US Solar Fund | ESG

Sustainability Philosophy and Approach

USF was established to both capitalise on and contribute to the world’s increasing awareness of the impact of climate change and the need to better manage the world’s resources for present and future generations. The Company is focused on sustainability, primarily as an investor in the solar industry, but also in the way the Company is managed.

USF’s primary activity is investing in renewable energy plants that generate emissions-free power, contributing directly to the world’s transition to a lower carbon economy. 2021 was the first year in which all solar assets in USF’s portfolio were operational. The 42 assets had a combined capacity of 493MWDC and displaced the equivalent of 639,000 tonnes of CO2 for the year. This is equivalent to powering 87,000 US homes or removing 139,000 US cars off the road every year.[1]

In addition to USF’s sustainable fundamentals, the Company also seeks to conduct its business in a sustainable way, to ensure that its impact on the communities in which it operates is positive, that its partnerships promote the goals of the United Nations Sustainable Development Goal (UNSDG) framework, and that its stakeholders can measure its impact.

ESG Principles at Work in USF

As assets are onboarded and in-construction assets become operational, site-specific KPIs are implemented based on a list of potential measures for each asset. The US contains many different ecological environments so the measures used for each site depend on the local environment as well as the size of the asset. As USF’s assets range from 2MWDC to 200MWDC, different measures are appropriate for different size assets. The list below includes actual measures that have been implemented (as noted in parentheses) and options that are being considered at various USF sites:

Environmental

• Minimisation of water usage and monitoring consumption (all sites)
• Vegetation management at or below county regulations to minimise the impact of wildfires (all California and Oregon sites)
• Planting of local/indigenous grasses, plants or wildflowers (Milford, Benson, Eagle Solar, Lane II, Pilot Mountain, Tate, Willard)
• Implementation of sustainable drainage and flood control measures (Benson, Eagle Solar, Lane II, Pilot Mountain, Tate, Willard, Four Oaks)

Social

• Attendance at local community and government meetings to maintain community engagement and dialogue (all sites)
• Ongoing relationship development with O&M providers, construction contractors, and landowners to encourage local community engagement and contribution (all sites)
• Effective complaint reporting and handling (all sites)
• Engagement with local education institutions to help develop understanding of renewable energy (Alkali, Rock Garden, Suntex, West Hines I)
• Contributions to select local and regional charitable organisations (Granger, Alkali, Rock Garden, Suntex, Pilot Mountain)
• On site, all injuries and incidents must be reported immediately, and reporting is followed by a well-documented investigation process, detailed report, and corrective action (all sites)

Governance

• Periodic and regular review of safety statistics and site visits with site service providers to ensure compliance with local and regional laws and the Investment Manager’s ESG practices (all sites)
• Annual review of contract compliance (including health and safety plans) with site service providers (all sites)
• Regular review of site permits and obligations to ensure safe and effective operations within the regulatory guidelines (all sites)

Governance considerations also require a company to examine its structure, leadership, shareholder rights and internal controls. USF’s Board of Directors is independent of the Investment Manager and seeks to implement a system of rules and practices that preserves the integrity and efficiency of its operations. The Board has worked with the Investment Manager and Company Secretary to maintain a framework of governance to meet the interests of stakeholders including shareholders, customers, financiers, government, suppliers and the community. The Company also considers acquisition and asset management principles and practices as they relate to dealing with anti-corruption and labour standards. USF recognises that these governance considerations are critical to building a successful, long-term business.

As an externally managed investment entity, USF has a company Board and no employees. USF’s assets are managed by New Energy Solar Manager Pty Limited, the Investment Manager. This high quality, experienced team is dedicated to managing two solar investment funds, New Energy Solar (ASX:NEW) and USF.

For more information, please refer to the Company’s most recent Sustainability Report.

Reporting and Frameworks

Since its 2019 IPO, USF has consistently reported on ESG and Sustainability considerations throughout its interim and annual reports. In February 2022, the Company published its first annual Sustainability Report which included and also expanded on existing frameworks like the United Nations Sustainable Development Goals, adding detailed descriptions of Environmental, Social, and Governance considerations and initiating reporting within the European Union Sustainable Financial Disclosure Regulation (EU SFDR) Annex One framework. Although USF is not required to report through the SFDR framework, the Board and Investment Manager recognise the value of the framework broadly and the specific relevance to EU based investors who support USF. Key ESG and Sustainability metrics will be mentioned in the Annual and Interim Reports while fulsome reporting will be captured in the Sustainability Report.

In April 2021, the parent of the Investment Manager became a signatory to the United Nations Principles for Responsible Investing (UNPRI) and mandatory reporting will commence in 2023 (a slight delay to typical timelines given a change in systems at the UNPRI organisation). As a signatory, the Company’s Investment Manager has committed to incorporating ESG issues into their policies and practices and also to seek and promote appropriate ESG disclosures.

The Board and Investment Manager commenced reporting against the Task Force on Climate-related Financial Disclosures (TCFD) framework in USF’s 2021 annual report. We recognise that over time we will continue to refine and expand our reporting as the needs and expectations of all of our stakeholders change and the industry standards and practices evolve.

For more information, please refer to the Company’s most recent Sustainability Report.

Carbon Neutral and 2021 Carbon Footprint

USF is Carbon Neutral

USF is committed to managing and reducing the Investment Manager and the Company’s carbon emissions as much as possible. For all emissions that remain, USF purchases offsets in order to be carbon neutral.

The carbon emissions offsets generated by USF’s plants are purchased by third parties through Renewable Energy Certificates (RECs) typically as part of the power purchase agreement. As a result, in order to achieve carbon neutrality, USF calculates the carbon footprint of its business operations and purchases carbon offsets.

2021 Carbon Footprint

There are two main considerations for USF’s carbon footprint: the construction and operation of solar plants and the travel and office space of the investment manager.

During 2021, all solar plants in USF’s portfolio were operating. For solar plant operations, USF has used estimates based on studies from 2012 and 2017; we recognize these studies provide us only with dated estimates. As a result, the Company is evaluating how best to measure this going forward to improve accuracy.

The Investment Manager maintains two offices for its operations, one in the US and one in Australia and in pre-COVID times executives regularly travelled within the US to visit asset sites and senior executives travelled between the US and Australia. During 2021, with COVID-19 travel restrictions in place, minimal travel occurred. Similarly, the offices in both the US and in Australia did not accommodate staff or operate as usual. Investment Management staff largely worked from home.

Also prior to the pandemic, the Investment Manager regularly travelled to the UK to meet with shareholders and the Board of the Company. For all flights, carbon offsetting measures were used.

USF has estimated the carbon footprint from its corporate activity previously and arrived at an estimate of 58 tonnes per annum. The Investment Manager uses carbon offsetting measures for all flights. Approximately 47 tonnes of the total 58 tonnes are attributed to flights and have been offset. It is estimated that COVID conditions should be reflected in a 60% discount on the business-as-usual scenario, implying 23 tonnes of CO2 for 2021. Excluding flights that have been offset, this would be approximately 4 tonnes of CO2 for 2021. These emissions have also been offset.

USF has purchased offsets that maintain the following standards: Gold Standard, Verified Carbon Standard, the Climate Action Reserve, CSA Group and the American Carbon Registry.

USF is currently considering engaging a consultant to assist in its carbon footprint calculation to expand data collection and scope of calculation.

For more information, please see USF’s most recent Sustainability Report.

[1] . Environmental figures use actual generation figures for the period. US CO2 emissions displacement is calculated using data from the US Environmental Protection Agency’s “AVoid Emissions and geneRation Tool” (AVERT), Equivalent US homes and cars removed figures are based on CO2 emissions displaced and data from the US Environmental Protection Agency and US Energy Information Administration.