The 2021–22 year marks the first full year of reporting against our Environmental, Social and Governance (ESG) Policy, covering activity across new investment commitments as well as our own operations. Our ESG market impact will be an annual reporting feature.
ESG assessment of new transactions completed in 2021–22
ESG approach to investment decisions
The CEFC has demonstrated a strong commitment to ESG over our first 10 years, seeking to “do no harm” in our investing and maximise co-benefits where possible.
Our approach to ESG assessment for investments is reflected in our ESG Policy. Potential investments are first subject to an “exclusions screen” reflecting the provisions of the CEFC Act and other common ESG exclusions. Next, investments are assessed through the “do no harm” lens where potential risks are identified and need to be sufficiently addressed or mitigated before they can progress. These “do no harm” principles are also applied across the investment lifecycle. Investment decisions are then guided by our “maximise impact” factors, through which we capture co-benefits that complement and amplify our core decarbonisation objective.
ESG assessment: transactions overview
In 2021–22, the CEFC ESG assessment of new investment commitments resulted in:
- 100 per cent of new transactions satisfied the core decarbonisation ESG factor
- 86 per cent met an additional two or more positive impacts, against a 70 per cent target
- 59 per cent met an additional three or more positive impacts, against a 40 per cent target.
ESG “do no harm” assessment
Screening for “do no harm” factors occurs at the initial pre-investment decision phase and is monitored through the investment and asset management phases. We focus on risks associated with corruption, negative ecological impacts, First Nations considerations, labour practices and modern slavery. A moderate rating triggers specific monitoring requirements for the life of the investment or until the CEFC assessed risk rating is rated as low. During the reporting period, we successfully addressed a small number of potential risks identified through our “do no harm” due diligence risk assessments, undertaken for new executed investments. No high-risk transactions were identified during the reporting period. Specific details are commercial in confidence.
Modern slavery considerations for new transactions
Modern slavery is a risk across the economy. In the clean energy sector, extraction and manufacturing processes, and indirect supply chain matters, are relevant to CEFC investment considerations. During the year, we worked with project proponents to assess and consider the processes for identification and management of modern slavery risks, with a particular focus on indirect supply chains. Through this collaborative approach, we were able to raise awareness of modern slavery issues and contribute to industry capacity around the assessment and management of potential risk.