ESG

Environmental, Social and Governance

Responsible Investment

At the 2015 United Nations Climate Change Conference 196 countries agreed to reduce their carbon output as soon as possible and to do their best to keep global warming to well below 2 degrees C, and pursue efforts to limit the increase to 1.5 degrees C. There is broad consensus that this will require emissions to be net zero by latest 2050.

Clean hydrogen has a vital role to play in this, and it can displace fossil fuels and hence reduce greenhouse gas emissions in transport, power generation, industrial energy, as a feedstock, and in heating. All of this results in ‘avoided GHG emissions’ that would otherwise have been released by burning fossil fuels.

Equally importantly, the uptake of hydrogen in trucks, trains and portable power plants, alongside battery electric in cars, can have a substantial impact on improving air quality in cities. According to the WHO, some 4 million premature deaths per year occur due to poor air quality today.

HydrogenOne Capital’s investment objective is to deliver an attractive level of returns while integrating core ESG principles into its decision-making and ownership process.

We have a powerful environment – social – governance investment case (ESG), closely aligned with seven of the United Nations Sustainable Development Goals. By excluding sectors such as fossil fuels producers, focusing strongly on energy transition themes, and proactively engaging with our investments and other stakeholders more broadly, we aim to deliver attractive returns and a positive environmental impact.

Profitable growth with strong ESG focus

ESG track record

The principals of the Investment Adviser have developed and implemented ESG policies in some of the world’s largest energy companies and in investment funds. This including the Task Force on Climate Related Financial Disclosures methodology, climate change and clean energy strategies, human rights and fringe communities relations, fracking, Arctic operations, disclosure and transparency, and executive compensation.

They have conducted ESG, community engagements and HSSE site visits in countries and territories including Alaska, Texas, Brazil, Nigeria, Morocco, Qatar, Russia, China, the Netherlands, Ireland and Canada.

ESG policy

HydrogenOne Capital Growth plc (the “Company”) will include, and will procure that any undertaking advised by the Investment Adviser in which it invests will include ESG criteria in its investment and divestment decisions, and in asset monitoring. The Board of the Company will have oversight of and will monitor compliance with the Company’s ESG policy, and will ensure that the ESG policy is kept up-to-date with developments in industry and society.

The Company has embedded four ESG principles into its policy:

Allocating capital to low-carbon growth

The Company is focused on investing for a climate-positive environmental impact, accelerating the energy transition and the drive for cleaner air. The Directors prioritise this long-term goal over short-term maximisation of Shareholder returns or corporate profits. The Company will enable investors to back innovators in low carbon industries by providing access to the capital markets.

Engagement to deliver effective boards

The Company prioritises positive and proactive engagement with the boards of its investments. The Directors recognise that structure and composition cannot be uniform, but must be aligned with long term investors while supporting managements to innovate and grow. The presence of effective and diverse independent directors is important to the Company, as are simple and transparent pay structures that reward superior outcomes.

Encourage sustainable business practices

The Company expects its Hydrogen Assets to be transparent and accountable and to uphold strong ethical standards. This includes a demonstrated awareness of the interests of material stakeholders and engagement to deliver positive impacts on environment and society. Hydrogen Assets should support the letter, and spirit, of regional laws and regulations. The Company and the Investment Adviser will encourage adoption of initiatives such as the Task Force on Climate-related Financial Disclosures and the EU Sustainable Finance Taxonomy, and will monitor the appropriateness of lobbying activities.

ESG in the Company

Given the nature of its investments, the Company intends to disclose key performance metrics (“KPIs“) that describe the environmental impact of its portfolio. The Company is particularly focused on the greenhouse gas emissions from investments and the emissions that have been avoided (“avoided emissions“) as a result of the investments, and intends to actively engage with portfolio companies to be able to adopt an appropriate reporting framework in this area. The Company will frame its investments around positive contributions to UN Sustainable Development Goals (“UN SDGs“), and will work within responsible frameworks such as those promoted by the UN Global Compact (“UN GC“), the London Stock Exchange’s Green Economy Mark, and the Principles for Responsible Investment (“PRI“). The Company will manage its own direct carbon footprint.

ESG standards:

Green Economy Mark

The Company anticipates that it will qualify for London Stock Exchange’s Green Economy Mark at Admission, which recognises companies that derive 50 per cent. or more of their total annual revenues from products and services that contribute to the global green economy. The underlying methodology incorporates the Green Revenues data model developed by FTSE Russell, which helps investors understand the global industrial transition to a green and low carbon economy with consistent, transparent data and indexes.

EU Sustainable Finance Disclosure Regulation (SFDR)

The EU Taxonomy SFDR became applicable on 10 March 2021. Its scope captures financial market participants and financial advisers operating in the EU. It sets specific rules for how and what sustainability-related information they need to disclose, preventing ‘greenwashing’, with the aim of pursuing two goals: (1) to integrate sustainability considerations into the financial system, and (2) to steer the flow of capital towards sustainable investments. The Company is an Article 8 fund. Article 8 products are described in the SFDR as products which actively promote environmental or social characteristics.

United Nations Sustainable Development Goals

In 2015, the member states of the United Nations adopted Agenda 2030. A key component of the Agenda 2030 are the seventeen UN SDGs. These long-term goals are designed to end poverty, improve health and education, reduce inequality, create sustainable economic growth and combat climate change. They are intended to create incentives to implement measures in the interests of people, the planet and prosperity, and therefore contribute to changing the world significantly by 2030.

The Company’s investment objective and investment policy is closely aligned with seven of these goals, namely Good Health and Wellbeing (Goal 3), Affordable and Clean Energy (Goal 7), Industry, Innovation and Infrastructure (Goal 9), Sustainable cities and communities (Goal 11), Responsible Production and Consumption (Goal 12) Life Below Water (Goal 14), and Life on Land (Goal 15).

Goal
UN SDG target
The Company’s focus
  • Reduce deaths from pollution (3.9)
Fuel cell vehicles to displace diesel
  • Increase renewable energy in the global energy mix (7.2)
  • Increase access to electricity (7.1)
  • Increase energy efficiency (7.3)
Invest in clean hydrogen/ exclude fossil fuels production
  • Upgrade industries for sustainability (9.4)
  • Increase R&D in industrial technologies (9.5)
Decarbonise heavy industry and enhance clean energy growth
  • Reduce the environmental impacts of cities (11.6)
Clean transportation fuels
  • Adopt sustainable practices and reporting (12.6)
Engagement for good governance and transparency across the portfolio
  • Reduce acidification (14.3)
Displacing CO2 with clean hydrogen
  • Combatting desertification and land degradation (15.3)
Avoiding build-up of CO2 in the atmosphere

Principles for Responsible Investment

The Principles for Responsible Investment (the “PRI“) is a United Nations-supported international network of investors working together to implement its six aspirational principles. The goal of the PRI is to understand the implications of sustainability for investors, and to facilitate incorporating these issues into their investment decision-making and ownership practices. Following Admission, the Company intends to become a signatory to the PRI.