Sustainable Annual Financing Allocation Framework and Impact 2020 Reporting Sustainable Financing Framework 2020

Contents Summary 03

Foreword from Paul Boote 04

Sustainability at the heart of the business 06

Sustainable Financing Framework Reporting 08 Sustainable Financing Framework Key Performance Indicators 08

Impact and Allocation Reporting 10 Sustainable Water and Wastewater Management 11 – Water Treatment works 11 – Wastewater Treatment Works 14 – Upstream / Downstream Thinking 16 – Bathing and shellfish water investment 18

Our purpose Bringing water to life Supporting the lives of people and the places they love for generations to come

Our values

Trusted Responsible Collaborative Progressive

We do the right thing for our We keep our promises to our We forge strong relationships, We are always looking for customers and stakeholders customers, communities and working together to make a new ways to improve and each other positive impact make life better

02 Annual Allocation and Impact Reporting Summary Our business model is designed to deliver sustainable shareholder value by providing high-quality environmental infrastructure and customer services. From 2020 onwards, post the sale of our waste management business, Pennon will be solely focused on delivering excellence in the UK water sector.

2019/20 Sustainable fInance progress September December First Sustainability Term loan Impact Report issued & RCF signed New Green lease signed 2019 2020

To March May November To March March £600m raised 19 New SWW RCF New Sustainable CPI £845m raised First allocation through signed linked to linked loan signed through completed from sustainable bathing water New Loan with sustainable Green Reserve financing quality KPI Sustainable linked financing account framework counterparty framework

Key sustainable outcomes Total low-carbon Bathing water compliance energy generation (‘sufficient quality’ or higher) (including Viridor) 98.7% 1,816GWh 2018: 98.7% (unchanged) 2018/19: 1,617GWh (+12.3%) Leakage Drinking water quality – (megalitres per day) Bournemouth Water 84 99.99% 2018: 84 (unchanged) 2018: 100.00% (-0.01pts) Sustainalytics score Drinking water quality – 75 South West Water 2018: 69 (+6) 99.98% 2018: 99.99% (-0.01pts) Bathing waters (classified as ‘Excellent’) 125 2018: 118 (+7)

pennon-group.co.uk 03 Sustainable Financing Foreword from Paul Boote Framework 2020

“Ensuring sustainability is embedded into our business leaves Pennon well placed to meet future challenges whilst continuing to deliver essential services to customers.” Paul Boote Group Finance Director Pennon Group plc

2019/20 has been a landmark Following the sale of Viridor the Group’s As the Group looks to build on the year for Pennon, culminating focus is now solely on the UK water success of the first year we look to in the announcement in March industry and delivering an outstanding improve and develop our reporting, 2020 of the sale of Viridor. level of service for our customers and the Group including Viridor, generated The transaction recognises communities we serve, while protecting 1,816GWh of low carbon energy in the strategic value that has the environment. 2019/20 primarily related to the power supplied from Viridor’s ERF and landfill been created over many During the year to March 2020 the Group gas fleet which was a significant years. Going forward, Pennon raised £245m of new sustainable finance achievement in the development and will continue to pursue continuing the success of our sustainable transition of the Viridor business. operational excellence and financing framework. We are grateful for Meanwhile it consumed (including growth within the UK water the support for our counterparties in self supply) 734GWh of energy. industry. making sustainable finance available to This meant that overall the Group was the Group meaning a total of £845m of In May 2018, we published an net exporter of low carbon energy sustainable funding has now been raised our Sustainable Financing in 2019/20. In light of the sale of Viridor, since May 2018. Framework (the Framework) the Continuing Group will become a net aligned to the Green Loan This represented c. 30% of our total importer of energy. We will continue to principles (GLP), the Green debt raised in 2019/20 and c. 70% of focus our efforts to both reduce demand Bond Principles (GBP) and the that raised for our subsidiary South as well as opportunities for self supply Social Bond Principles (SBP). West Water Ltd. This builds on our through further investment in on site The Framework set out our success during the first year and is now renewable energy. ambition to raise our finance embedded into our funding process. Carbon reduction has always been under the Framework with Our sustainability strategy has clear a focus to investors and the Group an initial target to secure three-year objectives and targets set for achieved CDP B rating in 2019 (up from 25% of our financing needs in the Group, with detailed action plans for C- in 2018). In 2020 our Sustainability this way. implementing these targets. We have Committee approved a Group Climate made good progress during the year Change & Carbon Management Strategy with these targets and continue to including a proposed Science Based invest and focus our efforts on further Target of 35% carbon reduction (Scopes improvements to our environmental 1 & 2) by 2030. The strategy and target performance. were developed on the basis of the During 2019/20 the Group’s capital Group including Viridor and therefore will investment was c. £340m, of this be reassessed to provide reporting to a c. £160m was relating to the water new target that will be appropriate for the business and supports the early K7 Continuing Group. regulatory investment focused on ODI delivery.

04 Annual Allocation and Impact Reporting Foreword from Paul Boote continued

The water sector has a stated goal of These are: As we look forward the impact of the Net Zero carbon emissions by 20301 and • Measurement of our overall global pandemic has resulted in many we have been working with colleagues Environmental, Social and Governance changes to the way we work, the way we across the sector to develop a Net Zero (ESG) performance as measured travel and the way we interact both with Roadmap for the water industry. This is through an independent rating colleagues and friends and family, it has due for publication in Autumn 2020 and provider seen communities come together to will set out pathways for how the sector meet these challenging times. • Performance against our target to could reach ‘Net Zero’. maintain and improve bathing waters These challenges and changes will We continue to refine our climate risks which is a top priority for customers likely impact the way we live our lives for analysis based on latest UK climate in the South West. years to come. Sustainable businesses modelling to inform the 2021 South West will be best placed to help meet these Water Climate Change Adaptation Plan To help develop our sustainable challenges making our work in this field (our current Adaptation Plan and related approach and strategy we have engaged even more vital. Water Resource / Drought Management DNV GL, a leading provider of risk Plans are available on the South West management and quality assurance, Pennon is focused on Water website). Further details on the who have provided support in key areas, the responsible and Group’s climate change risk management including the independent opinion on and strategy is included within our 2020 the Framework and Impact Reporting, sustainable provision of TCFD disclosure (see Pennon Annual alongside further assurance on projects essential utility services Report) and our 2020 CDP submission. as our allocations increase. and environmental This report provides our allocation and In South West Water, 2020 saw the infrastructure. impact reporting under the Framework, final stages of the AMP6 business plan detailing the finance raised, how this has delivered and the challenges of COVID-19 Innovation, new been utilised and our performance as began to be felt across the world. technologies and a holistic measured through the key performance At Pennon Group, our people – many approach underpin our indicators (KPIs). of whom are designated key workers commitment to delivering We continue to link our sustainable – have been working hard to ensure services to customers and communities service improvement and financing to our sustainability linked long-term value. KPIs and associated targets to meet are maintained despite the challenging the expectations of our customers circumstances. Their health, safety and stakeholders. and wellbeing remains our top priority. We recognise their ongoing efforts More information can be found at during this pandemic and thank them southwestwater.co.uk/environment/ for their service. working-in-the-environment/ climate-change/ Pennon Annual Report annualreport.pennon-group.co.uk

1 Water UK Public Interest Commitment April 2019 https://www.water.org.uk/publication/public-interest-commitment/ pennon-group.co.uk 05 Sustainable Financing Sustainability at the heart of the business Framework 2020 Built around our environmental, social and governance (ESG) framework, our sustainability strategy helps us to focus on the positive impact we can have on the communities we serve, and on the environment that we rely on.

Resource efficiency Community and natural capital investment stewardship and benefit

Healthy places Health, safety and habitats and wellbeing

Environmental Skills, diversity leadership and development

Good governance enabling investment, Quality services and innovation and satisfied customers sustainable growth

Responsible supply chain

It supports the creation of value – financial, social Environmental improvement programmes and environmental – for our shareholders and and contributing activities include: stakeholders. • 100% of Viridor and South West Water’s sites and We have set clear long-term objectives and operations covered by ISO 14001 environmental three-year targets to enable clear monitoring and management system accreditation continuous improvement of our performance in each • Active land stewardship on three special areas of of our nine sustainability focus areas. These cover conservation, two special protection areas and the areas of greatest significance and materiality nine sites of special scientific interest; with nine to our businesses, and range from key global SSSI Water Industry Environment Programme issues of carbon reduction, biodiversity and natural schemes approved by Natural and the capital stewardship, to local community benefits, Environment Agency employee wellbeing and development, and ensuring good governance, quality services and customer • 25 biodiversity enhancement opportunities satisfaction. identified on priority operational sites • Priority habitats restoration and management Our environmental focus areas include: programmes, including blanket bog, purple • Demonstrating leadership – in carbon moorgrass and culm grassland management and climate change adaptation, and • Five-year biodiversity plan launched, focusing on: in regulatory compliance and pollution prevention county wildlife sites; fish passage and protection • Proactively protecting and enhancing healthy measures; natural flood management; river places, habitats and biodiversity in our operational improvements; peatland restoration; and tree areas, especially working in partnership with planting wildlife trusts and other stakeholders • 48,400 trees planted in 2019/20 – strong • Showing leadership in natural capital management contribution to our 100,000 trees commitment and resource productivity.

06 Annual Allocation and Impact Reporting Sustainability at the heart of the business continued

• Building natural capital – South West Water land Our governance focus areas and objectives holdings in and National Parks include: will be prioritised for active management, as well • Engaging with our customers, clients and as 14 sites in areas of outstanding natural beauty stakeholders, aiming to exceed their expectations, (Cornwall, East , Tamar Valley and the supporting vulnerable customers, and ). continuously improving our services Our social focus areas and objectives include: • Enabling sustainable supply chain practice and partnerships including human rights, equal • Net gain in our social capital through positive opportunities and positive social and investment and support for local communities, including sponsorship, supply chain partnerships, • Environmental values and outcomes education services and employee volunteering • Strong and transparent governance and a • Aiming for the highest standards of health, safety sustainable finance framework, enabling and employee wellbeing in our workplaces investment, innovation and sustainable growth. • Achieving a diverse and productive workforce, Good governance improvement programmes reflecting the communities in which we and regional contributing activities include: operate, and developing and upskilling our employees through structured programmes and • Building trust via quarterly WaterShare+ panel opportunities. meetings in public and a customer annual general meeting from 2020 Social capital improvement programmes • Serving a population of 2.2 million and contributing activities include: • c. 5,300 regional jobs supported via our supply • New Deal plan for 2020-25 to ensure 2025 chain, and c. £600 million GVA to Cornwall, Devon customer bills are lower than in 2010, and to and Dorset economies include extra steps to eliminate water poverty • Continued participant in the Back the Great • Ongoing work with Citizens Advice and social South West campaign and its regional growth housing associations to support vulnerable prospectus customers • Ongoing support for the Mayflower 400 initiative, • > 25,500 customers are on a support tariff and including supporting local social enterprises and > 35,000 customers have benefited from one of promoting , Britain’s Ocean City. our other support schemes • Ongoing Love Your Loo, Think Sink and water A clear, strategic and long- efficiency campaigns to prevent blockages term approach to sustainability and promote good practice, including c. 1,300 enhances our business subsidised or free water butts distributed performance, strengthens our • Supporting Refill Southwest: providing hydration stations at public events, permanent resilience, protects our ongoing community Refill points and distributing reusable licence to operate via regulatory water bottles. compliance and is an integral element of our risk management processes.

pennon-group.co.uk 07 Sustainable Financing Sustainable Financing Framework Reporting Framework 2020 The Group has raised £845m of finance through the sustainable finance framework and the Group continues to find a range of products to meet our sustainable financing goals.

Funding Drawn / Amount Sustainable type Undrawn metric

PLC term loan Drawn £210m SLC PLC term loan Drawn £175m ESG Score / KPI PLC term loan Undrawn £50m SLC PLC RCF Undrawn £55m ESG Score / KPI SWW leasing Drawn / Undrawn £90m Eligible Green Assets SWW loan Drawn £50m Eligible Green Assets SWW loan Drawn / Undrawn £70m / £70m SLC SWW RCF Undrawn £75m Bathing Water Quality

Total £845m

The Framework has allowed the Group to access This has led to the Group entering into £845 million a variety of instruments which are classified under of Sustainable financing to March 2020. This three headings: represented c. 30% of our total debt raised in 2019/20 and c. 70% of that raised for our subsidiary 1. Term loans from sustainability-linked South West Water Ltd. counterparties (SLC), where the allocation and due diligence is completed by the counterparty As the products are developing, the Group is looking before funding is approved. to explore all opportunities whether this is new funding or sustainable deposits. 2. Green Financing, where the funding is allocated to eligible green projects under the appropriate The development of sustainable and socially guiding principles. responsible deposits has enabled us to start looking 3. Sustainability-linked loans and revolving credit into making more informed decisions with regards to facilities (RCFs) linked to specific company how we deposit our cash. This is an area that will be agreed KPIs. focused on more post-March 2020.

Sustainable Financing Framework KPIs

Sustainalytics ESG Score KPI The Environmental and Social areas Sustainalytics score of the ESG report have seen positive 75 movements, highlighting some of the areas we have been working on but also 72 We are pleased to see the sustainalytics identifying areas of the business where 69 score improve to our highest rating we need to review our activities and following our disappointment with reporting. 64 the small downturn in 2018. We 61 were confident in our sustainability The Governance score has remained programme during 2019 and the increase broadly in line with last year showing our 2015 2016 2017 2018 2019 in the score reflects the hard work from strong board position which would be all areas of the business in supporting expected from a publicly listed company. the sustainability focus of the Group. We are pleased that both Pennon Water Services and Viridor have achieved the latest ISO45001 accreditation.

08 Annual Allocation and Impact Reporting Sustainable Financing Framework Reporting continued

Sustainable Financing Framework KPIs

Bathing waters KPI From the £2 billion investment in ‘Clean measurements taken over a period of up Our Sustainability-linked RCFs and loans Sweep’ during the early 1990s to the to four years. have been aligned to improvements award-winning Upstream Thinking Bathing waters classified as ‘Excellent’ in our ESG score or to independent programme developed in the early company-specific targets such as our 2000s, South West Water’s investment has seen a steady improvement in the Bathing Water Quality. We are pleased to 125 report another successful year with an number of our bathing waters classified 118 increase in 2019 to 125 bathing waters as ‘excellent’ and an overall improvement 116 in bathing water quality across the being classified as excellent 108 region. Bathing Waters are of significant 102 importance to our customers and Independent monitoring of bathing to the local economy, given the waters is conducted by the Environment 2015 2016 2017 2018 2019 importance of tourism in the region. Agency on a weekly basis from May It is therefore important for South West to September each year, with each Water to commit to protecting bathing location classified as either excellent, water quality. good, sufficient or poor based on

The Framework Pennon Group developed a Sustainable Whilst focusing on the environmental Sustainable water and wastewater Financing Framework in 2018, known impacts of the Group’s actions, we management – including sustainable henceforth as, “the Framework”, in understand the many and often infrastructure for clean and/or drinking alignment with the ICMA Green Bond significant social benefits of various water, wastewater treatment, sustainable Principles (GBP)1, Social Bond Principles projects. Aligned with the published urban draining systems and river training (SBP)2 and the LMA Green Loan Sustainability Bond Guidelines 2017 and other forms of flooding mitigation. Principles (GLP)3. Under the Framework, the Group, where possible, will look Climate change adaptation – including Pennon Group has issued sustainable to demonstrate positive outcomes in information support systems, such as finance to support investment across the all areas. climate observation and early warning Group’s activities. Pennon Group’s activities are expected systems. Investments made by Pennon are to focus on, but not be limited to, the This Allocation and Impact reporting for targeted at improving a broad spectrum following categories from the GBP 2020 set out our progress throughout of outcomes. This Framework supports and GLP. the year and provides an update on our the financing of our water, wastewater Pollution prevention and control performance up to March 2020. and waste management investments – including waste water treatment, across the Group resulting in activities reduction of air emissions, greenhouse that demonstrate our environmentally gas control, soil remediation, waste and socially sustainable outcomes. prevention, waste reduction, waste recycling and energy/ emission-efficient waste to energy, value added products from waste and remanufacturing, and associated environmental monitoring.

1 Green Bond Principles (ICMA): https://www.icmagroup.org/green-social-and-sustainability-bonds 2 Social Bond Principles (ICMA): https://www.icmagroup.org/green-social-and-sustainability-bonds 3 Green Loan Principles: http://www.lma.eu.com/news-publications/press-releases?id=146 pennon-group.co.uk 09 Sustainable Financing Impact and Allocation Reporting Framework 2020

The Framework sets out our commitment to annual reporting which provides investors and counterparties with information on the selected projects including, once projects are operational, data such as actual energy saved or improvements in water quality. Quantification of additional environmental and sustainable benefits of the selected projects will also be provided where possible. We are in the early stages of allocating the funds to specific areas of the business and are now seeing the benefits of this investment and how this can be quantified. The funds have been allocated to the following categories and these have been detailed in the following areas: • Water Treatment works, including Mayflower Water Treatment Works • Wastewater Treatment Works • Upstream Thinking / Downstream Thinking • Bathing and shellfish water investment.

A total of £140.0m was released from the Green reserve account for South West Water in the year to March 2020, this included £60m for the Mayflower Water Treatment Works and the remaining funds allocated to the areas above. This was the first allocation of funds to South West Water projects and all projects were linked to the Green Loan Principles categories as detailed under the Framework.

10 Annual Allocation and Impact Reporting Impact and Allocation Reporting continued

Sustainable Water Water Treatment Works and Wastewater Management

Total allocation Our compliance with water quality standards are reported each year with our target to achieve greater than 99.98% we remain currently at 99.98%. £74.75million One of the forms of investment is the use of Granular Activated Carbon (GAC) including £60m for processes. These were delivered in AMP6 and we are providing water quality benefits the Mayflower Water by reducing the risk of pesticides, taste, smell and disinfection by-products. Treatment Works. Improving further the quality of water supplies has continued during the 2015-20 with South West Water investing around £20m in new GAC processes at treatment Water Treatment Works sites across the region. We have completed schemes at Tamar and Northcombe Water Treatment Works (WTW) serving areas of North Cornwall and upgrades and repairs and during 2018/19 at Tottiford WTW, which supplies areas in South Devon and was will help to improve and commissioned during 2018/19. This builds on previous similar investments at water maintain the quality of treatment works across our operating areas over the last 15 years: Drift and Wendron WTWs (West Cornwall), Restormel WTW (Mid Cornwall), Allers WTW (Tiverton) and water in our network. Pynes WTW (). In Bournemouth Water, GAC schemes are also being delivered at Alderney WTW and Knapp Mill WTW. There is significant investment in the Bournemouth area as we are replacing the old slow sand filtration processes with ceramic microfiltration and GAC, similar to Mayflower WTW which has recently been commissioned in the Plymouth area. GAC technology brings multiple benefits for water supplies. It is a specially engineered porous material with a large internal surface area – just one teaspoon has the same surface area as a football pitch. Due to its large surface area and special surface chemistry, it can remove natural and man-made organic matter sometimes presenting in our water resources such as residual agri-chemicals and the natural precursors of taste and smell in supplies. The activated carbon material is used in granular form in filter beds through which water is passed to remove trace impurities during the water purification process. Our GAC schemes are designed to complement existing treatment technologies and are often installed alongside other modern treatment technologies such as Ultraviolet (UV) disinfection. UV disinfection uses UV light to destroy harmful bacteria and viruses sometimes found in untreated waters. Completion of all of the GAC schemes described here will mean that the majority of our customers (approximately 75%) will benefit from the additional protection provided from GAC technology.

Photo Trenchford reservoir, Devon pennon-group.co.uk 11 Sustainable Impact and Allocation Reporting Financing continued Framework 2020

Sustainable Water and Wastewater Management Water Treatment works continued

Mayflower Water Treatment Works – 2020 update Mayflower went into supply continuously The new system was tested rigorously iSCADA has also provided an increased on 3rd August 2020 and we are in in this important process and has monitoring for demands. From this, the process of steadily increasing the provided useful lessons that will be Mayflower can either increase or output flow, which is blending with utilised when completing new facilities decrease flows. This has lead to Crownhill WTW to ensure a gradual in our Bournemouth area over the next the construction of a new pumping transition for our consumers – this AMP period. station, Lopwell pumping station will take at least three months. During was constructed to supply water to The monitoring and remote connectivity September 2020, approximately 30% of Mayflower WTW, the purpose of this mean the plant can be shutdown and Plymouth’s drinking water supply was was to reinstate the as a restarted in around 30 minutes, which is from Mayflower WTW. The treatment raw water source, to supplement the more efficient than other more traditional has been stable since going into supply existing Burrator Reservoir and River water treatment processes and will mean and we are continuing to optimise the Tamar raw water sources. The Plymouth disruption to supply can be minimised. treatment process during this time. area for a long time has seen low The facility was consistently providing natural water resources and the need During the commissioning stage the 10Ml/d capacity during commissioning to distribute water around the area to facility was the first plant to feature and is now recording an average daily meet demand. Mayflower is meeting the a new iSCADA platform, this uses output of 20Ml/d to be blended with targets set for the new facility and the over 3000 data inputs from the plant, the Crownhill WTW supply. Mayflower new pumping station will combine water SCADA (Supervisory Control and Data is designed to treat up to 90Ml/d, once resources in the area to continue to meet Acquisition) technology provides the the blending is completed over the next increased demand. This will help meet means to monitor and control distributed few months, Mayflowers treatment is a number of regulatory, customer and system from a central location, however expected to reach 55Ml/d showing the operational risks. Mayflower have integrated a new significant future proofing capacity technology, iSCADA which allows the factored in and the ability to increase and plant to be monitored and managed decrease flow quickly will mean efficient remotely in the field. It effectively creates water treatment in line with forecasted a 3D view of the plants operation, requirements in the future without monitoring flows both in and out which further investment, this has seen a can be adjusted to ensure that demand reduction in the amount of water needing is met efficiently and any changes to be stored making the process more can be made in a timely manner to effective. reduce wastage. The integration of iSCADA has been a Challenges during commissioning to huge success at Mayflower, the ability ensure all the relevant data was available of being able to access SCADA remotely meant additional time was required to has providing many benefits: ensure as much data as possible was • Decreased number of operators being provided to create new ways of required on site working at this “state of the art” facility. • Decreased number of vehicles movements Find out more at southwestwater.co.uk/mayflower • Decreased downtime.

12 Annual Allocation and Impact Reporting Impact and Allocation Reporting continued

pennon-group.co.uk 13 Sustainable Impact and Allocation Reporting Financing continued Framework 2020

Sustainable Water Wastewater Treatment Investment and Wastewater Management

Total allocation We report performance annually for In AMP7 there are also 13 wastewater percentage compliance with each of treatment works with schemes identified £49.3million these categories of permit as well as to increase flow to treatment, so reducing percentage compliance with permit on intermittent spills to the environment. South West Water’s a population equivalent basis. There is also a requirement to build increased storm storage at 59 sites, wastewater treatment South West Water has invested which will also reduce intermittent works consented significantly in wastewater treatment, spills to the environment. This will both in the network and improving the discharges are governed require significant investment and see quality of the water being released back improvements to our wastewater system. by either ‘numeric’ or in to our rivers and other waterways. ‘descriptive’ permits. With regard to UV disinfection, we have a Some of these improvements involve continual programme of refurbishment to Numeric consents the use of additional processes which maintain compliance, rather than improve place measurable remove more ammonia and phosphates compliance. That said we do in AMP7 from the water which can be harmful to numeric conditions have a programme of work to completely the environment. on the final effluent, replace the UV system at Plymouth whereas descriptive Capital maintenance refurbishment of Central as the plant is coming to the end some of our sites will help maintain and of its useful life. permits may impose improve our permit compliance. narrative conditions During AMP6 we installed 15 Phosphorus upon equipment used reduction schemes costing c. £12.5m and and / or impacts upon the two ammonia reduction schemes costing environment which must £3.7m. be prevented. For AMP7 we will be installing 30 Phosphorus reduction schemes with a current investment planned of c. £29.9m. We are also carrying out a full scale trial of an innovative new method for reducing phosphorus using algae at one site, which if successful could lead to new chemical free processes being installed late in AMP7 or AMP8. For ammonia removal we have eight schemes in AMP7 with a total investment of c. £8,6 of which will require biological process enhancements and two that relate to increased storage of storm sewage to reduce ammonia loadings on the receiving watercourses.

Photo Menagwins wastewater treatment works, 14 Annual Allocation and Impact Reporting St Austell, Cornwall Impact and Allocation Reporting continued

pennon-group.co.uk 15 Sustainable Impact and Allocation Reporting Financing continued Framework 2020

Sustainable Water Upstream Thinking and and Wastewater Downstream Thinking Investment Management

Total allocation There are two main strands of work for The long-term benefits of Upstream Upstream Thinking: Thinking include: £3.7million 1. Working with the agricultural • Reducing the resources (i.e. chemicals) Upstream Thinking is community to promote and support needed to intensively treat water reducing diffuse pollution environmentally safe farming • Increasing biodiversity Restoring wetlands and peat bogs. and agricultural run-off 2. • Reducing energy use for water Downstream Thinking is a catchment- treatment into the region’s rivers, based approach to alleviating sewer • Potentially delaying the need to estuaries, bathing waters flooding from our wastewater networks upgrade water treatment works and reservoirs. helping to accommodate more house • Less contaminated water reaching our building and reducing pollution of bathing and shellfish waters watercourses. • Increased catchment storage in We have invested over £20m in building wetlands and mires adds to the the resilience of the drinking water baseflow of river water supplies supply in these catchments through • Flood risk mitigation through peak flow Upstream Thinking, and this has been reductions more than doubled by partnership match • Protection of groundwater supplies, funding. reservoirs and other water supply Over the last five years, we have engaged assets. with farmers managing over 70,000 • Total reductions of nutrients like hectares, delivered over 864 farm plans phosphorous and Nitrates entering our and follow-up grants worth £1.72m, and rivers and estuaries restored 1,059 ha of peatland on Exmoor, • Carbon capture and storage. Dartmoor and Bodmin moors. Working in partnership with other There have been some great successes agencies and the community, over the upstream thinking programme Downstream Thinking incorporates a showing collaborative working with range of activities including retrofitting partners and the community to meet the Sustainable Drainage Systems (SuDS), combine objectives of these groups. Natural Flood Management (NFM), The following points offer a concise targeting sewer misconnections, and summary of the accomplishments during tackling sewer misuse. AMP6: • All UST2 projects completed and ODIs exceeded • 5,713 acres of restored or created habitat (46% above ODI target of 3,213 acres) • 864 Farm Water and Environment Plans created (23% above ODI target of 700).

16 Annual Allocation and Impact Reporting Impact and Allocation Reporting continued

Upstream Thinking Case Study: Rights of Way Repairs The Rights of Way repairs program launched at the beginning of UST2 in 2015, the Headwaters of the Exe catchment management programme focused on improving water quality and other ecosystem services in the upper part of the catchment, most of which lies within Exmoor National Park.

Cumulative starting position on AMP7 The Upper Exe catchment primarily comprises farmland and moorland areas, with ODI of 73,150 ha of active catchment woodlands along many of the watercourses. The main uses for land within the management within the farm plan areas catchment are upland farming, forestry and game shoots. Recreation and access (15% above the Ofwat target of 63,209 are also very important in this catchment. ha). This was made possible as South In wider terms, the project has also West Water achieved fast track status Benefits proved advantageous to the local from Ofwat for our 2020-2025 Business This exercise was used to target community in terms of recreation and Plan, allowing us to get a headstart on restoration works to paths with the tourism, and creating volunteering our plans. highest risk of erosion and pollutant run-off – usually those which run opportunities. In addition to grant distribution, steeply downhill towards watercourses workshop organisation and event hosting or those which run in close proximity Results by the UST Delivery Partners throughout and parallel to watercourses, with Working closely with local contractors AMP6, the work that contributed to the potential to wash sediments and other and Westcountry Rivers Limited, ODI achievements over the last five years pollutants into rivers during times of ENPA met and exceeded their initial has included: flood. As well as achieving its primary target, successfully restoring 6km • 2,721 acres of mire restoration on aims of improving water quality and of continuous path, with overall Exmoor, Dartmoor and Bodmin moor, supply, the programme also delivered improvements to rights of way supported by a £2m grant from Defra numerous other benefits which dovetail extending over 17km. • 1,114 acres of culm restoration by neatly with the outcomes of South The nature of the land within the Devon Wildlife Trust West Water’s long-term business catchment meant that, on several other plan, including resource protection • 1,878 acres of other habitat managed, occasions, additional assistance was and wider ecosystem services. The restored or created for biodiversity and sought. In 2018, ENPA teamed up with programme helped to build resilience water outcomes the Commando Helicopter Force to to extreme conditions and climate move 60 tonnes of local stone needed • 246 farm improvement grants to change, particularly through addressing for repair work along the Two Moors farmers – worth £1.72m and doubled by increased run-off and associated diffuse Way near their own match-funding contributions pollution arising from compaction and • 24,461 trees planted; South West damage to tracks and rights of way. Water’s first contribution towards the Before & after – Water UK commitment to plant 11 footpath million trees nationally. restoration: near Simonsbath

Before & after – section of path adjacent to the River Barle More information can be found at southwestwater.co.uk/environment/ upstream-thinking/

pennon-group.co.uk 17 Sustainable Impact and Allocation Reporting Financing continued Framework 2020

Sustainable Water Bathing and Shellfish and Wastewater Water Investment Management

Total allocation South West Water has invested around The outcomes lead to a mixture of £78million to improve shellfish water sustainable natural solutions and larger £17.4million quality since 2000 across the region. capital investment projects which have included UV disinfection installations, Customers in our region continue to There are 137 designated additional storm water storage and place a high priority on protecting sewage treatment upgrades. shellfish waters in the environment from flooding and England, 24 of which are reducing storm overflow discharges from The business has made a performance in South West Water’s our wastewater treatment works and commitment to improve the company sewerage network which may impact on Environmental Performance Assessment region. The Environment rivers, shellfish and bathing waters. (EPA) score from 2* to 3* by the end of Agency estimates that AMP6 and to achieve 4* status by the Again, a basket of measures are required end of AMP7. industry associated with to ensure these expectations are realised shellfish production in from protection of our treatment facilities In AMP6 the new Bathing Water quality the south west is worth through to the management of our standard required the company to meet wastewater network and catchment at least ‘Sufficient’ standard under the £5.35million a year. based initiatives designed to alleviate revised bathing water directive (rBWD) sewer flooding and protect the which is approximately twice as stringent environment. as the Mandatory pass standard under the previous BWD. We have worked hard The aim of our Shellfish Waters to challenge the specific requirements programme is to meet legislative with the Environment Agency to ensure requirements to protect or improve that the investment requirement is designated shellfish waters (SFW) in well evidenced and that where there is order to support shellfish life and growth, uncertainty, investigations are carried contributing to the quality of shellfish out first. products produced in commercial shell fisheries. The AMP6 investment will support the outcomes of the investment plan This investment will help us deliver our in ‘Benefiting the Community’ and commitment for reducing storm overflow ‘Protecting the Environment’. Outputs discharges and in doing so, support our include: regional community and economy. • Reduced overflow discharges The 2010 Shellfish Waters Directive frequencies /volumes through storm placed a new obligation on SWW to water storage or surface water ‘endeavour to meet’ the Shellfish Waters separation Regulations ‘Guideline’ Standard. • UV disinfection of wastewater effluent The company has an ongoing • Event / Duration monitoring of overflow programme of investigations that look to discharges feed into the planning and delivery of our AMP7 and future considerations. • Water quality investigations to inform future investment.

18 Annual Allocation and Impact Reporting Our 2020 target to achieve 100% compliance with the rBWD at bathing waters that can be impacted by the operation of our assets was met. There was £42m included at PR14 in the Business Plan for Plymouth Bathing Waters, which was accepted by Ofwat and this project has now been completed, it has allowed significant upgrades to its wastewater infrastructure across Plymouth to further improve water quality in the Plymouth Sound and protect bathing water quality at Plymouth Hoe East and West beaches, both of which have been rated ‘Excellent’ every year since the tougher new standards were introduced in 2015. The capital investment included improving key storm overflows across the city, removing surface water from the sewerage network in Cattedown and increasing stormwater storage capacity in Stonehouse. Ultraviolet disinfection technology has also been installed on the storm overflow at Plymouth Central Wastewater Treatment Works. This is the largest UV treatment plant of its type for intermittent storm overflow discharges in the UK. As noted earlier in the report, bathing water quality is a key objective of the company and has seen improvements in the number of excellent classified bathing waters in the last three years. This helps to support the local economy and the tourism industry in the South West.

pennon-group.co.uk 19 Sustainable For further information, visit Financing pennon-group.co.uk Framework Twitter @PennonGroup 2020

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