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    Clean Energy Infrastructure

    by Barney Coles

    Climate change, shifting demographics, and globally recognized standards are a few driving forces that have contributed to the rising importance of Environmental (E), Social (S) and Governance (G) factors in asset management. This, coupled with the ongoing global pandemic, made many institutional asset allocators and investors realize that it is equally important to deliver financial returns and preserve client capital in a sustainable manner.

    We believe that sound, fundamental ESG underwriting will translate into meaningful value creation through closer alignment between the objectives of institutional investors, business stakeholders, and society at large. The goal of strong risk-adjusted returns does not require us to compromise our core ESG values.

    Author
    Barney Coles
    Managing Director
    Co-Head of Clean Energy Infrastructure
    Capital Dynamics
    Spokesperson
    Klaus Gierling
    Managing Director
    Head of Business Development
    DACH, Nordics & Benelux
    Capital Dynamics

     

     

     

     

     

     

     

     

     

     


    Case Study

    Capital Dynamics R-EYE™ rating system: Longhill onshore wind project in West Lothian, Scotland

    ESG Screening in Action

    ESG and responsible investment (RI) principles are deeply rooted in our corporate DNA, and go back to 2008 when we became one of the earliest signatories of the UN-supported Principles for Responsible Investment (PRI). The PRI, the United Nations Sustainable Development Goals (UN SDGs) and other ESG factors are integrated across our investment processes and corporate ethos.

    Our proprietary ESG scoring system, the R-Eye™, developed in 2018, and implemented across our investment strategies in 2019, helps ensure that the UN-supported PRI principles and ESG factors along with UN SDGs are included throughout the full investment cycle, starting from investment appraisal to post-investment monitoring. Our R-Eye™ rating system scores each potential investment from 5 (strongest ESG score) to 0 (weakest ESG score) based on a set of criteria developed in conjunction with the UN SDGs. This scoring system helps ensure a consistent and transparent approach to RI due diligence.

    In February 2021, Capital Dynamics acquired a 50 megawatt onshore wind project in West Lothian, Scotland, which is expected to be one of the largest subsidy-free onshore wind projects in the United Kingdom once operational. The project received a high R-Eye™ score during the due diligence process, which is indicative of the project’s positive impact on the climate, environment and local community, among other factors.

    Construction of Longhill commenced in March 2021 and is expected to achieve commercial operations in the second half of 2022. The project is estimated to reduce greenhouse emissions by over 2.6 million metric tons during its lifetime – the equivalent of emissions produced by over 550,000 passenger vehicles driven for a year or the electricity to power over 440,000 homes for a year*.

    The project’s company Board is made up of 40% females and the project will ensure the local habitat is maintained. Longhill will be replanting the trees that have been felled and have leased a forestry area outside of the site to plant trees that cannot be replanted on the existing site due to the windfarm. Memorandum of Understandings have also been signed with three local community groups based within the vicinity of the wind farm. Longhill is committed to contributing a significant portion of its annual revenue to supporting these local community groups. Local employment will be utilized where possible during the construction process and key members of the asset management team managing the wind farm once operational will mostly be based in Scotland or North England.

    (*) Source: Capital Dynamics

    Featured image: Markus Distelrath from Pixabay
    Disclaimer
    “Capital Dynamics” comprises Capital Dynamics Holding AG and its affiliates.

    The information contained herein is provided for informational purposes only and is not and may not be relied on as investment advice, as an offer to sell, or a solicitation of an offer to buy securities. Any such offer or solicitation shall be made pursuant to a private placement memorandum furnished by Capital Dynamics. No person has been authorized to make any statement concerning the information contained herein other than as set forth herein, and any such statement, if made, may not be relied upon. This document is strictly confidential, is intended only for the person to whom it has been addressed and may not be shown, reproduced or redistributed in whole or in part (whether in electronic or hard copy form) to any person other than the authorized recipient, or used for any purpose other than the authorized purpose, without the prior written consent of Capital Dynamics.

    The recipient should not construe the contents of this document as legal, tax, accounting, investment or other advice. Each investor should make its own enquiries and consult its advisers as to any legal, tax, financial and other relevant matters concerning an investment in any fund or other investment vehicle. Capital Dynamics does not render advice on tax accounting matters to clients. This document is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of avoiding penalties which may be imposed on the taxpayer under said individual’s tax laws. Federal and state tax laws are complex and constantly changing. The recipient should always consult with a legal or tax adviser for information concerning its individual situation.

    When considering alternative investments, such as private equity funds, the recipient should consider various risks including the fact that some funds: may use leverage and engage in a substantial degree of speculation that may increase the risk of investment loss; can be illiquid; are not required by law to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; and often charge high fees, and in many cases the underlying investments are not transparent and are known only to the investment manager. Any such investment involves significant risks, including the risk that an investor will lose its entire investment.

    By accepting delivery of this document, each recipient agrees to the foregoing and agrees to return the document to Capital Dynamics promptly upon request.

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