benefits from both an independent Board of Directors, as well as an Alternative Investment Fund Manager (“AIFM”), International Fund Management Limited (part of PraxisIFM Group). The Board of Directors supervise the AIFM, which is responsible for making recommendations in relation to any investment proposals put forward by the Investment Adviser. The Investment Adviser is fully regulated and supervised by BaFin in Germany.

The Company has established procedures to deal with any potential conflicts of interest in circumstances where Aquila (or any affiliate) is advising both the AIFM (for the Company) and other Aquila managed funds who are counterparties to the Company. In the context of an investment decision, these procedures may include a fairness opinion in relation to the valuation of an investment, which is obtained from an independent expert.

After an investment has been made, continuous ongoing monitoring commences at both the portfolio and asset levels by the Investment Adviser. The aim of this ongoing monitoring is to identify, monitor and minimise sustainability risks over the entire term of the investment.

The environmental characteristics of the Company are moni­tored on a continuous basis throughout the lifecycle of investments, including:

• ongoing monitoring of the internal and external environ­ment and ESG relevant developments; both at the portfolio level and on the asset level;
• annual reporting including ESG aspects to relevant stakeholders;
• ad-hoc reporting in case any material and urgent issues are identified in the monitoring process; and
• quarterly risk reporting to the Board, including on ESG aspects.

General standards, including local health, safety and social laws are also reviewed on a regular basis for all assets, taking into account the location and development status of each asset.