Sustainable, Responsible &/or ESG Policy:

The Global Listed Infrastructure (GLI) team considers the ESG risks and opportunities at each stage of our investment process and works closely with our dedicated MAM Sustainability Team. This team provides resources such as external and internal ESG research and measurement tools, training, and guidance in the implementation of ESG practices. We expect the SGLI strategy to positively contribute to the objectives outlined above.

The Sustainable GLI universe is a subset of Macquarie’s Global Listed Infrastructure universe by virtue of its ESG screen, which generally requires a minimum ESG rating (by MSCI) of BBB, which we term an “investment grade” ESG rating.

We broadly agree with the methodology which MSCI adopts, an approach of seeking to answer two key considerations:

• What are the most significant ESG risks and opportunities facing a company and its industry?
• How are these issues being addressed by management?

We invest in companies that own and/or operate long life infrastructure assets. We expect and require these assets to provide relatively predictable cash flows over many years. It is thus important for us to be confident that the business structure and modus operandi today is appropriate and sustainable.

We critically evaluate the rating applied by MSCI and in certain instances make adjustments to the ESG screen. In certain instances, MSCI may make an assessment which we believe is correctly derived according to MSCI’s framework but is of limited significance in a broader investment context. In an extremely limited number of instances we have made an exception to the cut-off at BBB due to what we believe is an outcome of MSCI’s relative ranking process, in for example an industry with a very limited number of companies. Beyond this initial screen, our research process embeds the assessment of ESG risks alongside other risks to an investment thesis.

We believe that infrastructure assets may be subject to heightened ESG risks due to their very nature – providing services to many customers on a repeated basis places infrastructure companies in a position of significant social interaction. Furthermore, certain infrastructure sectors, especially power generation by utilities, has historically resulted in significant carbon emissions.

The investment process utilises a scoring system to assess compliance with the sustainable investment objective, identifying which of the following are met:

• commitment to a carbon reduction target, such as a net zero target, with low or declining expected carbon emissions;
• growth in assets that contribute to systemic decarbonisation e.g. electricity network or zero carbon gas capital expenditure;
• investment to increase infrastructure resilience, or protect natural capital;
• equality of access to essential services through investment or low income support;
• commitment to two or more identified SDGs.

The Investment Manager uses the following sustainability indicators to measure attainment of the Sustainable Investment Objective:
 

• Sustainable Development Goals: gender equality (SDG 5), clean water and sanitation (SDG 6), affordable and clean energy goal (SDG 7), decent work and economic growth (SDG 8), industry, innovation and infrastructure (SDG 9), sustainable cities and communities (SDG 11), responsible consumption and production (SDG 12), and climate action (SDG 13), (each of the listed goals, the SDGs).
• Sector specific metrics, for example, installed generation capacity (MW), renewable energy generated (GWh), energy consumption, Scope 1 and 2 greenhouse gas emissions, energy intensity (CO2/Revenue) etc. Metrics used will depend on the nature of the investment.

At least 90% of the Fund's investments will be Sustainable Investments, with at least 50% thereof contributing to the environmental objectives of climate change mitigation or climate change adaptation.

The Sustainable Investment Objective of the Fund will be monitored as follows:

• the exclusion screens are monitored by the investment risk team and reviewed at least quarterly;
• the investment team undertakes ongoing portfolio monitoring, which includes engagement with investee companies, measuring sustainability indicators and staying abreast of emerging developments within relevant sectors;
• the principal adverse impact indicators are reviewed on a quarterly basis by the investment team and the sustainability team;
• the Sustainable Investments are monitored quarterly to ensure they do no significant harm to environmental or social objectives; and
• governance practices of investee companies are reviewed at least quarterly by the investment team and the sustainability team.

The Investment Manager uses various data sources, both primary, and secondary, to ensure the attainment of the Sustainable Investment Objective of the Fund. There are limitations which exist with respect to data and methodologies, for example, data availability and comparability, and differing methodologies across different jurisdictions. However, the Investment Manager takes steps to reduce the impact of such limitations and they are not expected to significantly impact the Fund’s ability to achieve its Sustainable Investment Objective.

Any engagement by the Investment Manager with investee companies is exercised in accordance with the MAM’s Global Engagement Policy, whereby the Investment Manager’s investment team holds periodic meetings with investee companies to discuss environmental and social issues, among other topics.

Process:

The Investment Manager's strategy to attain the Sustainable Investment Objective incorporates both screening and fundamental analysis:

• Exclusion screening
• Environmental, social and governance (ESG) integrated fundamental analysis

Post investment, the Investment Manager actively manages the investments in the Fund including through its approach to stewardship, which comprises engagement and proxy voting, and ensuring alignment with MAM’s net zero commitments and the good governance requirements of the SFDR.

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Exclusion screen

First, the Investment Manager will apply an exclusion screen comprising qualitative and quantitative elements to ensure the Fund does not invest in companies that are involved in the construction of new coal or new nuclear power generation.In addition, the Investment Manager applies an exclusion screen to exclude the following types of company, on the basis that they may harm environmental and/or social objectives:

• companies with turnover of more than 10% from the production and/or distribution of military hardware;
• companies involved in the production and/or distribution of anti-personal mines, cluster munitions, nuclear weapons, chemical weapons and biological weapons (being any company where publicly available information clearly demonstrates that such company is actively and knowingly involved in the production and/or distribution of such weapons);
• companies with turnover of more than 5% from the production of tobacco; and
• companies with turnover of more than 30% from the production and/or distribution of coal.

The Investment Manager applies its proprietary infrastructure universe identification process which results in the investment universe for the Fund. To conduct this analysis, portfolio managers and analysts review the listed infrastructure opportunity set seeking pure infrastructure characteristics such as high barriers to entry, essential service provision, and stable and predictable cash flows from regulation or contracts. They use a variety of data sources, including corporate data as well as information from data providers such as Bloomberg or MSCI.

The Sustainable GLI universe is a subset of Macquarie’s Global Listed Infrastructure universe by virtue of its ESG screen, which generally requires a minimum ESG rating (by MSCI) of BBB, which we term an “investment grade” ESG rating.

We critically evaluate the rating applied by MSCI and in certain instances make adjustments to the ESG screen. In certain instances, MSCI may make an assessment which we believe is correctly derived according to MSCI’s framework but is of limited significance in a broader investment context. In an extremely limited number of instances we have made an exception to the cut-off at BBB due to what we believe is an outcome of MSCI’s relative ranking process, in for example an industry with a very limited number of companies. Beyond this initial screen, our research process embeds the assessment of ESG risks alongside other risks to an investment thesis.

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Fundamental analysis

The Investment Manager will then apply fundamental analysis on all of the issuers in the Fund’s portfolio, including consideration of ESG risks and opportunities, into the overall evaluation of all remaining companies in the investment universe.

Sustainability assessment

The investment process utilises a scoring system to assess compliance with the Sustainable Investment Objective, identifying which of the following are met:

• Commitment to a carbon reduction target, such as a net zero target, with low or declining expected carbon emissions
• Growth in assets that contribute to systemic decarbonisation e.g., electricity network or zero carbon gas capital expenditure
• Investment to increase infrastructure resilience, or protect natural capital
• Equality of access to essential services through investment or low-income support

Companies which satisfy at least one of the above criteria are eligible for investment by the Fund.

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Discounted cash flow model

The financial impacts of the sustainability assessment are reflected in a fundamental assessment of value based on at least 10 years of cash flow forecasts utilising a capital asset pricing model approach for discount rate selection. Both cash flows and/or the risk-adjusted discount rate may be impacted by the outcome of the sustainability assessment, for example increased capital expenditure forecasts from network investment (impacting cashflows) or expanded low-income access to infrastructure services (reducing political risk and hence cost of capital) may impact the discount rate used in the model.

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Qualitative assessment

An assessment of the company's qualitative fundamentals focusing on the below factors culminates in a written investment thesis that summarises the key investment criteria. By comparing the financial and qualitative aspects of each investment thesis to others within the screened investment universe, a ranking of the opportunity set which meets the sustainability objective is achieved providing the basis for portfolio construction.

Key factors assessed:

• the quality of the assets;
• the quality of the company's management;
• the nature of regulation and contracts, for example whether there is a framework for economic regulation that is stable and robust and whether the company has long term contracts with a supportive legal framework for enforcement;
• the company's balance sheet; andsovereign risks, for example the financial stability of the country, political risks, and the regulatory and tax environment within which the company operates.

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Net Zero commitment

In December 2020, we announced our commitment to invest and manage MAM’s portfolio in line with global net zero emissions by 2040.

MAM’s assets under management (AUM) that are currently committed to be managed in line with Net Zero Asset Managers (NZAM) approved methodologies include 100% of our unlisted infrastructure and agriculture portfolio, more than 80% of our unlisted real estate portfolio, and certain listed equity and corporate bond portfolios. For those assets which do not currently form part of the committed assets under management, consisting primarily of managed portfolios of public securities and alternative investments where MAM does not have significant influence, we intend to support the goals of the Paris Agreement in a manner consistent with our client-guided fiduciary and regulatory responsibilities. Further detail on MAM’s net zero commitment can be founds on our website and the NZAM website.

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Stewardship approach

Engaging with the management of the portfolio companies in which the Fund invests is a core part of the Investment Manager’s stewardship practices and a key component of the Fund’s investment strategy. The Investment Manager uses engagement as a way of attaining the Sustainable Investment Objective of the Fund and enhancing the performance of the portfolio companies’ contribution to the objectives. If any data indicates potential harm to the Sustainable Investment Objective by a portfolio company, and depending on the circumstances, the Investment Manager may choose to engage with the company in question. Alternative options could also be to divest, reduce holdings, or perform additional research.

A key element of the effective stewardship of public companies is the investor’s right to vote on company and shareholder resolutions (often through a proxy). The Investment Manager exercises proxy voting rights in accordance with its Proxy Voting Policy and Procedures, which ensure that proxy votes are exercised in the best interests of the Fund and with the goal of maximising the value of the Fund’s investments. Where possible, the Investment Manager will exercise proxy votes in alignment with the Sustainable Investment Objective of the Fund.

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Good governance policy

The Investment Manager has a policy for assessing the governance practices of potential and actual investee companies, including whether they have sound management structures, employee relations, remuneration of staff and tax compliance. Due diligence is performed as part of the pre-investment fundamental analysis, to ensure investments meet the good governance requirements at the time of investment. On a quarterly basis, the Investment Manager, in conjunction with its sustainability team, reviews the governance practices of investee companies. This is achieved by pulling reports on governance data from third party vendors which are then reviewed and assessed by the Investment Manager and the sustainability team, with any remediation or escalation actions agreed.

Resources, Affiliations & Corporate Strategies:

Below is a summary of the standards, initiatives, and frameworks of which the firm participates.

• Principles for Responsible Investment (PRI): MAM has been a signatory to the UN Principles for Responsible Investment since 2015. As signatories to the PRI, we utilize the principles as a source of possible actions for incorporating ESG issues into our investment practices.
  • *August 6, 2015 if exact date is required. https://www.unpri.org/signatory-directory/macquarie-asset-management/1448.article
• CDP (formerly Carbon Disclosure Project): Macquarie Group Limited (“Macquarie”), the holding company of MAM, has been a signatory to CDP since 2008 and communicates publicly about climate change via the CDP’s website.
• Global Reporting Initiative (GRI): Macquarie also reports annually on its approach to ESG — and how it affects investments and financial products — in its Annual Financial Report. The ESG disclosures in Macquarie's Annual Financial Report have been prepared in accordance with the GRI Standards."*Since March 31, 2011 if exact date is required.
• Task Force on Climate-related Financial Disclosures (TCFD): Macquarie has been supporting the important work of the TCFD since 2018, becoming a formal supporter in 2019, and has been actively implementing the TCFD recommendations. We have been reporting on progress annually since the release of Macquarie's first TCFD implementation progress and scenario analysis report in May 2019. The latest update is available in Macquarie's Net Zero and Climate Risk Report. Further, since 2020, PRI signatories, of which MAM has been one since 2015, have been required to report to the PRI on several indicators regarding their management of risks and opportunities related to climate change. These indicators are modelled on the disclosure framework of the Financial Stability Board’s Task Force on Climate-related Disclosures (TCFD).
  • *May 3, 2019 if exact date is required.
• IFRS Sustainability Alliance: MAM public markets was an original member of the Sustainability Accounting Standards Board (SASB) Alliance, now the IFRS Sustainability Alliance, having been a signatory since 2017. Members share the belief in the benefits of a coherent and comprehensive system for corporate disclosure and a more integrated approach to the way organisations, plan and disclose their approach to value creation. Furthermore, Macquarie's FY2024 ESG Report has been prepared with reference to the guidance of select SASB Standards
  • *May 18, 2017 is the date of the release of the founding of the SASB Alliance, if exact date is required.
• Climate Action 100+ (CA100+): MAM became a member of Climate Action 100+ in July 2020. As a member of Climate Action 100+, we have an obligation to collaboratively engage with companies that emit a high level of greenhouse gas emissions or have significant opportunities to drive the clean energy transition and achieve the goals of the Paris Agreement.
  • *July 8, 2020 if exact date is required.
• Transition Pathway Initiative (TPI): MAM has been a supporter of TPI since 2020, which is an asset-owner led initiative that assesses companies’ preparedness for the transition to a low carbon economy.
  • *August 10, 2020 if exact date is required.
• Net Zero Asset Managers initiative (NZAMi): MAM joined the NZAMi in March 2021. NZAMi is an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C; and to supporting investing aligned with net zero emissions by 2050 or sooner.
  • *March 29, 2021 if exact date is required.
• World Benchmarking Alliance (WBA): MAM joined the WBA in April 2021, a collective of organizations working at global, regional, and local levels to shape the private sector's contributions to achieving the SDGs. As an Ally, MAM is committed to WBA's mission, vision, and values, and believes in the power of benchmarks and cross-sector partnerships to drive systematic progress on the UN SDG's. Since joining, we have been actively involved in two collaborative engagements: sustainable supply chains in food and agriculture, and digital inclusion/ethical AI.
  • *April 12, 2021 if exact date is required.
• Global Impact Investing Network: As of February 2022, MAM is an active member of the Global Impact Investing Network. In addition to providing members with more details on their public catalogue of IRIS+ metrics (including ability to have input as new metrics are developed), they offer a community of best practices. This includes new regulations and standards like SFDR, impact frameworks and what others in the industry are doing in managing and communicating their positive impact and networking events.
• UK Stewardship Code: The ValueInvest Global Equity Team, which is a part of MAM, has been a signatory to the UK Stewardship Code since April 2015*. MAM as a whole has been a signatory to the UK Stewardship Code since September 2022*. As a signatory, we submit an annual report to the Financial Reporting Council (FRC) covering how we apply the 12 Principles of the Code.
  • *April 8, 2015 and September 7, 2022 If exact dates are needed.
• Institutional Investors Group on Climate Change (IIGCC): MAM has been a member of the IIGCC since 2020. The mission is to support and enable the investment community in driving significant and real progress by 2030 towards a net zero and resilient future. This will be achieved through capital allocation decisions, stewardship and successful engagement with companies, policy makers and fellow investors. MAM is also a member of the Investor Group on Climate Change (IGCC) since June 2023, a collection of Australian and New Zealand investors, which supports IIGCC.
• GRESB: MAM has been a member of GRESB since 2016. GRESB is a mission-driven and industry-led organization that provides actionable and transparent environmental, social and governance (ESG) data to financial markets.
• IAST APAC: Macquarie joined in 2023. The Investors Against Slavery and Trafficking Asia Pacific (IAST APAC) initiative is an investor-led, multistakeholder project. It was established in 2020 to engage with companies in the Asia-Pacific region to promote effective action in finding, fixing and preventing modern slavery in operations and supply chains. Investors can achieve greater impact working collaboratively and drawing on various sources of knowledge and expertise to assess and address modern slavery risk in operations and supply chains.
• Responsible Investment Association Australasia (RIAA): MAM became a RIAA member in 2021.

More information regarding ESG bodies, standards, and initiatives in which MAM participates can be found at the following webpage: https://www.macquarie.com/us/en/about/company/environmental-social-and-governance.html

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

Investing in sustainable infrastructure assets that are well positioned to help achieve net zero carbon emissions by 2050 globally.

Infrastructure can make the largest contribution towards increased sustainability of our communities and economies through reducing emissions associated with essential service provision, as well as helping other industries decarbonise through providing low carbon energy.

It is estimated that 2/3* of the required decarbonisation will need to come from infrastructure. Investments are likely to include proven technology to reduce emissions, such as wind and solar. Emerging technologies such as hydrogen can be accessed through large, experienced utilities with decades of knowledge.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

Recently announcing its commitment to investing and managing portfolios in line with global net zero greenhouse gas emissions by 2040. We are proud to be the first asset manager of our peers to announce a 2040 target, ten years ahead of the deadline to achieve the Paris Agreement goals.

MAM joined the Net Zero Asset Managers Alliance, comprising a group of asset managers supporting the goal of net zero greenhouse gas emissions by 2050 or sooner. MAM is also a participant in CA100+, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary climate change action.

SDR Labelling: Not eligible to use label