Green Investment Group Progress Report 2019 1 About This Report

Progress Report Accelerating the transition to a greener global economy October 2019

Green Investment Group Progress Report 2019 1 About this report

The purpose of this report is to provide an overview of GIG activity since its last progress report in October 2018. The report covers the period from September 2018 to the end of August 2019, unless otherwise stated. GIG provides real-time progress updates via its website and social media channels.

About the cover of this report The photo on the cover of this report shows Korea’s first floating LiDAR system. The LiDAR will collect wind resource data and its installation marks a critical step in the development of GIG’s first floating offshore wind project in South Korea, located off the coast of Ulsan City. To find out more about this project and GIG’s growing global development pipeline, see p.10-11. greeninvestmentgroup.com Green Investment Group @GreenInvGroup

Progress Report

Who we are and what we do �� 03 Green Investment Group at a glance �� 04 Building a global green investment platform �� 06 Highlights of the year �� 08 Building a sustainable development pipeline �� 10 Delivering projects in a post-subsidy world �� 12 Delivering green advisory services �� 14 Supporting the global green community �� 16 Funds under management �� 18 Macquarie: Sustainability and green investment �� 20 Our green impact �� 22 Governance over our green mission �� 24 Letter from the trustees of the Green Purposes Company �� 25 Green impact statements �� 27 Notes to the green impact statements �� 33 Independent assurance report �� 34 Who we are and what we do

Green Investment Group (GIG) is a specialist developer, sponsor and investor with a mission to accelerate the transition to a greener global economy. We support the growth of the global green economy by making new green infrastructure investments and developing new projects. Working across the full project lifecycle, including early-stage development, we offer our clients and partners expertise in principal investment, project and portfolio management, advisory services and access to flexible capital.

Our unique offer Our track record of pioneering green infrastructure investment, deep technical expertise, responsiveness to dynamic markets and flexible partnership approach defines us.

Technical expertise Flexible capital Partnership approach We provide our partners with deep Our strong balance sheet and We work with a range of partners technical knowledge across renewable breadth of experience enable us to complement and leverage our energy technologies, project to invest flexibly across the full expertise, access to capital and development, asset management capital structure. global reach. and green impact measurement.

New market models Development capital Green leadership We respond to the dynamic We’re building our in-house Our market-leading approach to renewables market by investing in development capability, working with green impact assessment continues technologies and businesses that partners to engage early in the project to be applied to all of our investments help energy consumers realise lifecycle, and investing in development and is at the forefront of efforts to greater value from energy systems. projects and platforms to build a increase standardisation in sustainable investment pipeline. green finance.

Our heritage

In 2012 the UK Green Investment Founded in 1969 in Sydney, Australia, Now operating as the Green Bank plc (GIB) was launched by Macquarie Group Limited (Macquarie) Investment Group, GIG brings the UK Government. It was the first is a diversified financial group with together the GIB business with institution of its type in the world – offices in 30 markets, employing over Macquarie Capital’s renewables team a publicly funded bank designed to 15,700 people globally. Macquarie has to create one of the world’s largest mobilise private finance into the been an active green investor since teams of specialist green investors. green energy sector. Between 2012 2005. In 2017, GIB was acquired by and 2017, GIB helped to finance Macquarie from the UK Government. more than £12bn of UK green infrastructure projects.

Green Investment Group Progress Report 2019 3 Green Investment Group at a glance

£ + + + 20 bn 25 400 of capital committed markets with people working on and arranged1 investments or GIG activities2 operations

Working across all green technologies

Offshore wind

Waste-to-energy

Solar

New York Onshore wind San Francisco Kansas

Austin Storage Mexico City

Energy efficiency

Hydro

Biofuel

1. Combining historic activitiy where UK Green Investment Bank (GIB), Green Investment Group (GIG) or Macquarie Capital have contributed equity or debt 2. Includes operating platform employees 3. Forecast lifetime 4. For 25 years, calculation based on UK benchmark numbers

4 Green Investment Group Progress Report 2019 181,000 kt CO2e 493,000 GWh greenhouse gas emissions avoidance,3 renewable energy generation,3 equivalent to removing 2.3m cars equivalent to the energy from the road1,4 consumption of 5m homes1,4

+ 20 GW global Edinburgh development pipeline London

Madrid Beijing Seoul Tokyo Shanghai Taipei Hong Kong Manila

Singapore

Sydney

Melbourne

GIG offices Markets where GIG is active

Green Investment Group Progress Report 2019 5 Building a global green investment platform

Dan Wong Macquarie Capital Co-Head and Chair of Green Investment Group

This report marks the second the project lifecycle – into early-stage anniversary of the formation of GIG. development – means that GIG is In that time, the business has grown investing where the market needs us from its UK base to become a global most. This significantly extends GIB’s business, fully integrated within previous approach of investing during and leveraging the capabilities and the construction and operational ambition of Macquarie. phases of projects. Macquarie has been proud to enable We have invested significantly in the rapid growth of GIG and to the business to enable its move into support the mission at the heart of the project development, quadrupling the business. That mission has remained people working for GIG from constant as GIG has grown: to 100 to over 400 and working with accelerate the transition to a greener our partners to build a 20 GW global global economy. This is more than just development pipeline. Our focus a phrase; it is a clear green purpose is now to deliver that pipeline into that is hard-coded into the business. construction and to add to it. It is enshrined in our legal constitution This is good, purposeful business. through our five green purposes, The urgency of our mission is clear: backed up by our Green Investment climate change is upon us and the Policy and Principles. energy transition is one of the defining That mission, however, is only as challenges of our lifetime. We are good as the action we take and proud, at Macquarie and GIG, to be I’m pleased to report that GIG leading the charge in finding solutions is investing and arranging large to accelerate that green transition. amounts of new capital. In the past two years we have invested or arranged almost £4bn in the UK and Europe alone. We are exceeding the commitments we made when we acquired GIB from Dan Wong, the UK Government. Macquarie Capital Co-Head and Our greatest contribution is not how Chair of Green Investment Group much we invest, but when we invest it. We believe that one of the biggest challenges of the energy transition lies not in access to capital, but in building a pipeline of investible projects. This shift to invest earlier in Right: CleanMax Solar Farm, Tumkur, India

6 Green Investment Group Progress Report 2019 In last year’s report, I set out the strategic themes that would drive GIG’s development: early engagement in the project lifecycle; expanding our reach to build a truly global business; the creation of development platforms; and the establishment of power purchase agreements (PPAs) as a viable source of revenue to anchor new projects. These themes continue to underpin our mission-led approach to investment in the green economy, transforming GIG into a unique global platform.

Mark Dooley Global Head of Green Investment Group

Following GIG’s expansion from its By bringing our financial expertise Global Commission on Adaptation home base in the UK across to projects from their very inception, and the Climate Finance Leadership Europe, Asia and North America in we’re able to develop high-quality Initiative, through to engagement 2017-18, 2019 saw GIG become investment opportunities that can with policymakers in our home active in Macquarie’s home market operate successfully in even the most market of the UK. of Australia and New Zealand. This challenging of markets. These themes have been our focus means GIG is now a truly global As a developer and sponsor in today’s for the past year, and will continue platform, active in over 25 countries renewables markets, we need to meet to shape the business in the years across six continents. By combining the challenge of reducing subsidies. to come. GIG’s expertise originally developed Our dedicated PPA team plays a huge in the UK, with the talent and know- Across the world, 2019 may well be role in this. With a growing number of how of our local teams we’re driving remembered as the year that the markets operating on a low to no- the low-carbon transition across climate emergency truly entered the subsidy basis, their skills in sourcing established and emerging economies. public consciousness. With record- and structuring PPAs as an alternative breaking temperatures and growing Perhaps the most marked change revenue source are increasingly in numbers of climate-driven natural in our activity is our commitment to demand – and not just from the power disasters, the realities of climate development. We’re now no longer generators. Corporates increasingly change are becoming increasingly only relying on others to kick-start expect their energy to come from tangible and inescapable. GIG’s projects. Instead, we’re increasingly low-cost and verifiably low-carbon mission to accelerate the transition to acting as the lead developer, sources, with the sustainable sourcing a greener global economy has never identifying development opportunities of energy becoming a key item on the been so urgent nor so critical. As the and driving projects forward from agenda both for shareholders and in world’s energy transition continues, dollar number one to electron the boardroom. GIG’s PPA team is at we’re determined to continue leading number one. the forefront of this burgeoning sector, the charge. structuring new PPA models that will This in-house development activity open up the market to even more has been complemented by generators and consumers of power. the growth of what we call our development platforms. Through these As a complement to our core platforms, we partner with smaller investment business, we are also local developers to create pipelines growing our advisory capability, Mark Dooley, of scale which will, ultimately, attract building on our pioneering work Global Head of Green Investment Group more institutional capital into the in areas such as Green Impact sector. This partnership platform Advisory services and developing model, alongside our in-house activity, green banks. We also continue has created a global development to take part in the wider global pipeline of 20+ GW. green investment movement, from supporting Macquarie CEO Shemara Wikramanayake in her roles on the

Green Investment Group Progress Report 2019 7 Highlights of the year

GIG has transformed its approach to The acquisition of Savion added development in Europe, establishing an additional 8 GW to GIG’s US seven new solar energy partnerships development pipeline, further with a collective pipeline of over advancing our vision of creating 4 GW of capacity.” an industry leading, US wide, solar and energy storage development platform.”

Edward Northam Chris Archer Head of GIG, UK & Europe Head of GIG, Americas

A year of global GIG activity

Inaugural Revego (UKCI) Rookery South Savion Macquarie GIG Africa Bedfordshire, USA Conference See p.19 UK Acquisition of London See p.13 the solar and storage unit of Tradewind Energy.

OCT DEC JAN JAN MAR MAR MAR APR 18 18 19 19 19 19 19 19

Earls Gate GIG offshore Electrodes CleanMax Grangemouth, wind event Holdings (UKCI) UK Seoul, Korea California, USA India See p.11 Debt financing See p.19 of an innovative battery storage project.

+ 11 £2.4 bn 13,000 kt CO2e 43,000 GWh new green of capital greenhouse gas emissions renewable energy generation,2 transactions committed or avoidance,2 equivalent to equivalent to the energy supported globally1 arranged1 removing 165,000 cars consumption of from the road1,3 440,000 homes1,3

1. In the reporting period 2. Additional forecast lifetime 3. For 25 years, calculation based on UK benchmark numbers

8 Green Investment Group Progress Report 2019 GIG is at the forefront of Asia’s We’re excited to now be utilising burgeoning offshore wind GIG’s expertise across Australia, industry. In June we launched Macquarie’s home market. The GIG Korea’s first floating LiDAR system, platform forms part of our ambitious marking a critical step in the plans to further grow our green development of our first floating investment business.” offshore wind project.”

Neil Arora Ivan Varughese Head of GIG, Asia Head of GIG, ANZ

Hornamossen GIG stakeholder H1 Holdings Tysvær Jönköping, event (UKCI) Norway Sweden Sydney, South Africa See p.11 See p.13 Australia See p.19

JUN JUN JUL AUG AUG AUG AUG 19 19 19 19 19 19 19

LiDAR installation East Anglia ONE Kisielice Korea Suffolk, UK Poland See p.11 See below Acquisition of a 42 MW onshore wind project, GIG’s first in Poland.

In August 2019, GIG entered This new partnership brings the total capacity into an agreement to acquire a of UK offshore wind supported by GIG to over 40 per cent stake in Iberdrola’s 5.7 GW across 14 projects – equivalent to ScottishPower Renewables’ almost 50 per cent of the total UK offshore wind 714 MW East Anglia ONE capacity in operation or construction. offshore wind farm.

Green Investment Group Progress Report 2019 9 Building a sustainable development pipeline

Risk perceptions are changing among renewable energy investors. In most markets, green energy is now a mature asset class, and more and more capital is being directed towards renewable energy projects. A recent survey of 100 large investors found that allocations to renewables are set to almost double over the next five years, with these investors alone expected to direct $US210bn towards the sector.1

Our partnership with GIG has ushered in an era of unprecedented opportunity and growth for Covanta. For a company whose core mission is ‘Protecting Tomorrow,’ we are energised by the opportunities before us to deliver reliable sustainable waste management infrastructure for citizens and communities across the UK, which promotes landfill avoidance and reduces greenhouse gases.”

Stephen J. Jones, President and CEO, Covanta

Left: Covanta waste-to-energy plant, Dublin, Ireland

Despite these achievements, Global strategic partnerships where few economies of scale exist – investment levels are still falling far while GIG adds value in procurement, Institutional investors face a short of what is required to deliver the financing, the negotiation of PPAs, fragmented landscape of smaller transition to a low-carbon economy – and in centralising oversight of developers who lack the capital why? One challenge is that there are construction and operation. to create a sufficient volume of simply not enough projects of scale, assets to meet the demands of As of mid-2019, GIG had created 12 in which this capital can be invested. large institutions. GIG is therefore such platforms globally. In mainland GIG is responding to this challenge partnering with local developers Europe, GIG has created seven by dedicating a growing proportion to create development platforms, solar energy development platforms of its resources to early-stage project combining complementary skill to date, working with developers in development, creating a pipeline sets to deliver successful, scalable, countries including Italy, Spain and of investment opportunities to help development outcomes. the Netherlands. These platforms bridge this gap and accelerate the collectively boast a development global energy transition. These platforms offer a means of pipeline of over 4 GW of solar accessing local knowledge and GIG’s global development pipeline capacity. The first projects from these de-risking the development process now sits at over 20 GW. That pipeline platforms are expected to come into without the need for considerable is made up of projects developed ‘in- operation during 2020. investment in human resources. house’ by GIG and through a growing Local development partners focus In the US, GIG acquired the solar number of development platforms. on finding and acquiring the rights to development and energy storage sites, ensuring grid connections and unit of Tradewind Energy, Savion. securing the required permits – areas Alongside its investments in Alira and

1. Source: Octopus Group, The green investor: why institutional investing holds the key to a renewable energy future. February 2019

10 Green Investment Group Progress Report 2019 Right: Korea’s first floating LiDAR system

Candela Renewables, this transaction In-house development expertise For GIG, the next few years will further advances GIG’s vision to involve the further evolution of its In addition to these strategic create a leading solar and energy development platform strategy, partnerships, GIG is undertaking storage development platform in the alongside a deepening of its in- an increasing amount of in-house US. Through these companies, GIG house expertise. In Europe, further development work, particularly in is currently developing over 100 solar development platforms are expected Asia, where the group has the largest projects across 26 different states to be established to broaden GIG’s offshore wind team in the region. with a total capacity of over 12 GW. geographic coverage, and to expand The predominantly local teams have its activities into early-stage onshore But it’s not just smaller developers extensive knowledge of domestic wind. In Asia, a combination of that GIG partners with. One of GIG’s development processes. GIG’s team growing demand for green energy, first strategic partnerships was with in Taiwan – numbering more and GIG’s development focus, Covanta, a New Jersey-based waste- than 50 – has been a leading suggests significant expansion in to-energy developer. Forged in late participant in Taiwan’s offshore wind GIG’s activity across the region. 2017, that partnership closed two roll-out, delivering the country’s first And in North America, strong solar projects in the UK throughout 2018- offshore wind farm, the 128 MW resource coupled with an abundance 19. In December 2018, GIG financed Formosa 1 project, with domestic of land and competitive costs, set a a 25 per cent stake in Earls Gate developer Swancor as well as Orsted strong backdrop for the continued Energy Centre, a 21.5 MWe waste- and JERA, and is also developing growth of GIG’s solar activity. to-energy project in Grangemouth, the 376 MW Formosa 2 project Scotland. The project will divert alongside Swancor. Through this development activity, over 200,000 tonnes of household GIG’s goal is to increase the In Korea, GIG is active at the very and commercial waste from landfill, volume and scale of green energy inception of the country’s offshore instead using it to generate 79 GWh transactions, creating a pipeline of wind sector, deploying the country’s of green electricity and 81 GWh of opportunity which will unlock the first floating LiDAR system in June heat. Earls Gate – which is believed investment needed to accelerate the 2019. It will collect data to enable to be the first waste-to-energy project global energy transition. what is set to be one of Korea’s first in Scotland to supply industrial heat floating offshore wind installations, – will create 500 jobs in construction the 1.4 GW Ulsan project, the first and 30 long-term posts. phase of which is targeted for GIG originally identified Earls Gate as completion in 2022. a promising project in 2016, entering European onshore wind has also into a development agreement with been a focus of GIG’s development developer Brockwell Energy in June activity. Building on its success the following year. GIG brought its own in Sweden with the Markbygden technical and commercial capability and Överturingen wind farms, GIG to the project team, structuring the continued its Nordic onshore wind project to increase its attractiveness expansion throughout 2018-19 with to investors through appropriate risk the acquisition of its first project in allocation and robust contractual and Norway – Tysvær Wind Farm. The commercial protection. A particular 47 MW project is being developed focus for the team has been the directly by GIG and is expected to establishment of engineering, start construction in early 2020. procurement and construction contracts with reliable and proven contractors, and the signing of an innovative Energy Supply Agreement.

Green Investment Group Progress Report 2019 11 Delivering projects in a post-subsidy world

The renewable energy sector has successfully created the conditions to enable deployment at a scale and pace few thought possible. Costs are falling rapidly, enabling these new sources of energy to compete directly with conventional sources in many markets – and win. Solar energy has delivered some of the most dramatic cost reductions, with solar photovoltaic module prices falling 80 per cent over the last decade.1 This dramatic fall in costs enabled the installation of over 100 GW of solar globally in 2018.2 But with this success come new challenges.

PPAs with onshore wind farms are one of our most important growth areas as customer demand is constantly growing. GIG’s depth of experience as a counterparty was evident throughout our delivery of the Hornamossen project and we are looking forward to continuing to work together.”

Tomas Sjöberg, Managing Director, Axpo Sverige

Left: Construction of Covanta’s Rookery South waste-to-energy plant, UK

The mainstreaming and maturing of The rise of the PPA While PPAs are becoming more renewable technologies has prompted popular in markets such as Spain In a growing number of markets in governments around the world to and Poland, the PPA strongholds which GIG operates, the underlying review and, in many instances, remove of North America and the Nordics business case for renewable the various publicly funded support continue to lead the way. The US is energy projects is supported by this schemes brought in to stimulate the home to the most developed and increased appetite among businesses market. This low- or no-subsidy world liquid market for renewable energy and consumers to buy renewable requires developers to find alternative offtake in the world. Within GIG’s US power through PPAs. For reasons sources of revenue to anchor the based development platforms, PPA of cost, long-term predictability, or low-cost, long-term financing needed experts with significant experience simply to play their part in driving for projects to be economically viable. of contracting solar energy projects the transition to a sustainable global Developers are increasingly looking to work with both corporate and utility economy, consumers of power are the growing number of corporations offtakers to structure the PPAs which increasingly attracted to PPAs. Last that are seeking to access green power will underpin their development year, companies entered into PPAs through power purchase agreements pipeline. In Sweden, GIG has with 13.4 GW of projects, according (PPAs) – usually long-term agreements been instrumental in some of the to data from Bloomberg – more than for the delivery of renewable energy largest and longest-term PPAs ever double the total in 2017.3 from a specific source, entered into structured. In June 2019, GIG between energy producers and energy acquired the 43 MW Hornamossen consumers – to provide that alternative onshore wind farm in northern revenue certainty.

1. Source: The International Renewable Energy Agency 2. Source: Bloomberg New Energy Finance, Clean Energy Investment Exceeded $300 Billion Once Again in 2018, blog post, 16 January 2019 3. Source: Bloomberg New Energy Finance, Corporate Clean Energy Buying Surged to New Record in 2018, blog post, 28 January 2019

12 Green Investment Group Progress Report 2019 Right: Craigellachie combined heat and power plant, Speyside, Scotland

Sweden, sourcing and structuring a The power of aggregation GIG expects to develop a growing long-term PPA with the Nordic arm of number of fully merchant projects, In many markets, demand from Swiss energy utility Axpo. Axpo will which require neither government off-takers is outpacing the supply sell the electricity from Hornamossen subsidy nor long-term PPAs to raise available from new projects coming on to its industrial customers as part funding. For example, the Rookery on stream. Finding the right projects of its renewables portfolio, helping to South waste-to-energy project in for off-takers can be a significant further decarbonise Swedish industry. the UK will sell its power on a fully challenge, but one that GIG has been GIG has now sourced and structured merchant basis, using the revenues able to overcome by opening the PPA PPAs for almost 1 GW of wind energy earned to supplement income from market to more buyers through multi- in Sweden – equivalent to 10 per waste-processing contracts with buyer or clubbed PPAs. Aggregating cent of the country’s total onshore local authorities and commercial volumes – pooling smaller companies wind capacity. customers. GIG reached financial together to buy energy from a larger close on Rookery South, alongside GIG’s first Norwegian onshore wind project – not only gives corporates partners Covanta and Veolia, in March project, the Tysvær Wind Farm, will access to a broader set of projects, 2019. Currently in construction, the also look to secure a long-term PPA but it also provides projects with facility will become a critical part with a large industrial off-taker which the ability to match their production of the UK’s waste infrastructure, will use the competitively priced volumes with an appropriate group of diverting over 500,000 tonnes of energy to power Norwegian industry. customers. waste per year from landfill and This growing demand from corporate For example, Macquarie’s Murra transforming it into enough electricity buyers for PPAs is illustrated by the Warra development – a 429 MW to meet the needs of the equivalent of success of RE100, a global corporate onshore wind farm in Australia – is over 112,500 homes. leadership initiative bringing together underpinned by the largest corporate The renewable energy landscape businesses committed to 100 per PPA in Australia and is a leading is becoming more varied, more cent renewable electricity. Macquarie example of a multi-buyer PPA, struck complex, and more challenging for announced in September 2019 that it with five corporate off-takers: Telstra, investors to effectively navigate. will become a member of RE100 and ANZ, Coca-Cola Amatil, Melbourne However, the underlying demand will source all of the energy supplying University and Monash University. for low-cost, low-carbon power is its premises and data centres from only moving in one direction. The renewable sources by 2025. Going merchant power of the consumer is, once PPAs, however, typically only form again, fundamentally changing the part of a project’s expected revenues, marketplace. Increasingly, corporate with the remainder earned from managers, customers and investors trading ‘merchant’, in wholesale expect green power supply simply power markets. A growing number of to come as standard. GIG stands projects have been financed on an ready to make sure that demand almost-merchant basis, while some can be met. existing projects that have come to the end of their guaranteed tariff period are being refinanced on that basis.

Green Investment Group Progress Report 2019 13 Delivering green advisory services

The impact investing market – where investors seek measurable social and/or environmental impact – is now worth more than $US500bn, according to the Global Impact Investing Network, twice its 2018 estimate.1 As the low-carbon transition takes hold, we’ve also seen enormous growth in the green bond market, which has quadrupled in size since 2014, with $US100bn in issuance in the first half of 2019.2 These bonds require the use of their proceeds to be tracked and their impact reported. But measuring and reporting impact requires specific expertise.

Through engaging GIG’s Green Impact Advisory service, we were able to perform ‘materiality mapping’ to identify key environmental and social metrics against which we want to measure our performance, and define a roadmap towards our aspirational goals. This has allowed us to demonstrate to our shareholders the real impact our investments are having.”

Giulia Guidi, ESG Senior Advisor, NextEnergy Capital Group

Left: Sheringham Shoal offshore wind farm, UK

Green Impact Advisory This year, GIG worked with NextEnergy has produced green impact reports on Capital to help the UK-based renewable projects and assets, this marked the During its initial years as the world’s energy fund manager understand how first time those methodologies have first green investment bank, GIG its activities are contributing to meeting been used to influence the design of developed an industry-leading green the UN Sustainable Development a green loan instrument. Given that impact assessment methodology, Goals (SDGs) – an issue of growing most investors typically invest through providing a template for best- interest to current and prospective such products, rather than directly into practice green impact disclosure. investors. GIG helped the company the underlying asset, the design of While GIG continues to apply these develop a new strategy to incorporate this type of instrument with integrated assessments to all of its investments SDGs into project assessment, impact reporting could significantly to ensure they support GIG’s green monitoring and reporting.3 That extend the reach of such reporting. purposes, the growing demand for advice drove change in its processes green advisory services has led to While a growing number of investors and brought renewed focus to the GIG also securing mandates with are looking to understand the organisation’s aspirational goals. third-party clients seeking to measure sustainability credentials of their and report their own contribution to GIG also advised on the green investments, concerns are rising about a greener economy. In addition to assessment and reporting for parent ‘greenwashing’, whether intended or impact reporting, GIG also provides a Macquarie Group’s inaugural green inadvertent. Investor uncertainty over more flexible Green Impact Advisory loan, a £500m facility to support greenwashing is acting as a brake on the service that is adapted to the evolving renewable energy projects globally – market. However, the use of robust and needs of its clients and the market. the first such loan to be issued under transparent green performance data, the Green Loan Principles. While GIG coupled with easily understood ratings as provided by GIG’s Green Impact 1. Source: Global Impact Investing Network, Sizing the Impact Investing Market, 2019 2. Source: Climate Bonds Initiative Advisory team, can offer reassurance 3. See www.nextenergycapital.com/un-sustainable-development-goals and confidence to investors.

14 Green Investment Group Progress Report 2019 Right: Siemens turbine blades at Gwynt y Môr offshore wind farm, UK

Setting the standard Green Bank Advisory The development of GIG’s advisory business has seen the group take GIG’s Green Impact Advisory team GIG is also providing advice to its unique origins and adapt is contributing to industry-wide governments and international techniques initially applied to its initiatives, building some of the financial institutions on how they own purpose to meet the needs of market infrastructure upon which might repeat the success the UK a growing green finance sector. By future green finance will rest. As a Government had in creating the combining its experience as a major member of the British Standards world’s first green bank. This year’s investor in infrastructure with the Institute (BSI) Sustainable Finance Green Bank Design Summit saw technical in-house capability to Strategic Advisory Group, GIG representatives of 22 emerging advise on green measurement, continues to provide advice to BSI markets convene to explore how they investment and reporting, GIG is on future priorities for green and could establish their own green banks. able to meet growing market demand sustainable finance standardisation. Eleven of these markets plan to have for support at the intersection of The team is currently working with a green bank operational within two finance and sustainability. BSI on two initiatives: leading the years. With first-hand experience, from development of an international inception through to privatisation, GIG standard on sustainable finance; is uniquely positioned to give practical and contributing to an international guidance to other jurisdictions certification standard for green bonds planning to set up green banks. and loans, which will enable issuers to demonstrate that a green debt Among other ongoing commissions, instrument is funding genuinely GIG is working with the Mongolian green projects. government regarding the creation of the Mongolian Green Finance This work is not only aligned with Corporation, an institution being set GIG’s mission to accelerate the up with support of the UN Green transition to a greener global Climate Fund. GIG’s advice draws economy, but it also ensures GIG’s on its unique heritage to provide Green Impact Advisory clients have advice on governance and target access to global best practice investment areas. guidance as they seek alignment with, or certification to, these standards. The GIG team has extensive experience working at the intersection of public policy and private investment, both as GIB and now as part of Macquarie Group.

Green Investment Group Progress Report 2019 15 Supporting the global green community

The global green transition requires a team effort across the public and private sectors, and the broader environmental community. As part of its mission, GIG supports a diverse range of networks, events, initiatives and policy activity, all intended to help accelerate the green transition by sharing experience and insight.

Macquarie Green Investment Group are driving the energy transition through their commitment to support wind and wider renewable energy projects. Their investments, experience and expertise are directly impacting the growth of wind energy and we’re delighted to have them as a member of the WindEurope Board.”

Giles Dickson, CEO Wind Europe

Left: Gwynt y Môr offshore wind farm, UK

Taking part in industry initiatives summit in July and made a series resilience challenges and on spurring The GIG team has supported of group commitments, including a climate adaptation action in areas Macquarie chief executive Shemara collective commitment of $US20bn of such as infrastructure, agriculture and Wikramanayake in her role on two increased green investment in emerging supply chains. markets and a new partnership to global climate initiatives: the Climate Both initiatives published reports in work more closely with publicly funded Finance Leadership Initiative and the the lead up to the UN’s Climate Week development finance institutions. Global Commission on Adaptation. in September 2019.1,2 The Global Commission on Adaptation The Climate Finance Leadership In addition, GIG’s team has been (GCA) was established by Initiative (CFLI) was established in involved in ongoing work to develop Ban Ki-moon, 8th Secretary-General January 2019 by Michael Bloomberg, international standards for sustainable of the United Nations, Microsoft the UN Secretary General’s Special finance and green bonds, as founder Bill Gates and World Bank Envoy for Climate Action. It brings described in more detail on p.15. together the chief executives of CEO Kristalina Georgieva, and Allianz, Axa, Enel, HSBC, Goldman is guided by 28 commissioners In GIG’s home market of the UK, Mark Sachs and Macquarie and the chief from OECD and non-OECD Dooley, Global Head of GIG, has been investment officer of the Japanese governments and the private sector, appointed to the UK Government’s Government pension fund GPIF, including Macquarie CEO Shemara Infrastructure Finance Review panel. to consider how to accelerate the Wikramanayake. Its focus is on GIG continues to play an active mobilisation of private climate finance. helping investors, government officials role in the City of London’s Green CFLI members contributed to an and other stakeholders gain a better Finance Initiative, as well as working interim report delivered to the G7 understanding of current and future with government and City of London officials supporting the set-up of the 1. https://cdn.gca.org/assets/2019-09/GlobalCommission_Report_FINAL.pdf new Green Finance Institute. 2. https://data.bloomberglp.com/company/sites/55/2019/09/Financing-the-Low-Carbon-Future_CFLI-FullReport_September2019.pdf

16 Green Investment Group Progress Report 2019 Right: Rhyl Flats offshore wind farm, UK

Supporting industry groups insight to governments of 25 countries At the conference, GIG published and conferences interested in setting up their own its first Progress Report, marking the green finance Institutions. anniversary of the creation of GIG, Across its key markets, GIG aims to GIG also provided financial following the acquisition of GIB play an active role in industry groups by Macquarie. and trade associations. In the UK, sponsorship to industry events in the these include: the Association for UK and overseas. These included: In November, GIG hosted 50 Decentralised Energy, RenewableUK, RE-Source Europe 2018, hosted stakeholders to provide an update Environmental Services Association, by WindEurope and Solar Power on its Scottish activity and hear Scottish Renewables, Solar Trade Europe, and RE-SourceUK 2019, from a panel of industry experts on Association, Renewable Energy hosted by RenewableUK and the the future of Scotland’s renewable Association, Aldersgate Group, Solar Trade Association; WindEurope energy industry. A Word About Wind, Scottish 2019 in Bilbao; GWEC’s Offshore Wind Conference; RWM2019, the Elsewhere, GIG held two events in Council for Development & Industry, Seoul, Korea in 2018 and 2019 with Making Energy Understandable UK’s largest recycling and waste management conference; the a focus on green investment and the for Customers and, through Korean offshore wind industry. The Macquarie, the Confederation of Scottish Green Energy Awards; RenewableUK’s Global Offshore events were attended by over 200 British Industry. Elsewhere, GIG members of Korea’s green community. was elected to the board of Wind Wind Conference; and the City of London’s flagship Green Finance In March 2019, GIG also convened Europe, and is involved with Solar over 130 industry, government and Power Europe, the International Solid Summit, part of London Climate Action Week in July 2019, at which regulatory leaders in a closed forum Waste Association and NORWEA to discuss the opportunities and in Norway, the American Council of the UK’s Green Finance Strategy was launched. Through Macquarie, GIG challenges of the green energy Renewable Energy, the US Alliance transition in America. for Sustainable Finance and, through also sponsored the Energy Taiwan Macquarie, the Japan Wind Power event in Taipei, the Global Offshore Throughout the reporting period, GIG Association and Japan Association of Wind Summit in Taipei, and the launch has continued to share details of its Asset Management for Offshore Wind. of the Taiwan Offshore Wind Industry activities and expertise through the Association. GIG website and LinkedIn and Twitter In addition, GIG has attended, Sharing our expertise accounts. Each new GIG transaction spoken at, hosted or sponsored more is announced on the website, often than 130 industry events during the Each year, GIG hosts stakeholder accompanied by a film providing reporting period. events in London and Edinburgh to further background on the transaction For example, GIG took part in the UK provide an update on activity over and any market-leading elements. Government’s first ever Green GB the past year and to look ahead to Week in October 2018, hosting an the next. event in Edinburgh with senior officials In October 2018, the first Macquarie from the Department for Business, GIG Green Energy Conference was Energy & Industrial Strategy at which held. The event combined GIG’s the Offshore Wind Green Impact Annual Review with Macquarie’s Report was launched. Alternative Energy Conference and Beyond the UK, GIG began engaging was attended by 450 stakeholders, this year with the UK’s Foreign including clients, members of the Office and the Government of the renewable energy industry and Philippines on the development of a community, journalists and staff. The green finance strategy for the country. event was followed up with thought- In March 2019, GIG participated in leadership videos shared on GIG’s the inaugural Green Bank Design website and social media channels. Summit, providing training and expert

Green Investment Group Progress Report 2019 17 Funds under management

As well as investing its own capital, GIG manages capital on behalf of long-term institutional investors – acting as a general partner in a dedicated renewable energy fund and managing a joint venture, UK Climate Investments, with the UK Government.

A significant opportunity exists to accelerate the low-carbon transition – connecting the world’s long-term savings pools with investment opportunities in green infrastructure. By better leveraging this institutional capital, we can finance the build-out of vital clean energy projects around the world whilst creating more sustainable economies.”

David Tilstone, Managing Director, GIG

Left: Rhyl Flats offshore wind farm, UK

Macquarie GIG Renewable During the reporting period, Supporting the UK’s Energy Fund 1 maintenance work was undertaken energy transition across all projects to repair turbine The six wind farms in the MGREF1 In 2016, GIB reached final close on blades damaged by erosion. The portfolio continue to make a the world’s first offshore wind fund. turbines, which often face harsh significant contribution to the UK’s This fund, now named Macquarie GIG weather conditions, require ongoing decarbonisation agenda. Renewable Energy Fund 1 (MGREF1), monitoring and repairs to mitigate currently manages investments in a Since inception, the portfolio has the impact of rain, salt spray, ice generated more than 15.7 TWh of portfolio of six operational offshore and other debris. Works to prevent wind farms around the UK; Gwynt renewable energy – equivalent to the corrosion of turbine foundations avoiding more than 6.1 Mt CO e. y Môr (576 MW), Inner Dowsing 2 by seawater were also progressed The MGREF1 portfolio is set to (97.2 MW), Lincs (270 MW), Lynn across key sites, as was the (97.2 MW), Rhyl Flats (90 MW) and generate enough clean electricity upgrade of lightning protection to power 1.1m homes each year. Sheringham Shoal (316.8 MW). systems to prevent damage during electrical storms. GIG’s asset management team With a total combined capacity of continues to work closely with more than 1,400 MW, the wind farms These upgrades aimed at improving stakeholders to identify and advance represent approximately 18 per cent the performance and longevity of further initiatives that support the of the UK’s total operational offshore wind turbines in the portfolio were ongoing contribution of the portfolio 1 wind generation capacity. complemented with the installation of to the UK’s energy transition. This Enhancing operational performance new software. The software upgrades, includes working closely with the which seek to optimise how wind Positioned miles off the coast in areas Crown Estate to progress potential turbines perform in different weather of high wind resource, offshore wind lease extensions at Gwynt y Môr and conditions, are helping to ensure farms require ongoing maintenance Sheringham Shoal. In August 2019, the capacity of each project is to optimise their performance and the Crown Estate confirmed that fully utilised. extend their service lives. To ensure both projects could progress to an capital investment is appropriately award of development rights after prioritised, GIG works closely with undertaking a plan-level Habitats operations teams to progress key Regulations Assessment, to assess asset management initiatives across the possible impact of the proposed the MGREF1 portfolio. wind farm extensions on relevant nature conservation sites of European importance. 1. Based on total UK operational offshore wind capacity of 7.9 GW, Offshore Wind Operational Report January-December 2018, The Crown Estate

18 Green Investment Group Progress Report 2019 Right: KIOCL 2, CleanMax Solar rooftop solar plant, KIOCL Limited, Mangalore, India

UK Climate Investments Green finance market development Funding innovative new renewable energy projects UK Climate Investments (UKCI) is In December 2018, UKCI made a a joint venture between GIG and ~£30m cornerstone commitment to In April 2019, UKCI made a £30m the UK Government. Forming part Revego Energy, a first-of-a-kind listed commitment in one of India’s leading of the UK’s International Climate renewables yieldco in sub-Saharan providers of renewable energy for Finance commitment, it targets Africa. This green finance vehicle commercial and industrial (C&I) transformational green energy will accelerate the deployment of clients, CleanMax Solar. Partnering investments where UKCI capital can renewable energy in the region by with C&I customers across India’s mobilise additional private sector recycling development capital and largest cities to build new rooftop and capital on a sustainable basis to providing institutional investors with ground-mounted solar generation promote cleaner, greener growth in access to long-term operational projects, CleanMax Solar enables developing economies. cashflows generated by a portfolio businesses to access clean, cheaper- of renewables projects. The vehicle than-grid electricity by removing the Last year, following a successful intends to seek a listing on the need for significant upfront capital transition onto the Macquarie platform, Johannesburg Stock Exchange investment. UKCI’s commitment will UKCI made two landmark investments and will be managed by Revego assist CleanMax Solar as it looks in India’s renewables sector – Fund Managers, a Black Economic to scale its operations, providing it supporting the development of a Empowerment (BEE) accredited fund with the capital needed to expand 50 MW solar farm in Maharashtra, manager. In this way, the investment is its network of solar farms across and seeding the country’s first both helping to support a key social the country. In approaching this offshore unlisted renewables yieldco and economic agenda whilst enabling investment, UKCI was able to draw on with an investment in a 185 MW the expansion of renewable energy the extensive expertise across GIG solar portfolio. across sub-Saharan Africa. to better understand how innovative UKCI built on this momentum during private offtake PPAs work in markets the reporting period with three new around the world. commitments across a range of In August 2019, UKCI announced a greenfield renewable energy projects ~£14m agreement with H1 Holdings and green finance capital market to support the development of innovations. The UK Government also 254 MW of renewables projects extended UKCI’s investment period across South Africa. The agreement by 12 months to November 2019 will see UKCI provide critical financing to allow UKCI to realise an for two onshore wind farms and increasingly attractive pipeline of one small-scale hydro project via transformational opportunities. an innovative financing mechanism developed by UKCI to support BEE entities.

Climate adaptation Following a successful pilot, UKCI and co-shareholders in its India Sun investment approved a £1.2m investment to install robotic waterless cleaning technology on its Bhadla solar farm. The technology will prepare the plant, which is located in a water-stressed region, for the expected future impacts of climate change – ensuring it continues to operate efficiently, whilst increasing the availability of scarce water for use by local farmers and communities.

Green Investment Group Progress Report 2019 19 Macquarie: Sustainability and green investment

Macquarie Group, GIG’s parent company, has a substantial and longstanding commitment to supporting the transition to a low-carbon economy. Together with its managed funds, Macquarie is one of the world’s largest investors in green energy, with more than 15 years of renewables expertise, and green energy and investment specialists across all regions.

In 2018-19, Macquarie invested or Global leadership Green impact reporting on arranged more than £4bn (~$A8bn) Macquarie Group’s CEO, Shemara Macquarie’s first green loan in green energy projects and, as Wikramanayake, has taken on two On 26 July 2019, Macquarie of 31 March 2019, had 13.5 GW of key global leadership roles in published the first green finance renewable energy assets in operation supporting the transition to a greener, impact report for its £500m green 1 or under management. lower-carbon economy across the financing facility, issued in June 2018. Macquarie services clients across world. Further details of these are Macquarie was the first financial various renewable energy technologies, provided on p.16. institution globally to issue a green loan under the Green Loan Principles. including solar, wind, waste-to-energy, Recent green investment The portfolio developed under these bioenergy and energy efficiency, and developments from across loan tranches is forecast to produce has consistently grown its commitment Macquarie Group and broadened its focus. almost 7,000 GWh per year and avoid Macquarie Group capital raising approximately 3,500 kt CO e per year. Macquarie works across the in August 2019 2 The proceeds from the green renewable energy and clean Macquarie successfully raised tranches have been committed to technology markets as a fund and $A1bn of share capital for investment solar, offshore wind and onshore wind project manager, adviser, financier through an institutional placement in projects across the globe – many of and participant in environmental August 2019, a significant proportion which were GIG-led. Going forward, markets. Its activities span the of which was earmarked for Macquarie may extend the use of investment cycle, from research into renewables projects. alternative energy to tailored capital the loan proceeds to support further solutions for the development and renewable energy, energy efficiency, construction of renewable assets. waste management, green buildings and clean transportation projects.

Diversification of Macquarie’s investment focus

Green Investment Bank acquisition (‘17)

Geothermal (‘17)

Batteries/storage (‘16)

Offshore wind (since ‘10) Solar PV (since ‘08)

Biomass (since ‘05)

Landfill gas/Biogas(since ‘05) Hydro (since ‘05)

Onshore wind (since ‘05)

Renewables (since ‘05)

Energy infrastructure (since ‘04)

Meter (since ‘03)

Power (since ‘97)

1990-2002 2004 2006 2008 2010 2012 2014 2016 2018

1. MW of renewable energy assets in operation or under management reflect 100 per cent generating capacity of each asset, not the proportion owned/managed by Macquarie

20 Green Investment Group Progress Report 2019 Bringing institutional capital into ESG at Macquarie In the 2018-19 financial year, the green energy sector Macquarie’s Board and Management Macquarie sought to use scenario In addition to overseeing investment recognise the importance of analysis to assess potential risks and asset management activities for sound environmental, social and and impacts to its business from UKCI and MGREF1 (see p.18-19), governance (ESG) practices as climate-related risks. The results of Macquarie Infrastructure and Real part of their responsibility to its this analysis are outlined in the ESG Assets (MIRA) is supporting the clients, shareholders, communities, section of the Macquarie Group growth of green energy by bringing people and the environment in which Annual Report 2019. additional long-term institutional Macquarie operates. RE100 capital into the sector via its managed Macquarie’s ESG approach is Macquarie also announced that it will funds. During the reporting period, structured around focus areas become a member of RE100, a global MIRA made a series of additional considered to be material to the corporate leadership initiative bringing investments in the sector and business. Building on Macquarie’s together businesses committed to progressed initiatives to improve principles of opportunity, 100 per cent renewable electricity data capture and reporting across accountability and integrity, these and will source all of the energy its portfolio. focus areas reflect the risks and supplying its premises and data In September 2018, a MIRA- opportunities identified by the centres from renewable sources by managed fund acquired Wheelabrator business and the issues of interest to 2025. Consistent with the dedicated Technologies, a leading its stakeholders. PPAs it has created for clients, waste-to-energy platform in the US. Macquarie will seek to develop Clear dialogue with stakeholders In August 2019, MIRA also announced projects to supply the green energy is important in building strong that it will acquire the 400 MW BARD for its new Sydney headquarters and relationships, understanding Offshore 1 project, Germany’s first Melbourne office.. utility-scale offshore wind farm. external dynamics, earning and In September 2019, Macquarie maintaining trust, enhancing business Carbon neutrality at Macquarie Infrastructure Debt Investment performance and evolving the ESG Since 2010, Macquarie has Solutions (MIDIS), on behalf of its approach. Macquarie regularly maintained a carbon-neutral European and Asian insurance engages with a broad range of commitment by working to reduce company clients, announced a new stakeholders, including clients, and offset emissions. To meet this €38m debt investment in a portfolio of shareholders, investors, analysts, commitment in 2018-19, Macquarie Spanish solar farms. governments, regulators, staff, purchased and retired a portfolio of suppliers and the wider community. voluntary carbon offsets, focusing Green Climate Fund accreditation Macquarie’s ESG focus areas include: on project quality and verifiable Macquarie Alternative Assets emissions reductions. Carbon business conduct and ethics Management Limited was accredited ● credits that met the Verified Carbon to the Green Climate Fund (GCF) ● ESG risk management Standard and the Climate, Community in February 2019. The GCF is a ● investments, markets and products and Biodiversity Standards were United Nations fund which partners ● sustainability in direct operations purchased from projects in Peru and with accredited organisations, like Zimbabwe. These projects, supported people and workplace. Macquarie, to provide concessional, ● by the sale of carbon credits on risk-mitigating capital for climate More information regarding international markets, reduce carbon change mitigation and adaptation Macquarie’s ESG approach can be emissions in the countries and projects in emerging markets. found at www.macquarie.com/ESG. communities in which they operate. Macquarie is continuing to engage Task Force on Climate-related with the GCF on potential projects or Financial Disclosures programmes to drive a paradigm shift in green energy and/or other sectors Macquarie supports the important in key markets. work of the Task Force on Climate- related Financial Disclosures (TCFD) and is actively implementing the TCFD recommendations.

Green Investment Group Progress Report 2019 21 Our green impact

GIG has developed a market-leading suite of principles, policies and processes which inform all its investment decisions. Through its commitment to transparent disclosure, GIG continues to demonstrate application of best practice in green impact performance reporting.

Green governance framework GIG’s green governance framework is applicable to all its investment activity A+ globally. This framework includes: ● Compliance with GIG’s Green Investment Policy and its seven Green Investment Principles GIG achieved an A+ ● Contribution to one or more of GIG’s five Green Purposes rating for both its PRI ● Independently assured green impact data (see p.27) assessment categories, ● Adherence to Macquarie’s Environment and Social Risk Policy putting its performance ● Signatory to the Principles for Responsible Investment (PRI) in the top 20 per cent of ● Adoption of the Equator Principles PRI signatories.

Reporting green impact With GIG now investing in the early Green impact for new investments development stage of projects, the made within the year is reported, method of reporting the green impact as well as green impact of all GIG of its investments has been updated. investments to date. This includes GIG continues to report five key green projects from previous years that impact metrics: continue to be held as they progress ● Greenhouse gas emissions through to operations, and projects no longer held where GIG’s investment avoided (kt CO2e) ● Renewable energy catalysed their delivery. It is noted that generated (GWh) under this approach, green impact ● Energy demand reduced (GWh) reported by GIG in relation to projects ● Materials recycled (kt) catalysed but no longer held may also ● Waste to landfill avoided (kt). be reported by other investors. For projects no longer held, an estimate is The same data is collected for all made of their remaining lifetime green projects but the way this impact is impact at the point of exit. presented has been updated. Although GIG is increasingly focussed In previous years, where operational on the early-stage development of assets were held for prolonged green projects, its Green Impact periods, actual and forecast green Statements only report on projects impact from the projects held at when they have moved to the ‘ready- the end of each financial year was to-build’ stage or beyond; early-stage reported. Reporting now reflects development projects may not always the lifetime green impact of all progress, so this approach avoids the investments to date, highlighting the risk of overstating green impact. expected green impact of By investing in early-stage investments made in the past year. development projects and This new approach provides greater development partnerships, GIG is clarity on the increasing green impact catalysing more investment into green that GIG is catalysing through its projects, laying the foundation for investment activity. greater future green impact.

Right: Rhyl Flats offshore wind farm, UK

22 Green Investment Group Progress Report 2019 Our five green purposes

01 02 03 04 05 Reduce Increase Protect Protect Promote greenhouse gas natural resource the natural biodiversity environmental emissions efficiency environment sustainability

The reduction of greenhouse reporting period are both anticipated projects would have greater than gas emissions to contribute to this green purpose minor adverse impacts on biodiversity. All projects that GIG invested by diverting waste from landfill. The With the international expansion of in during the 2018-19 reporting quantified contribution is summarised GIG there is a greater opportunity period are expected to contribute to in the landfill diversion metric below. to contribute to this green purpose, greenhouse gas emissions reduction. As well as evaluating the quantitative for example by investing in waste Of the investments that have contribution to this green purpose, management projects in countries reached final investment decision, the qualitative contribution of all where current waste management the greatest contribution is made by investments is also assessed with practices threaten biodiverse GIG’s investment into the Canadian reference to project Environmental ecosystems. GIG is actively Breaks onshore wind farm, which GIG Impact Assessments (EIAs). All the pursuing investment opportunities progressed through construction and projects in which we invested during in these areas. the reporting period were evaluated is due to commence operations in the The promotion of environmental through the EIA process as having second half of 2019. sustainability minor or no significant effects The advancement of efficiency in following mitigation. GIG applies All of the projects invested in during the use of natural resources contractual safeguards to projects to the reporting period are expected The contribution to this green ensure that required environmental to contribute to the promotion purpose is measured by the mitigation is delivered. of environmental sustainability. metrics below on renewable energy Contribution to this green purpose The protection or enhancement generated, energy demand reduction is assessed against a range of of biodiversity and materials recycled. All of the qualitative criteria. Projects are projects invested in during the None of the projects in which GIG scored more positively where financial reporting period are expected to invested during the reporting period innovation is demonstrated, such as contribute to this green purpose. are expected to make a direct through the use of PPAs, or through contribution to the protection or financing the development of assets The protection or enhancement enhancement of biodiversity. that will contribute to the transition to a of the natural environment The evaluation of potential adverse low-carbon economy. The two waste-to-energy projects impacts, also based on project in which GIG invested during the EIAs, determined that none of the

Lifetime green impact metrics Additional lifetime green impact from Lifetime green impact from all investments made in 2018-19 investments to date

Greenhouse gas emissions avoided (kt CO2e) 12,842 180,973 Renewable energy generated (GWh) 43,374 492,667 Energy demand reduced (GWh) - 3,959 Materials recycled (kt) 2,228 34,782 Waste to landfill avoided (kt) 8,944 104,413

The above metrics give an overview of the environmental benefits arising from GIG’s portfolio of investments. To ensure reporting is comparable with previous years, the green impact is reported for the year April 2018 to March 2019. Full green impact statements can be found from p.27, along with notes on reporting methodology.

More details of GIG’s green governance framework, green impact performance and reporting methodology can be found in the GIG Green Investment Handbook and on the GIG website.

Green Investment Group Progress Report 2019 23 Governance over our green mission

On 17 August 2017, the UK Green Investment Bank Limited became part of the group of companies of which Macquarie Group Limited (Macquarie) is the ultimate holding company. At this time, Macquarie announced that, “in order to pursue the Green Investment Bank’s vision to invest in green infrastructure internationally and positively contribute to the globalisation of the renewables industry, the Green Investment Bank will now operate under the name Green Investment Group.”

A consistent mission The Green Purposes Company In performing its role, the GPC is committed to public accountability, New investments made under the and special share transparency and competency, and name Green Investment Group in The Green Purposes can only be to contributing positively to the future the UK and Europe continue to be altered with the consent of the development of GIG. made by UK Green Investment Bank Green Purposes Company (GPC), Limited entities. Investments made the holders of a special share in the Over the course of the past year, elsewhere may be made by other UK Green Investment Bank Limited, GIG has continued to build on its Macquarie Group entities using the issued on 17 August 2017. No strong and constructive relationship Green Investment Group name and proposal has been made to change with the GPC trustees, meeting them brand for trading and marketing the Green Purposes. at least on a quarterly basis and purposes. However, other entities providing them with a wide variety are only permitted to do this in The GPC is a company limited by of information on GIG’s transactions, return for a contractual undertaking guarantee, owned and operated by their green impact and its wider that any activities will be compliant trustees independent of GIG and business strategy. with the UK Green Investment Bank Macquarie Group. The primary role The trustees addressed the Limited’s Green Purposes, its Green of those trustees is to approve or Macquarie Green Investment Group Investment Principles and its Green reject any changes proposed to GIG’s Green Energy Conference on GIG Investment Policy. Green Purposes as they apply in the UK and Europe. performance in 2017 and 2018, and As such, all activity undertaken under are invited to address the same event the Green Investment Group name and The trustees were appointed on in 2019. The trustees also have the brand align to the Green Objective 31 October 2016 for an initial term opportunity to provide a letter in the enshrined in the articles of association of five years and are not remunerated. GIG Progress Report and Annual of the UK Green Investment Bank The trustees are: Report, which they did in 2018 and Limited, by contributing to its five ● James Curran, former CEO of 2019 (see p.25). Green Purposes. the Scottish Environment Protection Agency; ● Trevor Hutchings, previously a senior civil servant at the then Department of Energy and Climate Change, and currently Director of Strategy and Communications at Gemserv; ● Tushita Ranchan, an experienced green infrastructure investor and former CEO of a renewable energy company; ● Robin Teverson, Chair of the House of Lords EU Energy and Environment Sub-Committee; and ● Peter Young, environmentalist and former Chair of the Aldersgate Group.

24 Green Investment Group Progress Report 2019 Letter from the trustees of the Green Purposes Company

This letter, also to be included in the relevant GIG annual report, sets out GPC’s assessment of how GIG has performed against the five green purposes. It covers investments in the UK and Europe for the financial year 2018-19. The GPC has reached its views informed by regular meetings with GIG’s senior management, reviewing substantive information provided by GIG, individual work by the Trustees, and specialist consultancy research and support. Our areas of particular interest are set out below.

Green assessments We would like the same transparency External green assurance objectives to be applied to their The principal assessment of GIG’s This report contains the statement own reporting, including by utilising investment performance against the from GIB’s independent Green independent assurance to ensure that five green purposes is made with Assurers who have verified that the green impacts claimed are robust and reference to the information provided assessment of green impacts from deserve the confidence of the market. to us by GIG and this Progress GIG’s investments have been made Published green impact reporting on Report, including GIG’s Green consistent with GIG’s published all investments at the time they are Impact Statements. approach, based on good quality announced would also be welcomed. data. However as noted above, We commend the published Using the latest available data where confidentiality constraints commitments behind GIG’s prevent publishing explanation of assessment methodologies as set Last year GPC highlighted the the sources and assumptions in the out in their Green Investment Policy, opportunity to use more refined data, GPC feels that independent Green Investment Principles and forecasting of estimates of carbon assurance processes should seek Green Impact Reporting Criteria. savings where data permit. GPC to plug that gap. The positive attributes of this recognises the balance between GIG’s principles of consistency approach as highlighted in our Investment strategy letter last year endure, and we have and accuracy, but the divergence no doubt that the GIG assessment between GIG’s adopted data set and GPC has welcomed public statements methodology remains one of the the latest UK and European country in this report and elsewhere of GIG’s most comprehensive available in data for calculating carbon savings is new emphasis on development and the market. widening. GPC believes the continued helping create investible projects. use of these criteria risks over- This could also help broaden the Our attention this year is whether the estimating the actual green impacts. types of green investment made. outputs meet reasonable expectations If not addressed in the future this has Whilst major capital investments from GIG’s comprehensive approach the potential to make investments in reflecting this approach are in and allow GPC to fulfil its role in some technologies (such as electricity the future, GPC believes GIG’s confirming investments made are only waste-to-energy plants) become commitment to development is consistent with the green purposes. incompatible with GIG’s own green substantial, sustained and across a Three areas give us cause for concern investment policy and principles. range of technology types. and we look forward to encouraging GIG to find ways of addressing these: Reporting against all five Thought-leadership Green Purposes Transparency We commend the GIG for remaining GIG’s published green impact committed to thought-leadership GIG state under their principle reporting, including in this report, through its input to several public of transparency in their Green focuses only on the first two purposes, activities, to the investment Investment Policy “We expect greenhouse gas emissions and community, and a wider influence specific exclusions or inclusions of natural resource efficiency. The through its parent Macquarie; information to be clearly identified statements made regarding the supporting Shemara Wikramanayake’s and assumptions explained, and remaining three purposes are limited new roles on the Global Commission appropriate references to be provided and opaque. We welcome GIG’s on Adaptation and the Climate for both data and assumptions”. active interest in future investment to Finance Leadership Initiative being deliver all five green purposes, but an example. believe now is the time to review the methods to address all five purposes in readiness of a broader investment portfolio in the future. There is also an opportunity to remove the risk of perceived double counting with the current set of metrics.

Green Investment Group Progress Report 2019 25 Letter from the trustees of the Green Purposes Company (continued)

Innovation Divestments Forward look In terms of technology innovation, GPC is interested in the treatment We have indicated areas of focus for GIG’s UK and European portfolio of divestments in green impact GPC going forward. We hope the new remained disappointingly narrow, reporting. We welcome the clarity advisory services being operated by consisting of onshore wind and on how these are dealt with in this GIG in the UK and Europe and the waste-to-energy. Globally, report and GIG’s Green Impact broadening of technology types will including through UK Climate Reporting Criteria. GIG recognises become more evident, and that GIG’s Investments, a wider range of the precedent set in allowing lifetime commitment to green impact reporting technologies have been involved claiming of green impacts from sold will allow continued improvement. such as solar and battery storage. assets risks double counting, if others Further enhancement of green impact GPC hopes that the development adopt the same methodology. GPC reporting will build investor and focus will see a similar broadening of wishes to see greater clarity between market confidence in the value of opportunities, ideally across all five contributions from investments when such reporting, and in ensuring green purposes. held and after sale in the aggregated green investments deliver on all figures presented here and elsewhere. their promises. In terms of financial innovation GPC also have concerns that current the expansion of power purchase lifetime impact calculations discussed agreements to leverage new under ‘Green assessments’ overleaf developments and to purchase on p.25 could lead to permanent and and revitalise ailing investments is material over-estimates remaining in demonstrating market leadership. the green impact reports, if green We would encourage GIG to consider impact estimates for recent projects how it can further support earlier Peter J Young were not re-evaluated. We look stage and innovative projects which forward to working with GIG in their Chair, for and on behalf might not otherwise attract investment development of these emerging of the Trustees from more traditional providers. reporting methods further. Our aim Green Purposes Company Investment record would be to achieve the same surety 25 September 2019 as for financial statements, noting that We are pleased that GIG has retention of value on the company published its assessment method balance sheet is not allowed after to measure against the £3bn sale of assets. commitment made in April 2017. Using this methodology GIG has invested in UK and Europe, during its first full financial year (to 31 March 2019), just under £1bn (over 50 per cent in the UK, nearly 25 per cent in the rest of Europe and the balance in the rest of the world, including UK Climate Investments). It is clear that the £3bn commitment equates more with the former disclosure of investment + co-investments (by GIB) and includes both direct and arranged investment by GIG.

26 Green Investment Group Progress Report 2019 Green impact statements

Image: Rhyl Flats offshore wind farm, UK

Green Investment Group Progress Report 2019 27 Green impact statements Reduction of greenhouse gas emissions

Understanding the green impact statements The green impact statements below The green impact statements should in accordance with the Independent and overleaf indicate the principal be read in conjunction with GIG’s Assurance Report set out on environmental benefits arising from methodology for calculating green p.34-35. GIG’s investments. Green impact impact, the details of which are set The approach to reporting green metrics are reported in terms of out in GIG’s Green Impact Reporting impact has been updated in this year’s estimated lifetime green impact Criteria 2018-19, a copy of which is green impact statements. Please refer from 2018-19 investments and all published on GIG’s website. to p.22 for more details. investments to date, where the project Selected totals for data in the green has reached final investment decision. impact statements in respect of the The reporting period for the green financial year 2018-19 have been impact statements is April 2018 to independently assured by Deloitte March 2019.

Estimated lifetime greenhouse gas emissions reduction of new GIG investments in the reporting period

Year ended Year ended 31.03.19 31.03.18

kilotonnes CO2e kilotonnes CO2e Offshore wind 0 0 Waste 3,501 4,381 Energy efficiency 0 0 Bioenergy 0 10,692 Onshore renewables 9,341 2,117 Total 12,842 17,190

Estimated lifetime greenhouse gas emissions reduction of all GIG investments to date

Year ended Year ended 31.03.19 31.03.18

kilotonnes CO2e kilotonnes CO2e Offshore wind 53,339 52,821 Waste 39,397 36,755 Energy efficiency 2,277 2,282 Bioenergy 72,817 72,932 Onshore renewables 13,143 3,802 Total 180,973 168,592

28 Green Investment Group Progress Report 2019 Green impact statements Generation of renewable energy

Estimated lifetime renewable energy generated by new GIG investments in the reporting period

Year ended Year ended 31.03.19 31.03.18 GWh GWh Offshore wind 0 0 Waste 9,499 7,499 Energy efficiency 0 0 Bioenergy 0 33,337 Onshore renewables 33,875 44,104 Total 43,374 84,940

Estimated lifetime renewable energy generated by all GIG investments to date

Year ended Year ended 31.03.19 31.03.18 GWh GWh Offshore wind 123,934 122,741 Waste 63,234 53,853 Energy efficiency 1,265 1,265 Bioenergy 222,359 222,727 Onshore renewables 81,875 47,999 Total 492,667 448,585

Green Investment Group Progress Report 2019 29 Green impact statements Energy demand reduction

Estimated lifetime energy demand reduced by new GIG investments in the reporting period

Year ended Year ended 31.03.19 31.03.18 MWh MWh Electricity 0 0 Heating fuels 0 0 Total 0 0

Estimated lifetime energy demand reduced by all GIG investments to date

Year ended Year ended 31.03.19 31.03.18 MWh MWh Electricity 1,800,459 1,817,481 Heating fuels 2,158,799 2,159,255 Total 3,959,258 3,976,736

30 Green Investment Group Progress Report 2019 Green impact statements Recycling of materials

Estimated lifetime materials consumption avoided through materials recycling by new GIG investments in the reporting period Year ended Year ended 31.03.19 31.03.18 tonnes tonnes Compost 0 0 Digestate (PAS 110) 0 0 Compost-like output 0 0 Plastics - mixed 0 0 Ferrous metals 132,750 102,857 Non-ferrous metals 80,845 93,669 Paper/card 0 0 Glass 0 0 Mineral aggregates 2,014,065 3,443,239 Waste electrical and electronic equipment (WEEE) 0 0 Other 0 0 Total 2,227,660 3,639,765

Estimated lifetime materials consumption avoided through materials recycling by all GIG investments to date Year ended Year ended 31.03.19 31.03.18 tonnes tonnes Compost 987,642 987,642 Digestate (PAS 110) 7,053,177 7,038,440 Compost-like output 1,128,809 1,128,809 Plastics - mixed 704,051 704,051 Ferrous metals 1,203,478 1,064,879 Non-ferrous metals 381,068 293,117 Paper/card 654,299 654,299 Glass 9,424 9,424 Mineral aggregates 16,479,384 14,755,646 Waste electrical and electronic equipment (WEEE) 34,328 34,328 Other 6,146,348 6,146,348 Total 34,782,008 32,816,983

Green Investment Group Progress Report 2019 31 Green impact statements Avoidance of waste to landfill

Estimated lifetime waste to landfill avoided by new GIG investmentsin the reporting period

Year ended Year ended 31.03.19 31.03.18 tonnes tonnes Biodegradable waste 6,669,380 11,281,419 Non-biodegradable waste 2,274,540 4,370,448 Total 8,943,920 15,651,867

Estimated lifetime waste to landfill avoided by all GIG investments to date

Year ended Year ended 31.03.19 31.03.18 tonnes tonnes Biodegradable waste 67,872,301 61,921,009 Non-biodegradable waste 36,540,983 33,524,366 Total 104,413,284 95,445,375

32 Green Investment Group Progress Report 2019 Notes to the green impact statements

Year-on-year changes to estimated ● Projects cancelled in the period have been influenced by the ban lifetime green impact – there were no cancellations of on plastic waste exports to China projects in the reporting period. and had a material effect on the The table below shows how the The project agreement for the green impact in 2018. Due to the lifetime green impact at the end Derby waste-to-energy plant was potential effect on the remaining of 2018-19 compares to that at terminated by Derby City and lifetime green impact of the the end of 2017-18, and provides Derbyshire County Councils on project, the forecast green a breakdown of the year-on-year 2 August 2019, ending senior impact has been more changes. The changes in lifetime lenders’ involvement with the conservatively re-estimated. green impact were caused by: project. The estimated lifetime green impact arising from the Equator Principles ● Removal of estimated remaining project is nonetheless expected to In the reporting period, GIG did not lifetime of exited assets that were be delivered (albeit delayed), and make any investments to which the acquired as operational – as noted therefore continues to be included on p.22, GIG’s approach to green Equator Principles apply. The Equator in the green impact statements. impact reporting now focuses on Principles are not applicable to the green impact catalysed by ● Existing projects’ variation of equity investments. GIG’s investment. Consequently, performance/reforecasts from when GIG acquired assets that last year’s forecast – for some of were already operational, the the projects that were in GIG’s remaining lifetime green impact of portfolio at the end of 2017-18, these is removed upon divestment. green impact produced in the Green impact from such assets reporting period differed from the divested prior to, during, and since previous year’s forecast, leading to the reporting period has therefore reforecasting of the green impact. been removed. The Dublin waste-to-energy plant received materially different input ● New investments made in the feedstock in 2018 to that expected period – GIG invested in four new at the point of investment. The projects in the reporting period; higher-than-expected non- all of these are expected to biogenic content in the project’s contribute to increased forecast input feedstock is expected to green impact.

Estimated lifetime green impact of all GIG investments to date – year-on-year changes Greenhouse gas emissions Renewable Energy Waste to reduction energy demand Materials landfill kilotonnes generated reduced recycled avoided

CO2e GWh MWh tonnes tonnes Year ended 31.03.18 173,855 460,629 3,976,736 32,977,454 100,947,902 Removal of estimated remaining lifetime of exited (5,263) (12,044) 0 (160,470) (5,502,527) assets that were acquired as operational Revised 31.03.18 following operational asset exits 168,592 448,585 3,976,736 32,816,984 95,445,375 New investments made in the period 12,842 43,374 0 2,227,660 8,943,920 Projects cancelled in the period 0 0 0 0 0 Variation of forecast remaining lifetime and actuals (461) 708 (17,478) (262,636) 23,989 from last year’s forecast Year ended 31.03.19 180,973 492,667 3,959,258 34,782,008 104,413,284

Green Investment Group Progress Report 2019 33 Independent assurance report

Independent assurance report to the UK Green Investment Bank Limited on Green Impact Data and the application of Equator Principles within the Progress Report. We have been engaged by the Directors of the UK Green Investment Bank Limited (“GIB”) to conduct a limited assurance engagement relating to the Assured Disclosures concerning Green Investment Group (“GIG”)’s performance-related Green Impact Data (“Green Impact Data”) and the application of Equator Principles within the GIG Progress Report for the year ended 31 March 2019.

Our unqualified conclusion Criteria (the “Reporting Criteria”), materially misstate the Green Impact Based on our work as described in Data for the year ended 31 March this report, nothing has come to our 2019. The data have been prepared attention that causes us to believe that on the basis of the methodology set the Assured Disclosures, which have out in the respective GIG Reporting been prepared in accordance with the Criteria which can be seen on the GIG Green Impact Reporting Criteria GIG website. and Equator Principles Reporting

Responsibilities of the Directors The Directors of GIB are responsible for preparing the GIG progress report, including the following Assured Disclosures:

Green Impact Data Estimated lifetime performance for new GIG investments in the reporting period and all GIG investments to date as at financial year end –see p.27-33.

Greenhouse gas emissions reduction (kilotonnes CO2e) Renewable energy generated (GWh) Energy demand reduced (MWh) Materials consumption avoided through materials recycling (tonnes) Waste to landfill avoided (Annual Actual, Lifetime and Average Annual) (tonnes) Equator Principles (see p.33) Total number of Project Finance transactions and Project-Related Corporate Loans that reached financial close within the reporting period, to which the Equator Principles apply (absolute).

Find out more www.greeninvestmentgroup.com/green-impact

34 Green Investment Group Progress Report 2019 Independent assurance report

Responsibilities of the Our procedures consisted Inherent limitations assurance provider primarily of: Since the Estimated Lifetime Our responsibility is to express ● interviewing managers at GIB’s Green Impact Data are based on a conclusion on the Assured offices, including those with assumptions about the future which Disclosures based on our operational responsibility for cannot be predicted with certainty, as procedures. We conducted our the preparation of the Assured with any predictions about the future, Disclosures and application of engagement in accordance with the actual future Green Impact Data Equator Principles; International Standard on Assurance may be more or less than the stated Engagements (ISAE3000 revised) ● evaluating the processes and Estimated Lifetime Data. Assurance Engagements Other controls for managing, measuring, collating and reporting the GIB does not receive project data or than Audits or Reviews of Historical conduct further estimations following Financial Information, issued by the Assured Disclosures, including the application of the methodology GIG’s exit date from an investment. International Auditing and Assurance within the Reporting Criteria to Standards Board, in order to state With respect to disposals, underlying assumptions; and whether anything had come to our GIB processes do not require attention that causes us to believe ● testing a representative sample reconciliation between: the operating that the Assured Data have not of Green Impact Data and assumptions on which Estimated Equator Principles applicable been prepared, in all material Lifetime Green Impact Data is deals, selected on the basis of respects, in accordance with the based; and asset actual or expected their inherent risk and materiality applicable criteria. performance data (if any) stated in to the Green Impact Data. The investment disposal documentation. focus of our testing is the work Our engagement provides limited Consequently we rely on written undertaken by GIB to prepare assurance as defined in ISAE3000 management representations to the Assured Disclosures based (Revised). The evidence gathering confirm that Estimated Lifetime procedures for a limited assurance on information supplied by GIG’s clients, projects or fund managers Green Impact Data with respect to engagement are more limited than for or collected within GIG. We have disposed of investments is based on a reasonable assurance engagement, not carried out any work to verify the best information available to GIB and therefore less assurance is that information, nor have we management at the point of disposal. obtained than in a reasonable conducted site visits. assurance engagement. Independence Our report is made solely to GIB, in We performed the engagement accordance with ISAE 3000. Our work in accordance with Deloitte’s has been undertaken so that we might independence policies, which state to GIB those matters we are cover all of the requirements of required to state in this report and for the International Federation of no other purpose. To the fullest extent Accountants’ Code of Ethics and in permitted by law, we do not accept or some areas are more restrictive. The assume responsibility to anyone other firm applies the International Standard than GIB for our work, this report, or on Quality Control 1 and accordingly for the conclusions we have formed. maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Deloitte LLP London 1 October 2019

Green Investment Group Progress Report 2019 35 Edinburgh office Hong Kong office Atria One, Level 7 Level 18, 144 Morrison Street One International Finance Centre Edinburgh 1 Harbour View Street, EH3 8EX Central UK Hong Kong +44 (0) 330 123 2167 +852 3922 1888 London office Sydney office Ropemaker Place 50 Martin Place 28 Ropemaker Street Sydney London NSW 2000 EC2Y 9HD Australia UK +61 2 8232 3333 +44 (0)203 037 2000 New York office 125 West 55th Street New York NY 10019 USA +1 212 231 1000 www.greeninvestmentgroup.com Green Investment Group @greeninvgroup

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36 Green Investment Group Progress Report 2019