Asian Energy Impact Trust | ESG

A net-zero world in 2050 can only be achieved if we tackle the challenges where they are most needed.  We believe that investment in Asian renewable energy is vital to achieving net zero as:

• Asia’s 4.6bn people account for more than half of global energy consumption – 85% of that consumption is from fossil fuels;
• developing markets account for the majority of future global CO2 emissions but they only receive 20% of clean energy investment; and
• the average ‘carbon cost’* of GDP in Asia is almost four times as high as that of the four largest economies in Europe,

*Carbon cost calculated as the amount of carbon released in proportion to the generation of USD1tn of GDP

ThomasLloyd Energy Impact Trust PLC (TLEI) is the first impact-focused UK investment trust dedicated to investing in sustainable energy infrastructure projects that will help mitigate Asia’s expanding climate change issues.  TLEI has qualified for the London Stock Exchange's Green Economy Mark, which recognises companies that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy.  In addition, as a fund that has sustainable investment as its objective, the Company is aiming to qualify as an Article 9 fund under the EU Sustainable Finance Disclosure Regulation (SFDR).

TLEI is a purpose-driven company with the investment objective to generate a triple return, comprising a financial return on investment, a measurable environmental return and a discernible social return, by investing in a diversified portfolio of unlisted sustainable energy infrastructure in fast-growing and emerging economies in Asia that contribute towards a zero-carbon future. Its investments require a long-term view to be taken and sustainable business practices applied, in both the initial investment decisions and the subsequent asset management.

The TLEI Board views ESG as integral to the overarching investment objective, and not as a cost to the Company.

TLEI’s Investment Manager, ThomasLloyd, also shares this view. ThomasLloyd Group is a values-driven organisation, and the approach to impact investing is embedded in their culture, their approach and the assets they manage. ESG, and delivering a positive and measurable impact to the communities the firm invests in and society as whole, is at the core of their investment business.

TLEI is mindful of investors’ responsibilities to society as a whole, and of our role as Board of Directors in guiding our Investment Manager to implement an Environmental, Social and Governance (ESG) policy consistent with those responsibilities. Additionally, TLEI shares the Investment Manager’s belief that ESG matters can have a material impact on the value of the underlying assets, its social licence to operate and therefore on investors’ capital.

TLEI has established a dedicated and fully-independent ESG Committee. This independent oversight reinforces the importance that the Board and the Investment Manager places on ensuring the highest standards of ESG investment, serving to foster a culture of responsibility and transparency across all ESG considerations.

TLEI has positioned itself as an impact fund with a core impact objective to accelerate the transition to net zero through investments, building and operating a diversified portfolio of sustainable renewable energy assets in South and Southeast Asia.

The Investment Manager invests using an integrated ESG investment approach with an objective of contributing to environmental and social progress.

ESG factors are integrated throughout the investment process and the monitoring and oversight of investments. The Investment Manager uses both a top-down review, based on operational, financial and ESG data, and a bottom-up review, following a detailed assessment of the investee company’s ability to meet the necessary ESG criteria. Top-down exclusions are made by screening potential investments on a country and sector basis. Certain sectors are excluded from investment if they are not consistent with the Investment Manager’s socially- and environmentally-responsible standards. Bottom-up exclusions are made by screening at the level of the potential investment. This includes analysis of the operational activities of the companies through which TLEI's investments are held and the track record, affiliations and good standing of the investment sponsors. The criteria include but are not limited to:

Top-down criteria:

• Anti- money laundering, bribery and corruption compliance with UN anti-corruption lists, lists provided and managed by the US Office of Foreign Assets Control (“OFAC”) and the EU Sanctions List
• Transparency International Corruption Perception Index
• World Bank Ease of Doing Business Index
• Bertelsmann Stiftung’s Transformation Index (“BTI”), including BTI’s environmental policy metric
• Respect for foreign investors’ rights to property adjudicated by a transparent and fair legal system

Bottom-up criteria:

• Good corporate governance including compliance with international accounting and reporting standards (IFRS or national equivalent)
• Human resources policies, including non-discrimination, fair pay and compliance with modern anti-slavery and child labour legislation
• Health and safety standards and worker protection
• Anti-money laundering and prevention of bribery and corruption policy
• Environmental criteria, including but not limited to greenhouse gas emissions, energy performance, biodiversity protection, water preservation and waste reduction

The ESG analysis does not end at the point of investment. The Investment Manager’s approach is to work with the management teams to attain the sustainability objective of furthering environmental and social progress. Reporting is prepared at a company or project level based on a range of key Impact and ESG sustainability indicators, selected after analysis by the Investment Manager and third-party specialist service providers. The Investment Manager carries out materiality reviews to ensure a consistent risk management approach which, where appropriate, flags to the Investment Manager priority issues.

The Board embraces the concept of active stewardship.  The Board asks the Investment Manager, in adopting a stewardship role, to monitor, evaluate and actively engage with investee companies with the aim of preserving or adding value. The Investment Manager is a signatory to the UN Principles of Responsible Investment (UNPRI) and the Investment Manager’s stewardship policy reflects its view of best practice and is aligned with the UK Stewardship Code.

Since 2013, the Investment Manager has been measuring and reporting on the impact of the investments it manages across a number of metrics, including but not limited to employment data, C02 emissions avoided, energy security and health and safety data.  TLEI measures direct impact against the following four UN SDGs:

• #7 Affordable and Clean Energy
• #8 Decent Work and Economic Growth
• #11 Sustainable Cities and Communities
• #13 Climate Action

The impact opportunity is maximised through an investment process, which conforms to the highest standard of ESG practice.

The Investment Manager is very well aware of “impact washing” and “green washing” and has committed to transparency and accountability in how the impact of its sustainable renewable energy investments and associated initiatives is presented. As pure-play impact investors, the Investment Manager sets out deliberately and intentionally to have a positive social and environmental impact through its investments and is committed to regularly measuring and reporting this performance. On an annual basis, the Investment Manager produces detailed Impact Reports which draw on real-life experience and evidence.

You can view the Investment Manager's Impact Reports here.