No consideration of adverse impacts of investment decisions on sustainability factors
The Manager has elected to exercise its discretion under Article 4(1)(b) of SFDR not to commit to considering the adverse impacts of investment decisions of the Company on sustainability factors in the manner specifically contemplated by Article 4(1)(a) of the SFDR but will continue to consider and manage these impacts in line with its Sustainable Investment Policy.
The manner in which sustainability risks are integrated into the investment decisions of Gresham House Asset Management Limited (the “Manager”) in relation to the Company
As detailed in the New Energy Sustainable Investment Policy, specific to the Manager’s investment division, the Manager integrates ESG (“sustainability”) risks and opportunities into the investment process.
The Manager integrates sustainability risks and opportunities through the completion of the ESG Decision Tool prior to investment. The Tool supports the identification of potential material ESG risks that need to be managed and mitigated during the investment period of the asset. The Tool also determines if there are any reasons why the asset may not be invested in at this stage for ESG reasons.
Post-investment, material sustainability risks identified through the ESG Decision Tool or as part of the division’s assessment of material sustainability risks to its assets, are monitored and managed on an ongoing basis. The Manager will also monitor ESG related data, where available, to support the ongoing management of sustainability risks for assets.
The likely impacts of sustainability risks on the returns of the Company
The Manager has determined that the sustainability risk (being the risk that the value of the Company could be materially negatively impacted by an environmental, social or governance event or condition) faced by the Company is low to medium.
The Manager has put in place processes and checks to minimise ESG-related risks associated with the manufacturing and sourcing of the components used in energy storage plants, as well as the construction and operation of these plants.
Sustainability-related disclosures
Publication date: 23 December 2022
Environmental and social characteristics
The Company is committed to investing in and increasing battery energy storage system (BESS) capacity to support the decarbonisation and electrification of energy systems. Battery energy storage systems (BESS) play an essential role in supporting the decarbonisation of energy systems and consequently the broader economy. The Company, in this way, aims to contribute positively to climate change mitigation and net zero strategies.
The Manager will assess adherence to the characteristic through measuring and monitoring:
- total operational battery energy storage capacity (megawatts (MW) and megawatt hours (MWh))
- total battery energy storage capacity under construction (megawatts (MW) and megawatt hours (MWh))
The Manager also intends to measure, monitor, and report on carbon emissions avoided (tCO2e) as a result of the operation of BESS and increase in BESS capacity. The Manager is in the process of finalising a robust methodology to estimate the carbon emissions avoided through the increased adoption of BESS in energy systems.
Summary
The Company is committed to investing in and increasing battery energy storage system (BESS) capacity to support the decarbonisation and electrification of energy systems. Battery energy storage systems (BESS) play an essential role in supporting the decarbonisation of energy systems and consequently the broader economy. The Company, in this way, aims to contribute positively to climate change mitigation and net zero policies.
The Company promotes environmental or social characteristics but does not have sustainable investment as its objective.
As detailed in the Gresham House New Energy Sustainable Investment Policy, the Manager integrates sustainability risks and opportunities into the pre-investment process for all assets through the completion of the ESG Decision Tool prior to investment. Post-investment, material sustainability risks identified through the ESG Decision Tool or as part of the division’s assessment of material sustainability risks are monitored and managed on an ongoing basis.
In line with the Company’s focus on supporting decarbonisation of the economy, the Manager will consider any climate-related risks and opportunities within the acquisition and construction phase and aim to mitigate or minimise risks.
At least 96% of the Company’s investments are aligned with the environmental and/or social characteristics of the Company. The Company does not commit to making sustainable investments as defined under the SFDR.
The Manager will measure and monitor the MWs and MWhs of operational BESS capacity and BESS capacity under construction on a regular basis. This is a central objective and outcome of the Company and remains core focus for the Manager.
MW and MWh operational and in-construction capacities are taken from the as built site diagrams and connection agreements, with in-construction assets driven from the site specifications as approved within the EPC agreement.
The parent entity of the Manager has a dedicated Sustainable Investment Team. This team provides support in relation to the evolution of processes around sustainable investing applied by the Manager. The Sustainable Investment Team carries out annual auditing of ESG processes to ensure they meet the sustainability-related commitments of the Manager. This includes an assessment of ESG metrics, ESG Decision Tools and investment processes.
As detailed in the Gresham House New Energy Sustainable Investment Policy, the Manager commits to engaging with relevant stakeholders as part of its ongoing investment and management of BESS assets. Engagement is focused to maximise the efficient operation of BESS that help balance the UK electricity grid, allowing it to make optimal use of intermittent renewable energy generation in the UK electricity generation system.
The fund does not designate a reference benchmark.
No sustainable investment objective
The Company promotes environmental or social characteristics but does not have sustainable investment as its objective.
Environmental or social characteristics promoted by the Company
The Company is committed to investing in and increasing battery energy storage system (BESS) capacity to support the decarbonisation and electrification of energy systems.
Battery energy storage systems (BESS) play an essential role in supporting the decarbonisation of energy systems and consequently the broader economy.
The Company, in this way, aims to contribute positively to climate change mitigation and net zero policies.
Investment strategy
The Company seeks to provide investors with an attractive and sustainable dividend over the long term by investing in a diversified portfolio of utility scale energy storage systems, which utilise batteries, located in Great Britain, and the Overseas Jurisdictions.
The Company aims to do this through the construction, development, acquisition, management, and operation of battery energy storage system (BESS). BESS assets are managed to provide several integral functions to energy systems that will enable the decarbonisation of the grid through increased renewable energy generation and generate varied revenue streams.
Functions include “Trading”, providing “Balancing Mechanisms” to the grid, and “Ancillary Services” (such as ” Frequency Response”, which maintains electrical stability by responding to deviation in frequency flowing through a network).
As detailed in the Gresham House New Energy Sustainable Investment Policy, the Manager integrates sustainability risks and opportunities into the pre-investment process for all assets through the completion of the ESG Decision Tool prior to investment. Post-investment, material sustainability risks identified through the ESG Decision Tool or as part of the division’s assessment of material sustainability risks are monitored and managed on an ongoing basis. In line with the Company’s focus on supporting decarbonisation of the economy, the Manager will consider any climate-related risks and opportunities within the acquisition and construction phase and aim to mitigate or minimise risks.
The Company invests in individual battery energy storage projects. All projects are companies that sit within special purpose vehicles invested in by the Company. Projects may either be operational or under construction at time of acquisition. Due diligence is carried out prior to acquisition for all projects. As noted above, this includes completion of the ESG Decision Tool to assess potential sustainability risks and opportunities. In addition, all projects will be assessed to ensure the project compliance to all relevant legal and regulatory requirements. The projects do not have management structures, employees, or tax policies in the way “investee companies”, as understood by the SFDR, might have.
Proportion of investments
At least 96% of the Company’s investments are aligned with the environmental and/or social characteristics of the Company. The Company does not commit to making sustainable investments as defined under the SFDR.
“Other” category investments include a legacy asset that uses mostly gas engine technology to provide power to the grid although does have a small amount of BESS (used as primary energy source before gas takes over) and a small amount Diesel generator capacity (primarily used as back up for Capacity Market Obligations). Under the investment policy, only energy storage systems (primarily BESS assets) will be invested in and as such the Company will not invest in equivalent assets going forward.
Monitoring of environmental or social characteristics
The Manager will measure and monitor the MWs and MWhs of operational BESS capacity and BESS capacity under construction on a regular basis. This is a central objective and outcome of the Company and remains core focus for the Manager.
The Manager is working to develop a credible carbon avoided methodology and will monitor this as a key metric to measure the attainment of the environmental characteristic to support climate change mitigation through the Company’s contribution to the decarbonisation of the energy system over time. The Manager is seeking input from a third-party carbon consultant to support the development of this methodology and the parent entity’s Sustainable Investment Team will also provide oversight.
Methodologies
MW and MWh operational and in-construction capacities are taken from the as built site diagrams and connection agreements, with in-construction assets driven from the site specifications as approved within the EPC agreement.
The methodology for carbon emissions avoided is currently under development and will be made available once ready.
Data sources and processing
MW and MWh operational and in-construction capacities are taken from the as built site diagrams and connection agreements, with in-construction assets driven from the site specifications as approved within the EPC agreement.
This disclosure will be updated when the Company adopts new metrics to assess carbon emissions avoided.
Limitations to methodologies and data
This disclosure will be updated when the Company adopts new metrics to assess carbon emissions avoided.
Due diligence
The Manager integrates sustainability risks and opportunities through the completion of the ESG Decision Tool prior to investment. The Tool supports the identification of potential, material ESG risks that need to be managed and mitigated during the investment period of the asset. The Tool also determines if there are any reasons why the asset may not be invested in at this stage for ESG reasons.
Post-investment, material sustainability risks identified through the ESG Decision Tool or as part of the division’s assessment of material sustainability risks to its wind, solar and battery energy storage system (BESS) assets, are monitored and managed on an ongoing basis. The Manager will also monitor ESG related data, where available, to support the ongoing management of sustainability risks for assets.
The parent entity of the Manager has a dedicated Sustainable Investment Team. This team provides support in relation to the evolution of processes around sustainable investing applied by the Manager. The Sustainable Investment Team carries out annual auditing of ESG processes to ensure they meet the sustainability-related commitments of the Manager. This includes an assessment of ESG metrics, ESG Decision Tools and investment processes.
Engagement policies
As detailed in the Gresham House New Energy Sustainable Investment Policy, the Manager commits to engaging with relevant stakeholders as part of its ongoing investment and management of BESS assets. Relevant stakeholders include developers, landowners, planning authorities, contractors and equipment suppliers during the development and contracting/procurement/construction process, as well as investors.
During the operational phase of the project, the Manager will engage with several stakeholders including local communities, insurers, operations & maintenance contractors, asset optimisers, the Environment Agency, and local fire services. Engagement is focused to maximise the efficient operation of BESS that help balance the UK electricity grid, allowing it to make optimal use of intermittent renewable energy generation in the UK electricity generation system.
Designated reference benchmark
The fund does not designate a reference benchmark.
Gresham House
Specialist asset management
