Annual Report and Financial Statements

GCP Infrastructure Investments Ltd

("GCP Infra" or the "Company")

12 December 2024

LEI 213800W64MNATSIV5Z47

Annual report and financial statements for the year ended 30 September 2024

The Directors of the Company are pleased to announce the Company's annual results for the year ended 30 September 2024. The full annual report and financial statements can be accessed via the Company's website www.graviscapital.com/funds/gcp-infra/literature and will be posted to shareholders on 10 January 2025.

About the Company

The Company seeks to provide shareholders with regular, sustained, long-term dividend income whilst preserving the capital value of its investments over the long term by generating exposure to infrastructure debt and/or similar assets. It is currently invested in a diversified, partially inflation-protected portfolio of investments, primarily in the renewable energy, social housing and PPP/PFI sectors.

The Company is a FTSE 250, closed-ended investment company incorporated in Jersey. It was admitted to the Official List and to trading on the LSE's Main Market in July 2010. It had a market capitalisation of £684.7 million at 30 September 2024.

Highlights for the year

Financial

Portfolio valuation

£960.0m

30 September 2023: £1.0bn

Representing a mature, diversified and operational portfolio of 50 investments across the renewable, PPP/PFI and supported living sectors.

Dividends for the year

7.0p

30 September 2023: 7.0p

Delivering the dividend target set by the Board for the financial year of 7.0 pence per share.

NAV per share 

105.22p

30 September 2023: 109.79p

Reflecting downward revaluations incurred during the year, offset by the impact of share buybacks.

Weighted average annualised yield¹

7.8%

30 September 2023: 7.9%

Representing a yield on the portfolio of investments with stable, pre-determined, long‑term, public sector backed revenues.

Dividend yield¹

8.9%

30 September 2023: 10.3%

Representing the yield on the closing share price of 78.60 pence per share at 30 September 2024.

Net assets

£913.1m

30 September 2023: £956.6m

Reflecting disposals of assets during the year in line with the stated aims of the Company's capital allocation policy.

Partially inflation protected

47%

30 September 2023: 41%

Representing the percentage of the portfolio, by value that have some form of inflation protection.

Total shareholder return¹

28.4%

30 September 2023: -25.2%

Reflecting improvements in market factors and the implementation of the capital allocation policy.

NAV total return¹

2.2%

30 September 2023: 3.7%

Continuing to meet its investment objective of capital preservation, with a NAV total return¹ of 176.6% since IPO.

Andrew Didham, Chairman of GCP Infra, commented:

The Company has maintained its 14-year track record of delivering on its objectives of income generation, capital preservation and diversification for its shareholders. The Company generated total profit and comprehensive income for the year of £19.5 million (30 September 2023: £30.9 million) and paid a dividend of 7.0 pence per ordinary share (30 September 2023: 7.0 pence). For the forthcoming financial year, the Company has set a dividend target¹ of 7.0 pence per share.

The impact of a higher rate environment, combined with reduced demand from wealth and retail investors looking for alternative sources of income, continues to weigh on the Company's share price. At the year end, the Company's share price was 78.90 pence, representing a 25.0% discount² to NAV (30 September 2022: 67.70 pence, representing a 38.3% discount² to NAV). The Board and the Investment Adviser are working closely to address the discount¹ at which the shares trade through the execution of the Company's capital allocation policy.

Progress has been made on executing the stated aims of the policy, including the refinancing of the Company's RCF in March 2024, which saw a reduction in total commitments by £40 million, and repayments of £47 million. Additionally, the Company disposed of its interests in Blackcraig wind farm at a 6.4% premium to the valuation as of 31 March 2024, with further disposals occurring post year end. While progress on disposals has been slower than anticipated, the Company is resuming its share buyback programme imminently and remains committed to its goal of returning at least £50 million to shareholders in the near term.

The new government's ambitious infrastructure targets, spanning decarbonisation, energy security, and the digital economy, are supported by innovative revenue models like contracts-for-difference, which offer potential opportunities for future investments. The focus on streamlining planning, grid connections, and the National Wealth Fund by the new government is also particularly encouraging. We look forward seeing how the policy environment in the UK evolves over the coming months.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Capital allocation

Leverage

£57.0m

30 September 2023: £104.0m

Representing a significant reduction in leverage and an LTV¹ of 6.2%.

Disposals

£31.4m

30 September 2023: £nil

Reflecting disposal of interests in Blackcraig wind farm at a 6.4% premium to the valuation at 31 March 2024.

Share buybacks

3.4m

30 September 2023: 13.6m

Totalling 17.0 million shares bought back since the buyback programme commenced in March 2023.

ESG

ESG policy

1 new

30 September 2023: None

Implemented an ESG policy to ensure investment practices align with the Investment Adviser's Responsible Investment policy.

Renewable generation

1,320 GWh

30 September 2023: 1,398 GWh

Representing renewable energy exported by portfolio assets, equivalent to powering 488,842 average homes.

SDG alignment

9 SDGs

30 September 2023: 9 SDGs

Reflecting the alignment of the portfolio with certain SDGs, as outlined by the United Nations.

Community support

£3.9m

30 September 2023: £3.6m

Reflecting the contribution to Community Benefit Funds by portfolio assets since IPO.

Charities supported

14

30 September 2023: 5 charities

Representing charities supported by the Company and the Investment Adviser raising c. £47,000 during the year.

Internships hosted

5

30 September 2023: 3

Continued supporting young talent through the Investment Adviser's paid internship scheme. 

1. APM - for definition and calculation methodology, refer to the APMs section below.

Read more below.

At a glance

The Company's purpose is to invest in UK infrastructure debt and/or similar assets to provide regular, sustained, long-term dividends and to preserve the capital value of its investments over the long term.

1. Non-financial objective. Further information is included below.

2. The dividend target set out above is a target only and not a profit forecast or estimate and there can be no assurance that it will be met.

3. APM - for definition and calculation methodology, refer to the APMs section below.

4. The LSE Green Economy Mark recognises London-listed companies generating more than half their revenues from green environmental products and services. The Company's portfolio is 62% invested in the renewable energy sector.

5. The Company's portfolio is 12% invested in supported living and 23% invested in PPP/PFI projects in the healthcare, education, waste, housing, energy efficiency and justice sectors which are measured in alignment with the UN SDGs, and 3% of the portfolio is invested in PPP/PFI leisure projects.

Our portfolio

The Company's portfolio is comprised of loans secured against assets in the UK which fall under the following classifications:

Read more below.

Senior ranking security

53%

Weighted average annualised yield¹

7.8%

Average life

11 years

Partially inflation protected

47%

1. APM - for definition and calculation methodology, refer to the APMs section below.

Creating long-term value

Our investment case

The Company has a number of key differentiators that make it well positioned to take advantage of attractive risk-adjusted returns.

Scale

The Company targets smaller investment opportunities that may be overlooked by larger investors, such as commercial banks. This flexibility allows the Company to enter niche markets and scale investments over time through follow-on financing to existing borrowers, which supports long-term growth and enhances returns by increasing exposure to successful investments.

Diversification

The Company has an explicit objective of diversifying across a range of asset classes. This means the Investment Adviser seeks the most attractive risk-adjusted returns as it is not bound to invest in sectors that are unattractive due to higher competition or asset characteristics.

Track record

The Company has been investing in the infrastructure sector for over a decade. This has allowed the Investment Adviser to develop its expertise in several specialist asset classes, such as anaerobic digestion and biomass. As part of this, the Investment Adviser has a proven model which assesses and evaluates opportunities in new asset classes.

Debt focus

The Company's focus on debt provides flexibility across senior and subordinated positions, allowing it to match investment risk with an appropriate capital structure solution and associated return. This approach allows the Company to tailor investments according to risk profiles, maximising returns while managing risk effectively.

Sustainability expertise

The Company's investment philosophy is centred on the long‑term sustainability of its portfolio. As part of this philosophy, the Board and the Investment Adviser continually seek to improve the way ESG criteria is embedded, integrated, monitored and measured within the portfolio.

Making a positive impact

The Board and the Investment Adviser work closely to ensure the Company's activities have a positive impact.

Sustainable Development Goals

By investing in assets that are integral to society, including those which contribute to a greener economy, the Company aligns with certain SDGs, as outlined by the United Nations ("UN"). These goals were created in 2015 by the UN to create a better and more sustainable world by 2030. The Company's portfolio positively contributes to the provision of renewable energy, the development of infrastructure to support economic growth, and also provides high-quality and safe buildings for vulnerable adults, healthcare patients and students. Furthermore, the Company's approach to governance, labour and health and safety makes a positive contribution to the employees, customers, suppliers and local communities in which the assets operate.

B Corp

In April 2024, the Investment Adviser was awarded a B Corp certification. Certified B Corporations are leaders in the global movement for an inclusive, equitable and regenerative economy.

As a certified B Corp, the Investment Adviser is part of a community of like-minded businesses that engage with each other to share ideas and best practice. The certification formalises the Investment Adviser's sustainable and long-term business model, as well as providing a framework to ensure it continues to operate in accordance with the highest ESG standards.

Read more in the Investment Adviser's Responsible Investment report.

Overall B Impact Score

Based on the B Impact Assessment, the Investment Adviser achieved an overall score of 99.4. The median score for ordinary businesses who complete the assessment is 50.9.

SDG Innovation Accelerator

In 2024, five employees from the Investment Adviser participated in the SDG Innovation Accelerator for Young Professionals. This programme empowers young talent under the age of 35 by driving collaborative business innovation aligned with the UN SDGs. An intensive, nine month programme, the Innovation Accelerator is designed to promote sustainability by activating the potential of future business leaders and change makers.

Three employees participated in the programme as 'innovators', seeking to identify and solve sustainability issues within the Investment Adviser and two senior members also participated as a 'mentor' and 'champion', to help guide the innovators on their sustainability journey.

As part of the programme, the team of innovators came up with ideas to improve the social benefits received by employees at the Investment Adviser. The employees presented their findings and ideas to a group of industry professionals, as well as the Responsible Investment committee of the Investment Adviser.

Benefitting the environment

The Company invests in renewable energy generation which has a positive environmental impact.

Clean energy infrastructure

The assets in the Company's portfolio have strong environmental credentials, with 62% of the portfolio invested in renewable energy projects that provide alternative energy sources to fossil fuels. The Board recognises that investing in clean energy infrastructure is one of the main ways to protect our planet against climate change, and the Company is committed to finding new and innovative ways to support the transition to net zero through its investments.

The carbon impact of infrastructure contributes to a significant proportion of the UK's national emissions from a construction, operation and maintenance perspective. In many cases, the UK's existing infrastructure was not originally designed and constructed with global warming in mind. The Investment Adviser has sought to introduce energy efficiency projects at portfolio assets where there were opportunities to do so.

In October 2020, the Company was awarded the Green Economy Mark from the London Stock Exchange. This classification recognises companies that are driving forward the global green economy.

SolarCatcher

The Company has provided funding of up to £20 million to support the build-out of innovative renewable energy infrastructure on public sector sites, predominantly schools, across England. Named 'SolarCatcher', the project is a fresh approach to the energy transition, as it uses existing car park infrastructure to generate on-site renewable energy for schools and academies, whilst providing electric vehicle charging points for staff and visitors.

As part of the financing, each school enters into a power purchase agreement with SolarCatcher under which they purchase power produced by the solar panels for use within the school, thereby reducing the power they need to draw from the electricity grid. These power purchase agreements are executed for a fixed price which is lower than the price the schools pay to their usual supplier.

Electric vehicles

In the global push towards net-zero emissions, decarbonisation of the transport sector is key. The Company has financed the acquisition of 250 zero-emission capable London black cabs for two fleet operators. These investments have a unique financing structure, which is a 'pay-for-mile' scheme managed by Zeti, a platform for investment in electric vehicle fleets, over a circa five year term.

The fleets benefit from the maximum low-emission vehicle plug-in Government grant funding and from accelerated capital allowances that result in a one year deduction against taxable profits that are equal to the full cost of the vehicle.

Biomass

Biomass is the term given to the organic raw material which can be used directly in power plants or can be used to produce biofuels. Unlike other renewable sources of power, biomass can be available 24/7 and is not reliant on the weather. It is the technology most closely comparable to fossil fuelled power stations and, as such, is most suited to the requirements of the electrical grid network.

The Company was a first mover in biomass gasification technology in the UK through its investment in Birmingham Bio Power Ltd. This plant uses four gasifier units fed with up to 72,000 tonnes of waste wood per year sourced from the West Midlands, and has been operational since 2016. The Company also lends to waste wood projects in Widnes and Northern Ireland, along with smaller anaerobic digestion plants in Scotland and Northern Ireland.

Benefitting society

The Company's portfolio has clear benefits to communities and end users in society.

Infrastructure, by definition, has a core social purpose. With long-term investment in renewable energy, PFI assets such as schools and hospitals, and social housing for vulnerable adults, the Company's portfolio has an overall positive impact on society. By investing in the supported living sector, the Company has funded properties across the UK that benefit vulnerable adults. Through the Company's investments in the PPP/PFI sector it is exposed to a number of sub-sectors including education, healthcare, waste, leisure and housing. These assets are integral to UK society and provide long-term partnerships with the public sector.

Community Benefit Funds

Renewable projects not only have a positive impact on the environment but also have wider benefits for society, improving local communities through CBFs. A CBF is a voluntary commitment by a developer to provide funds which are made available to local community projects. By way of an example, the accepted standard commitment for a wind farm is £5,000 per MW. These funds can be used to finance any initiative a community deems appropriate and necessary for their local area, including community-owned renewable energy projects, recreational facilities or equipment for local schools. Benefits under the protocol are negotiated directly with host communities and tailored to their needs to ensure a positive legacy is achieved. The Company's portfolio assets have donated £3.9 million to CBFs since its IPO.

Supported living

The Company has historically targeted investments in the 'supported living' sector through financing the development or conversion of accommodation to suit specific care needs for individuals with learning, physical or mental disabilities. One portfolio the Company has invested in comprises 13 properties and 51 units of supported living accommodation which are designed to meet the individual and unique needs of adults with disabilities and mental health problems. The portfolio is leased to Westmoreland Supported Housing Ltd, which is a registered provider of social housing. The Company supported Westmoreland over a period of financial distress. As a result, Westmoreland is now in a materially better financial position than it was previously and continues to provide high-quality accommodation and care for its vulnerable tenants.

Internships

The Investment Adviser offers paid internships to young people, prioritising those from diverse backgrounds who may otherwise find it difficult to find work experience.

This year, two paid internships were offered to students participating in the 10,000 Black Interns programme, which offers paid internship opportunities across more than 25 sectors, along with training and development opportunities. Another two internships were offered to students in the Young Women in Finance programme, a not-for-profit social organisation dedicated to the eradication of gender bias for new graduates entering the finance industry. One other internship was offered to an ESG masters student.

All interns worked across different projects at the Company, with a particular focus on the climate risk assessment and ESG policy.

Capital allocation policy

The Board is continuing to execute the policy and has made progress during the year.

Policy aims

In recognition of the disconnect between share price and NAV, and the material discount¹ at which the shares are trading, the Company reported that it planned to follow a progressive capital allocation policy in its 2023 annual report. This sought to realise £150 million of capital through disposals or refinancings to facilitate a material reduction in its RCF, return at least £50 million to shareholders, and rebalance underlying portfolio exposures.

The capital allocation policy has three key priorities: a material reduction in leverage, an improvement in the risk-adjusted return of the existing portfolio, and facilitating the return of at least £50 million of capital to shareholders whilst maintaining the dividend target.

The Board's focus during the financial year has been on the execution of the policy. The Investment Adviser's focus has therefore been on refinancing loans and disposing of investments where appropriate to achieve the Company's aims. The stated aims of the policy were based on interactions with shareholders and sought to address their concerns. This included reducing leverage while interest rates were high by decreasing the size of the RCF and ultimately paying down the drawn balance. Refer below for further information.

Targets of the policy - £150m Capital realisation target

1. APM - for definition and calculation methodology, refer to the APMs section below.

Disposals

The Investment Adviser has sought to restructure the underlying exposures in the portfolio and exit sectors where investors have concerns, as well as reducing the Company's exposure to merchant electricity prices and demonstrating a conservative valuation methodology through its sales processes. The policy also involved completing buybacks as a potential discount management tool, while simultaneously returning capital to shareholders.

The first transaction was completed earlier in the year, with the disposal of the Company's interest in Blackcraig wind farm. See below for further information.

Post year end, the Company completed the disposal of a portfolio of rooftop solar assets, generating proceeds of £6.8 million. Further, it expects to complete, subject to contract, on the disposal of a portfolio of onshore wind farms, generating proceeds of c.£20 million. The Company's disposals total £38.2 million at the end of 2024, with a pipeline of additional disposals in excess of £150 million. 

The Investment Adviser has consistently witnessed delays in transaction processes across the market, which has slowed progress towards achieving the stated aims of the capital allocation policy. However, the Company expects to complete additional disposals in 2025, and remains committed to the capital realisation target and stated ambitions, with the share buyback programme recommencing imminently.

Blackcraig Wind Farm

In April 2024, the Company disposed of its interest in loan notes secured against Blackcraig Wind Farm, a 52.9MW onshore wind farm located outside Dumfries and Galloway in Scotland, at a 6.4% premium to its valuation at 31 March 2024. The Company originally acquired the senior secured loan notes in 2017 from the UK Green Investment Bank. The disposal generated net cash proceeds of £31.4 million which included principal and interest and were used to reduce the drawn balance on the Company's RCF.

Chairman's statement

I am pleased to present the Company's annual report for the year ended 30 September 2024.

Andrew Didham

Chairman

Introduction

I am pleased to present the Company's annual report and financial statements for the year to 30 September 2024. The Company's shares have continued to trade at a material discount¹ to the NAV during the year. The impact of a higher rate environment, combined with reduced demand from wealth and retail investors looking for alternative sources of income, continues to weigh on the Company's share price.

The current yield on 15-year gilts is similar to where it was at the Company's IPO. The disconnect between the Company's shares trading at a premium at IPO and for the majority of the period since, and the material discount¹ at which it trades today, remains. However, over this period, it has a 14 year track record of delivering on its objectives of income generation, capital preservation and diversification. The Company's mature, diverse and operational portfolio will continue delivering on these objectives moving forward.

The Company remains committed to the capital allocation policy set out in the 2023 annual report. While progress on disposals has been slower than expected, the Investment Adviser continues to progress with material transactions that will, if completed, allow the Company to achieve the objectives set out in the previous annual report.

As a Company that invests in UK infrastructure that benefits from public sector support, the wider policy environment and the availability of long-term revenue support models is important. The new Government has adopted, and in certain cases extended, ambitious targets for infrastructure deployment to address the challenges of population change, decarbonisation and energy security, as well as the transition to a digital economy. It has been encouraging to see the growth of the contract-for-difference scheme which supports renewable energy generation and the emergence of other contract-for-difference, regulated asset base or cap and floor revenue support models in sectors such as biomethane, carbon, hydrogen, sustainable aviation fuels, interconnectors and long duration energy storage. These may present opportunities for the Company when it resumes investing in the future. The expected increased focus on policy which supports new infrastructure development across the planning process, grid connections and the establishment of the National Wealth Fund (previously the UK Infrastructure Bank) is also encouraging.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Capital allocation policy

The Board remains committed to the capital allocation policy detailed in the Company's 2023 annual report. Progress has been made during the year, with further developments made post year end, as the Company seeks to execute on its target of releasing £150 million (c.15% of the portfolio) to facilitate the key priorities of the policy:

·      reduction of leverage, reducing the drawn balance of the RCF to zero;

·      return at least £50 million of capital to shareholders, in addition to maintaining the Company's dividend target; and

·      rebalancing the portfolio and materially reducing exposure to supported living, and to merchant electricity prices, while re-focusing the portfolio on debt.

Reduction of leverage

The Board has prioritised the reduction of leverage whilst interest rates have been elevated. The Company's RCF was refinanced in March 2024, with total commitments reduced from £190 million to £150 million in line with this stated aim. The drawn balance of the facility has reduced from £104 million at 30 September 2023 to a materially reduced level of £57 million at year end following repayments. Subject to the completion of a further pipeline of disposals, the Company continues to work towards reducing drawn balances to zero alongside the buyback programme. Further details on the Company's financing activity are provided below and details of the RCF can be found in note 15.

Return of capital

In total, 3.4 million shares were repurchased during the year under the existing share buyback authority. The repurchase of shares continues to offer attractive returns, given the current discount¹ to NAV, and the dividend yield on the share price of 8.9% at 30 September 2024. The Company's shares have traded at an average discount¹ of 32.4% during the year and an average premium¹ of 3.4% since IPO. At 30 September 2024, the share price was 78.90 pence, representing a discount¹ to NAV of 25.0%.

The Company will be recommencing the share buyback programme imminently, and remains committed to its target of returning at least £50 million to shareholders in the near term.

The method by which the Company will return £50 million of capital to shareholders remains under consideration. The Board continues to believe that the use of share repurchases is a means of addressing imbalances in supply and demand which may otherwise create volatility in the rating of the Company's shares.

Portfolio rebalancing

The focus of investment-related activity for the Investment Adviser and the Board during the year was releasing the target £150 million of capital through refinancings and disposals. The first of these occurred in April 2024, when the Company announced the disposal of its interest in loan notes secured against Blackcraig Wind Farm, a 52.9MW onshore wind farm located in Dumfries and Galloway, Scotland. The disposal generated net cash proceeds of £31.4 million which represented a 6.4% premium to the valuation of the investment at 31 March 2024.

Further transactions were completed post year end, including the disposal of a portfolio of rooftop solar assets installed on domestic properties across the UK, generating proceeds of £6.8 million. The Company expects to complete, subject to contract, on the disposal of a portfolio of two onshore wind farms in the UK, expected to generate proceeds of c.£20 million. Transactions in the supported living sector have been significantly slower moving than expected; however, there is positive momentum and the Company believes it will be able to materially reduce exposure to this sector in 2025.

The Company made one new loan of £2.6 million in the year to an existing borrower. Portfolio follow-on investments of £24.7 million made during the year were focused on restructuring and management to preserve value and potential future profitability. This was offset by repayments of £39.2 million, giving a net repayment from the existing portfolio of £11.9 million.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Financial performance

This year, financial performance continued to be driven by electricity prices and inflation. A material cooling in both factors resulted in downward revaluations during the year and had a resulting negative impact on profitability. The Company generated total profit and comprehensive income of £19.5 million (30 September 2023: £30.9 million).

The net assets of the Company decreased to £913.1 million (105.22 pence per share) from £956.6 million the previous year (109.79 pence per share). Further information on financial performance can be found below.

The Company seeks to pay regular, sustained, long-term dividends to shareholders, and paid a 7.0 pence per share dividend for the year, in line with the target for this financial year. The same target¹ is reaffirmed for the forthcoming financial year. The dividend of 7.0 pence per share for the year was 0.3 times covered on an earnings cover² basis, which includes investment revaluations in accordance with IFRS, and was 1.0 times covered on an adjusted earnings cover² basis, calculated on the Investment Adviser's assessment of adjusted net earnings² in the year. Further information can be found below.

ESG

The Company's portfolio continues to have a positive impact as it contributes to the generation of renewable energy and finances infrastructure that has clear benefits to users in society. The Board and the Investment Adviser believe that investing in assets with a positive environmental and social impact is key to protecting our planet for future generations.

The Company has made good progress this year against the ESG objectives set out in the 2023 annual report, including implementing an ESG policy to formalise ESG processes and ensure the Company's responsible investment practices align with the Investment Adviser's responsible investment policy.

The Investment Adviser obtained certification as a B Corporation during the year, formalising its sustainable and long-term business model. The certification provides a framework to ensure the Investment Adviser continues to operate in accordance with the highest sustainability standards. The Investment Adviser also improved its PRI score for the second consecutive year, highlighting its commitment to improvements in its ESG credentials. These achievements complement those of the Company, which was awarded the Green Economy Mark from the LSE in 2020 in recognition of the Company's contribution towards driving a greener economy.

More details on the Company's approach to responsible investment can be found in the sustainability section below.

Market outlook

At the time of writing, the Bank of England base rate is 4.75%, following the Bank of England's decision to cut rates by 0.25% in August 2024 and November 2024. These were the first cuts since the onset of the Covid-19 pandemic in 2020. Inflation has cooled significantly over the year compared to previous periods. CPI rose by 1.7% in the year to 30 September 2024, and then to 2.3% in the twelve months to 31 October 2024. The link between electricity prices and inflation in the UK is strong, and the Board recognises that geopolitical tensions in the Middle East and the conflict in Ukraine may impact electricity prices and have a knock-on effect on inflation going forward.

As mentioned previously, the policy backdrop for the sector has become increasingly positive. Despite this, there remains a disconnect between investment company sentiment and broader infrastructure investment. The Board and the Investment Adviser recognise there is a broad range of investment opportunities in the current market at attractive rates. However, these remain secondary to the priority of addressing the discount² and shareholder concerns.

1. The dividend target set out above is a target only and not a profit forecast or estimate and there can be no assurance that it will be met.

2. APM - for definition and calculation methodology, refer to the APMs below.

The Board also acknowledges the positive developments post year end regarding cost disclosure requirements, with HMT drafting a Statutory Instrument to remove the requirement for investment companies to publish ongoing charges, a figure widely accepted to be an inaccurate representation of the actual cost of investing in shares in an investment company. With many citing this misleading cost as a headwind for investment in the investment company sector, the potential for the cost to be removed may create demand for shares going forward. The Statutory Instrument became law on 22 November 2024. However, following this announcement, investment platforms have said they will continue requiring ongoing charges to be disclosed. The Investment Adviser is working to address this, and the Board will continue monitoring the impact of cost disclosure on the Company's share price.

The Board

The Board composition will see several changes in the year ahead to align with corporate governance best practice. Michael Gray and Julia Chapman have both served on the Board for nine years, and their retirement will be phased over the coming year. Mr Gray will retire from the Board in February 2025, and Ms Chapman will stay on the Board for a further transition period, assisting with the identification of an appropriate replacement.

I would like to take this opportunity to acknowledge the important role Mr Gray and Ms Chapman have played in the stewardship of the Company during their tenure and thank them for their invaluable contribution to the Company.

I am delighted to extend a warm welcome to Ian Brown, currently the Head of Banking and Investments at the UK's National Wealth Fund, who will be appointed to the Board subject to regulatory and shareholder approval. Mr Brown will bring a wealth of knowledge and experience in the UK lending and infrastructure sector and will greatly contribute to the Company's strategic direction.

Further information on Mr Brown, including his biography, will be included in the 2025 AGM circular and announced upon his appointment. There are no details requiring disclosure in respect of this appointment under paragraph 6.4.8 of the UK Listing Rules of the FCA.

Andrew Didham

Chairman

11 December 2024

Strategic report

Evolution of the portfolio

Since the Company's IPO in 2010, the infrastructure sector has evolved considerably, becoming a better understood and more mainstream asset class. The Company has a track record of being an early-mover, ensuring it invests into maturing sectors and captures an enhanced risk-adjusted return. With a changing landscape of Government support over the last 14 years, the Company has retained an entrepreneurial approach to identifying new investments. As such, the portfolio has evolved over time in response to changing investment opportunities and requirements.

At the Company's IPO in 2010, the Company was the first UK infrastructure debt focused investment company in the UK, with its portfolio comprising 100% subordinated PFI. The aftermath of the global financial crisis on the long-dated debt market was longer lasting than expected and therefore the Company was able to benefit from attractive investment opportunities, whilst maintaining dividend payment levels.

In 2012, the Company made its first renewable energy investment in domestic rooftop solar projects, which have now grown to c.50,000 systems. This was followed by investments in the anaerobic digestion, biomass and wind sectors, with the Company lending to the first waste wood power station to be developed in the UK. Investments in the renewable energy sector continued into 2014, with the Company making its first investment in the hydro-electric sector.

The Company then made its first investment in social housing in 2016, entering into the supported living sector. Investment in the renewable energy sector continued into 2018, when the Company made its first investment in the offshore wind sector, investing in Race Bank wind farm.

In 2021, the Company made its first investment in the Eden Geothermal project, which is the first deep geothermal well in the UK since 1986.

At the year end, the valuation of the Company's portfolio was £960 million.

Strategic overview

The market

The infrastructure market

Infrastructure comprises the fundamental physical systems that are essential to the functioning of society and its economy, covering a variety of industries and sectors. Infrastructure investments typically comprise a significant initial investment which is repaid over the life of the asset in consideration for the essential service it provides. Typically, these investments are long-term, stable and provide inflation protection, and have inherent capital protection through the physical nature of the assets.

Almost half of the Company's investments by value have some form of inflation protection. This includes direct links to inflation for supported living and certain renewable assets, as well as a mechanism that increases loan principal values based on inflation exceeding a set threshold (usually 2.75% to 3.0%).

Investors have historically valued the long lives of infrastructure assets, which often outlive political and economic cycles, and the services they provide. Increasingly, the need to decarbonise the energy sector to achieve legally binding targets and accelerating digitalisation trends has prompted further interest in the sector.

The Investment Adviser has witnessed significant early developments in new policy initiatives from the new Government since their victory in the general election in July 2024:

·      planning reform was a key agenda item in the new Government manifesto, with swift changes to the National Planning Policy Framework highlighting ambitions in increased housebuilding and the development of new onshore renewable energy generation;

·      the National Wealth Fund and Great British Energy have been formed with public funding to accelerate efforts to decarbonise the UK's electricity system and encourage private funding in UK infrastructure;

·      mission control has been launched with Chris Stark, former Chief Executive of the Climate Change committee, in charge of tracking progress towards delivering a net zero electricity system by 2030 and co-ordinating between Government entities; and

·      the merger of the National Infrastructure Commission ("NIC") and the Infrastructure Projects Authority ("IPA") into a new body, the National Infrastructure and Service Transformation Authority ("NISTA"), to better support the delivery of major capital projects.

These new policies support UK infrastructure investment, while new subsidy regimes for emerging technologies (Net Zero Hydrogen Scheme, Carbon Capture Business Model) and the expansion of existing regimes (such as the CfD scheme) offer an attractive opportunity for the UK to drastically scale up the deployment of new infrastructure.

In the Autumn Budget, announced post year end, the new Government outlined its plan to address the large deficit and the need for increased investment in the UK's distressed finances and assets. While taxes and NHS funding grabbed the initial headlines (including £1.5 billion for new hospital beds and diagnostic centres), the new Government's commitment to making the UK a clean energy superpower was a positive reinforcement. The Board believes this presents a material opportunity for investment and growth in the UK and is needed for the UK to stay on track with its decarbonisation commitments. The Board is also looking forward to the announcement of the Government's ten year infrastructure strategy to be published in spring 2025, along with the newly formed National Infrastructure and Service Transformation Authority which will be set up to oversee it.

Challenges and opportunities

The table below sets out some of the key challenges and associated opportunities for UK infrastructure investment.

How the Company is responding to market opportunities and challenges:

Whilst the policy backdrop for the UK infrastructure sector is positive, there remains a disconnect between market sentiment and broader infrastructure investment. Focus remains on addressing the share price discount¹ to NAV at which the shares trade and any shareholder concerns. The Company's response to the current market environment is as follows:

1. Reduce leverage:

Central bank base rates remain at elevated levels globally, with the Bank of England's base rate currently at 4.75%. The Company's RCF incurs a margin over SONIA. As is typical with elevated base rates, this borrowing is less accretive to value than in a low interest rate environment. The Company has prioritised paying down all drawn balances under the RCF and has reduced amounts drawn by £47 million during the year.

2. Return capital to shareholders:

The Board and the Investment Adviser believe the implied yield on the Company's shares, which are trading at a significant discount¹ to NAV, is higher than the actual risk on the underlying investments given the positive ongoing performance of the portfolio. Therefore, buying back the Company's shares offers an attractive risk-adjusted return for shareholders. The Company has also committed to returning £50 million to shareholders as part of its capital allocation policy. The Company will be recommencing the buyback programme imminently, working towards satisfying this commitment.

1. APM - for definition and calculation methodology, refer to the APMs section below.

3. Adjust the underlying portfolio exposures:

The Company has committed to reducing equity risks, as well as its exposure to the supported living sector. It is intended that the portfolio will be refocused on debt investments in sectors with attractive risk-adjusted returns.

The disposal of the Company's interest in loan notes secured against Blackcraig wind farm, a 52.9MW onshore wind farm, at a 6.4% premium to the valuation at 31 March 2024, generated net cash proceeds of £31.4 million. The disposal of a c.8.3MW portfolio of domestic rooftop solar installations post year end, and the disposal of a portfolio of onshore wind assets with combined generating capacity of 28MW, subject to contract, are expected to reduce the Company's exposure to merchant electricity prices by c.£27 million.

Furthermore, active transactions in the supported living sector are expected to materially reduce the Company's exposure to this sector in early 2025.

4. Engage with shareholders:

The Company and the Investment Adviser have sought to engage with shareholders to better understand their concerns and develop a strategy to address these. This has been combined with enhanced transparency in reporting, including a line-by-line breakdown of the portfolio, which is available on the Company's website, and broader attempts to share new and insightful information more frequently.

Key policies

Investment strategy

The Company's investment strategy is set out in its investment objective, policy and strategy below. It should be considered in conjunction with the Chairman's statement and the strategic report which provides an in-depth review of the Company's performance and future strategy. Further information on the Company's business model and purpose is set out below.

Investment objective

The Company's investment objective is to provide shareholders with regular, sustained, long-term dividends and to preserve the capital value of its investment assets over the long term.

Investment policy and strategy

The Company seeks to generate exposure to the debt of UK infrastructure project companies, their owners or their lenders and related and/or similar assets which provide regular and predictable long‑term cash flows.

Core projects

The Company will invest at least 75% of its total assets, directly or indirectly, in investments with exposure to infrastructure projects with the following characteristics (core projects):

·      pre-determined, long-term, public sector backed revenues;

·      no construction or property risks; and

·      benefit from contracts where revenues are availability based.

In respect of such core projects, the Company focuses predominantly on taking debt exposure (on a senior or subordinated basis) and may also obtain limited exposure to shareholder interests.

Non-core projects

The Company may also invest up to an absolute maximum of 25% of its total assets (at the time the relevant investment is made) in non-core projects, taking exposure to projects that have not yet completed construction, projects in the regulated utilities sector and projects with revenues that are entirely demand based or private sector backed (to the extent that the Investment Adviser considers that there is a reasonable level of certainty in relation to the likely level of demand and/or the stability of the resulting revenue).

There is no, and it is not anticipated that there will be any, outright property exposure of the Company (except potentially as additional security).

Diversification

The Company will seek to maintain a diversified portfolio of investments and manage its assets in a manner which is consistent with the objective of spreading risk. No more than 10% in value of its total assets (at the time the relevant investment is made) will consist of securities or loans relating to any one individual infrastructure asset (having regard to risks relating to any cross default or cross-collateralisation provisions). This objective is subject to the Company having a sufficient level of investment capital from time to time, the ability of the Company to invest its cash in suitable investments and the investment restrictions in respect of 'outside scope' projects described above.

It is the intention of the Directors that the assets of the Company are (as far as is reasonable in the context of a UK infrastructure portfolio) appropriately diversified by asset type (e.g. PPP/PFI healthcare, PPP/PFI education, solar power, social housing, biomass etc.) and by revenue source (e.g. NHS Trusts, local authorities, FiT, ROCs etc.).

Policies

Distribution

The Company seeks to provide its shareholders with regular, sustained, long-term dividend income.

The Company has the authority to offer a scrip dividend alternative to shareholders. The offer of a scrip dividend alternative was suspended at the Board's discretion for all dividends during the year, due to the discount¹ between the likely scrip dividend reference price and the relevant quarterly NAV per share of the Company. The Board intends to keep the payment of future scrip dividends under review.

Leverage and gearing

The Company intends to make prudent use of leverage to finance the acquisition of investments and enhance returns for shareholders. Structural gearing of investments is permitted up to a maximum of 20% of the Company's NAV immediately following drawdown of the relevant debt.

The calculation of leverage under the UK AIFM Regime in note 15 to the financial statements includes derivative financial instruments as is required by the applicable regulation.

Our non-financial objectives

The key non-financial objectives of the Company are:

·      to build and maintain strong relationships with all key stakeholders of the Company, including (but not limited to) shareholders and borrowers;

·      to continue to focus on creating a long‑term, sustainable business relevant to the Company's stakeholders;

·      to develop and increase the understanding of infrastructure debt as an asset class; and

·      to focus on the long-term sustainability of the portfolio and make a positive impact, through contributing towards the generation of renewable energy and financing infrastructure that is integral to society.

Business model

The Company's purpose is to invest in UK infrastructure debt and/or similar assets to provide regular, sustained, long-term dividends and to preserve the capital value of its investments over the long term.

1. APM - for definition and calculation methodology, refer to the APMs section below.

2. Twelve month period to 30 June 2024 to facilitate data inclusion in the annual report.

3. The dividend of 7.0 pence per share is fully covered by an adjusted EPS¹ of 7.09 pence per share.

Company impact

Sustainability credentials

The Company has a positive environmental impact through its investments in renewable energy, PPP/PFI and supported living. The Board aims to enhance the integration of ESG criteria in the Company's operations, ensuring that the portfolio not only addresses the current needs of stakeholders, but is also able to adapt to future challenges.

The Investment Adviser continued its data collection project this year to collect material ESG metrics from assets in its portfolio. The data collection project enables the Investment Adviser to assess the impact portfolio assets are having on the environment and society. The process involves the Investment Adviser's portfolio management team liaising with each asset operator to obtain relevant ESG data on the underlying portfolio assets. The data points that are considered material by the Investment Adviser are detailed in the table below.

The data collection project enabled the Investment Adviser to compare data with the previous year. It was noted that the 1,320 GWh of renewable energy exported by portfolio assets marginally decreased during the year, primarily due to reduced wind power and solar irradiance. The percentage of SPVs with at least one female board member increased from 36% to 49% year-on-year, following the appointment of an additional female director to SPV boards.

Further information on the Company's data collection project can be found below.

SDG alignment of the Company's portfolio:

1. Twelve month period to 30 June 2024.

2. Twelve month period to 30 June 2023.

3. At 30 June 2024.

4. At 30 June 2023.

5. At 30 September 2024.

6. At 30 September 2023.

7. Source: Ofgem, average gas and electricity usage.

Q&A with the Investment Adviser

Philip Kent

CEO, Investment Adviser

Capital allocation policy

Do you expect to fully execute on the targets laid out in the capital allocation policy, and what is next for the Company once it has completed its stated aims?

To facilitate the aims of the policy, the Investment Adviser has been focused on executing disposals and refinancing processes to realise the £150 million capital target. The Company's disposals total £38.2 million at the end of 2024, with a pipeline of additional disposals in excess of £150 million. We have experienced consistent delays across transactions throughout the year, with processes taking longer than expected across all sectors. However, the Board and the Investment Adviser remain committed to achieving the stated aims of the capital allocation policy as quickly as possible.

The capital allocation policy was developed in conjunction with shareholders to help address the disconnect between share price and NAV. Once the Company has executed on the stated aims of the policy, the Board will re-evaluate its position based on the price at which shares are trading. If there is a material discount¹ thereafter, the Board will evaluate the merits of continuing to return capital to shareholders against the risks of decreasing the Company's scale. Nevertheless, we, and the Board remain optimistic about future investment opportunities.

The new Government has made encouraging commitments to decarbonisation that will require significant investment across the UK. A heightened interest rate environment also offers the opportunity to take materially reduced risk to achieve the same level of return or capture elevated returns from new technologies that will form part of the Government's decarbonisation mandate.

Investment opportunities

Where does the Investment Adviser see attractive opportunities in the UK infrastructure market?

The UK infrastructure market finds itself in a far better position than it was at this time last year, with aggressive ambitions for deployment of renewables: 60GW offshore wind, 50GW solar photovoltaic, 30GW onshore wind and 10GW of low carbon hydrogen capacity, and decarbonisation of the electricity grid by 2030. This comes alongside policy support in a number of new sectors, including a cap and floor scheme for long-duration energy storage, and ambitions for four industrial carbon capture and storage clusters sequestering 20 to 30 million tonnes of carbon dioxide per year by 2030.

The Company is well placed to benefit from a transitioning subsidy landscape, and has a track record of being an early-mover in new sectors, particularly through its focus on debt. Significant policy developments will be required in the next decade to support widespread decarbonisation across existing sectors (wind and solar), but also across a broad spectrum of industries including heat, transport, industry and agriculture. There are attractive opportunities to benefit from enhanced returns in new technologies before yields compress, which is an approach the Company has a legacy of executing. Fundamentally, the ambitions stated will require levels of investment that have not previously been seen, and this will stretch liquidity in the market, providing further investment opportunities for the Company.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Share price performance

What do you believe has caused the disconnect between share price rating and NAV?

There are several reasons for the discount¹ between the share price and underlying NAV. One of the most significant reasons is the current interest rate environment, as increases in base rates have fed through to discount rates, which has caused valuations to decrease. This has increased the cost of debt, with many investment companies relying on leverage for capital deployment programmes and to enhance returns. At the same time, investors have seen an attractive opportunity to reallocate into traditional fixed income such as government and corporate debt.

We now find ourselves in a position where central banks have started to cut interest rates, and we hope that as this progresses the relative attractiveness of listed investment companies increases.

The increased interest rate environment has highlighted areas of stress within some investment companies, where shareholders have focused on valuations, highlighting a lack of uniformity in methodology. In a handful of isolated cases, flaws in certain approaches have caused contagion across a whole asset class, such as social housing and battery energy storage.

Cost disclosure

Can you explain the legacy of double counting in cost disclosure, and what recent developments mean for investment companies?

In the United Kingdom, the Financial Conduct Authority ("UK FCA") is responsible for implementing regulations to ensure a financial product is transparent when disclosing the costs associated with investing. These costs can include fees for fund management, transaction costs or the charges of underlying assets. The aim for cost disclosure is to provide investors with a clear view of how much they are paying, which allows them to make informed decisions.

In 2018, the European Union ("EU") introduced the Packaged Retail and Insurance-based Investment Products ("PRIIPs") regulation, which required investment managers to provide retail investors with a Key Information Document ("KID"), explaining a product's features, risks and all associated costs, including their ongoing charges figures ("OCFs"). This regime runs parallel to the 2009 Undertakings for the Collective Investment in Transferable Securities ("UCITS") regulation, which applies to the EU and any UK funds that market themselves to EU investors.

Following Brexit, the UK began work on updating its own PRIIPs regime, with the UK FCA reviewing and adjusting the framework to make it more relevant to the UK market. As part of this, the UK FCA implemented new cost disclosure guidance on 1 July 2022, which required closed‑ended investment companies to report in the same way as open-ended funds.

These regulations aimed to increase transparency for non-UCITS vehicles by requiring them to disclose their costs more clearly. However, as investment companies already provided detailed cost information under the former rules, institutional investors and intermediaries were made to report these costs again in their own disclosures to clients, which has resulted in double counting. As a result of the double counting, some investors have been unable to invest in investment companies or have significantly reduced their exposure.

It is broadly accepted by the industry and by the Government, that this single aggregated figure is not an accurate representation of the actual costs of investment in shares in an investment company. Following the successful campaigning of a group of parliamentarians and industry participants, HM Treasury proposed a Statutory Instrument to remove the requirement for investment companies, along with persons advising on or selling shares of investment companies, to produce a KID. Additionally, investment companies, and firms investing in them will not be required to disclose costs and charges relating to investment companies to clients, pursuant to the MiFID Org Regulation.

The Statutory Instrument became law on 22 November 2024. However, additional issues have been encountered post period end, with investment platforms continuing to require ongoing charges to be disclosed in the KID. We continue to monitor the impact of cost disclosure on the Company, and the Investment Adviser has been active in the campaign to resolve the issue.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Investment Adviser's report

Company position

The Company's portfolio remains well diversified across a wide range of operational renewable energy projects, social infrastructure (through PPP/PFI schemes) and supported living projects. The Company's explicit diversification objective has historically enabled it to adapt to developments in any one sector (such as decreasing yields and more competition) and move into other areas if a sector no longer represents attractive risk-adjusted returns.

In the 14 years since its IPO, the Company has seen this cycle play out across multiple sectors and has adapted its approach to investing as one sector matures or sought out new sectors for investment. Similarly, where there have been changes to investor sentiment around certain sectors (such as supported living) or an end to a subsidy regime (such as in PPP/PFI), the Company has been able to maintain its investment policy, objective and strategy which have been consistent since IPO.

Key investment activity

The Investment Adviser's focus for the year has been executing the Company's capital allocation policy. The first disposal contributing to the stated aims was completed in April 2024. Post year end, one additional disposal was completed, with another disposal expected to complete, subject to contract. As previously noted, there are three stated aims of the policy: reducing leverage, returning capital to shareholders, and adjusting exposure to supported living and merchant electricity prices within the portfolio.

The Company has made material progress in reducing leverage, with total commitments reduced from £190 million to £150 million in March 2024, and drawn balances reduced to £57 million at year end, down from £104 million at 30 September 2023. This represents a net debt position of £45.2 million at 30 September 2024 and an LTV of 6.2%.

Furthermore, the Company completed buybacks of 3.4 million shares for a consideration of £2.2 million.

Post year end, the rooftop solar assets disposal and the expected disposal of onshore wind assets will reduce loans with exposure to merchant electricity prices by c.£27 million. The Investment Adviser is progressing transactions which will materially reduce the Company's exposure to the supported living sector in 2025.

New investments have not been a priority for the Company due to its focus on its capital allocation policy. However, the Company has completed a handful of follow-on investments to optimise the performance of existing portfolio investments and made one new investment to support an existing borrower. A full summary of investments and repayments for the year is shown below.

Investment risk

The table below details the Investment Adviser's view of the changes to the risk ratings for sectors where changes have been observed in the past year.

Interest capitalised

The Company received total loan interest income of £87.3 million (30 September 2023: £80.8 million) from the underlying investment portfolio. Of this, £65.1 million was received in cash and £22.2 million was capitalised in the year (30 September 2023: £58.8 million and £22.0 million respectively). Refer to note 3 for further information. The capitalisation of interest occurs for three reasons:

1) Where interest has been paid to the Company late (often as a result of moving cash through the Company and borrower corporate structures), a capitalisation automatically occurs from an accounting point of view.

2) On a scheduled basis, where a loan has been designed to contain an element of capitalisation of interest due to the nature of the underlying cash flows. Examples include projects in construction that are not generating operational cash flows, or subordinated loans where the bulk of subordinated cash flows are towards the end of the assumed life of a project, after the repayment of senior loans. Planning future capital investment commitments in this way is an effective method of reinvesting repayments received from the portfolio back into other portfolio projects.

3) Where loans are not performing in line with financial models, resulting in:

(i)   lock-up of cash flows to investors who are junior to senior lenders; and

(ii)  cash generation is not sufficient to service debt.

Other unscheduled capitalisations in the year related to the re-direction of cash flows into three gas-to-grid anaerobic digestion projects in Scotland to address performance issues encountered in the year.

The table below shows a breakdown of interest capitalised during the year and amounts paid as part of final repayment or disposal proceeds:

The table below illustrates the forecast component of interest capitalised that is planned and unscheduled.

The Investment Adviser and the independent Valuation Agent review any capitalisation of interest and associated increases to borrowings to confirm that such an increase in debt, and the associated cost of interest, can ultimately be serviced over the life of the asset. To the extent an increase in loan balance is not serviceable, a downward revaluation is recognised, notwithstanding that such an amount remains due and payable by the underlying borrower and where capitalisation has not been scheduled, it attracts default interest payable.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Sector background and update

Renewables

Renewable projects generate renewable energy across the heat, electricity and transport sectors and benefit from long‑term Government subsidies.

62%

Percentage of portfolio by value

£597.8m

Valuation of sector

Background

Renewable energy comprises energy sources that naturally replenish themselves and have a positive environmental impact. The Company was an early-mover in supporting renewable energy projects in the UK. Over the last decade, it has invested in a range of technologies across the sector, initially financing a portfolio of domestic rooftop solar projects in 2011, an investment that has grown to c.50,000 systems today.

Since the Company's IPO in 2010, many subsidy support regimes have come and gone in the UK, with the portfolio benefiting from exposure to a range of subsidies. The UK has made significant progress with its decarbonisation objectives, but to fully achieve its ambitions, it needs to go further and faster.

Current position

The new Government has made the clean energy transition second only to economic growth in its mandate, showing clear conviction in introducing new policy and funding support for renewable energy. With ambitious targets for the deployment of existing mature technologies, as well as new policy support to facilitate the transition of sectors at a more nascent stage, two new funding bodies have been established, the National Wealth Fund and Great British Energy.

The CfD remains the key support mechanism for low-carbon generation and supports both mature and developing technologies. The results of the sixth allocation round were announced in September 2024, which awarded contracts for 9.6GW of capacity, a significant improvement from the previous round. The existing pool of alternate support mechanisms includes the Green Gas Support Scheme and the Net Zero Hydrogen Fund.

The UK renewable energy market remains subject to the results of the Review of Electricity Market Arrangements ("REMA"), which was launched in response to a rapidly evolving electricity system with an increasingly volatile generation mix and demand profile. The Investment Adviser hopes the aspirations of the new Government in encouraging new deployment will factor into policy considerations before sweeping changes are made.

Future outlook

Ambitious targets have been set in the UK not just for electricity generation, but across the wider energy transition, with a new framework for carbon capture clusters located across industrial clusters in the UK, as well as mandated levels of sustainable aviation fuel ("SAF") usage, and deployment of electric vehicles ("EVs"). The outlook for the renewable energy market in the UK is the most positive it has been in over a decade, and the ambitions of the new Government have the potential to significantly accelerate deployment of both mature and emerging technologies.

Reform of the planning regime in the UK is essential to facilitate the deployment of new renewable energy. The Company will continue to monitor the success of the new Government in reforming and modernising the planning process to facilitate its targets.

The Board and Investment Adviser are actively monitoring the development of new subsidy regimes in the UK, and believe the Company is well placed to benefit from new policy frameworks when it is in a position to resume investing.

Impact

1,320 GWh - Renewable energy exported by portfolio assets¹

SDG alignment

SDG 7 - AFFORDABLE AND CLEAN ENERGY

SDG 8 - DECENT WORK AND ECONOMIC GROWTH

1. Twelve month period to 30 June 2024 to facilitate inclusion in the annual report.

UBB Waste facility

UBB Waste is an energy-from-waste facility located in Gloucester. It disposes of Gloucestershire's residual waste by processing waste that remains after the residents of Gloucestershire have separated out as much of the recyclable and green waste as they can. This is waste that would otherwise go to landfill.

The facility is largely automated and combusts up to 190,000 tonnes of waste each year (approximately 75% of which is provided by Gloucestershire County Council). Heat generated from the combustion process is then converted into electricity through the application of a steam turbine. Generating more than 14.6MW, the facility produces enough electricity to power the equivalent of c.25,000 homes each year.

Construction of the facility began in August 2016 and reached completion in October 2019. The Company first invested £48 million via senior secured debt in 2017. The loan is amortising, with the interest rate set at 7.92% and the final repayment date set for 2042.

Revenue from the project comes from various sources and is highly contracted. A significant proportion comes from 'gate fees' for processing waste, which are at a fixed price and index linked through a CfD agreement with Gloucestershire County Council over a 25 year concession period.

The capacity that remains after Gloucestershire County Council has delivered all residual household waste generated within the county is serviced by processing additional waste from nearby third party commercial and industrial parties. This presents an opportunity for the Gloucestershire energy-from-waste facility to earn additional gate fees.

Another significant source of revenue comes from the electricity generated by the facility, which is sold directly into the grid via a PPA agreement at a fixed price.

As an investment, the Gloucestershire energy‑from-waste facility has several defensive characteristics. Barriers to entry in terms of construction are extremely high, it's a real asset providing a valuable service and, because the Company is invested in its debt, there's the added benefit of capital structure protection.

Sustainability indicators

Environment

65,360 MWh

Energy exported in 2023/24¹

Social

44

FTEs at portfolio asset level¹

Governance

3

ISO certifications¹

Financial

£39.7m

Valuation at 30 September 2024

1. Data at 30 June 2024 to facilitate inclusion in the annual report.

Supported living

Supported living projects create long-dated cash flows supported by the UK Government through the secured pledge of centrally funded benefits.

12%

Percentage of portfolio by value

£118.1m

Valuation of sector

Background

The Company has historically targeted a subset of social housing provision referred to as 'supported living', through financing the development or conversion of existing accommodation to suit specific care requirements of individuals with learning, physical or mental disabilities. This involves providing debt finance to entities that own and develop properties which are leased under a long-term fully repairing and insuring lease to RPs who operate and manage the properties. The RPs receive housing benefits for individuals housed in such properties. The budget for housing benefits in this sector is funded by the central Government and has historically been, and remains, highly protected and uncapped.

Current position

As the Company has reported previously, a number of RPs to which the Company's investments are exposed have historically been graded non-compliant in respect of governance and financial viability by the Regulator of Social Housing ("RSH"). During the year, new management was appointed in a number of the non-compliant RPs, with positive progress made in addressing the concerns of the RSH. The Company has agreed to a number of concessions in the contracts between RPs and borrowers which seek to enhance the financial viability of these entities and retain the long-term value of its investments.

The Investment Adviser maintains the view that the fundamentals of the sector, which is underpinned by a well‑protected housing benefit budget and a care model that has demonstrated healthcare and financial benefits for the recipients and the UK Government, remain attractive. However, listed companies specialising in the sector have faced a number of challenges, with these issues negatively impacting sentiment towards the asset class.

Future outlook

The Company is aware of the concerns of some shareholders regarding the sector and has highlighted its intention to reduce its exposure to the sector as part of its capital allocation policy. The Investment Adviser has been exploring opportunities for the Company to reduce its exposure through disposals or refinancings and expects to materially reduce investment in the sector in the future.

Impact

3,050 - People housed in supported accommodation¹

SDG alignment

SDG 9 - INDUSTRY, INNOVATION AND INFRASTRUCTURE

SDG 11 - SUSTAINABLE CITIES AND COMMUNITIES

1. Data at 30 June 2024 to facilitate data inclusion in the annual report.

Hilldale Housing Association

The Company has, since 2015, been invested in a portfolio of 20 properties which provide 94 units that are leased to Hilldale Housing Association ('Hilldale'), a not-for-profit RP of social housing in the UK and a subsidiary of Change Housing. Hilldale provides supported living accommodation to vulnerable adults with learning disabilities, mental health issues, and other physical or sensory disabilities. The Company's exposure is held through senior debt facilities extended to two underlying borrowers.

Hilldale operates under a 'lease-based' model, holding properties under long-term leases and letting them out to individuals in return for exempt rents which are claimed from local authorities. As has been highlighted previously, the specialist supported living industry has faced a number of challenges in recent years as the sector has matured and regulations and regulatory oversight have evolved. Lease-based social housing providers have faced continued scrutiny from the RSH, in particular around their financial viability given the structure under which they operate. Hilldale has not been immune from this, and has been working to stabilise the business and improve its financial position and standing with the regulator.

It has also been working through a period of increased costs driven by higher energy prices and inflationary pressures. As a result, the Company has been collaboratively working with Hilldale to ensure that support is provided both to the company itself and to its tenants.

In 2023, the Company, via its borrowers, agreed to a cap on the inflation applied to contractual lease rents due from Hilldale, limiting this to 7% compared to CPI, which has been at times in excess of 10%. In March 2024, the Company and its borrowers agreed to provide further support to Hilldale to help it achieve its long‑term financial goals, providing a minor reduction in lease rents payable and a one year break in lease rent indexation. This has allowed Hilldale to navigate the challenges above, as well as the increased costs which it has been facing. This agreement has aligned the leases with industry standards, including the timing of rental indexation and the provision of support for the improvement of EPC ratings across the portfolio.

As a result of this support, Hilldale is now in a good position and can continue with its goal of supporting vulnerable individuals. Its relationship with the Company remains a positive one.

Sustainability indicators

Environment

D

Average EPC rating¹

Social

14

FTEs at portfolio asset level¹

Governance

5

Governance policies implemented¹

Financial

£17.7m

Valuation at 30 September 2024

1. Data at 30 June 2024 to facilitate inclusion in the annual report.

PPP/PFI

PPP/PFI enables the procurement of private sector infrastructure financing through access to long‑term, public sector backed and availability-based payments.

26%

Percentage of portfolio by value

£244.1m

Valuation of sector

Background

Partnerships between the public and private sector to develop, build, own and operate (or a combination thereof) infrastructure have taken a number of forms, with the best known as PFI (Public Finance Initiative), which originated in the UK in the mid-1990s. Since this time, over £60 billion has been invested in the development of new projects across the healthcare, education, leisure, transport and other sectors under such schemes. The design and implementation of revenue support mechanisms such as PFI has been devolved to the Scottish, Welsh and Northern Irish administrations. The Company has exposure to a number of asset classes within the PPP/PFI sector including education, healthcare, waste, leisure and housing.

Current position

The PPP/PFI model for procuring infrastructure fell out of favour before 2020 and there are no material new projects expected to be procured this way in the medium term in England. In Scotland and Wales, the devolved administrations have designed versions of the Mutual Investment Model ("MIM") to facilitate private finance which supports major capital projects, with success developing healthcare, education and transportation projects. To date, these have been large projects benefiting from significant competition for financing and competitive rates from bank lenders.

Future outlook

There has been speculation that the new Government in the UK will develop a funding model which encourages private capital to finance new social infrastructure; however, there has not yet been any formal confirmation of this. If this were to change, it would reverse long‑standing policies against the procurement of new infrastructure using private sector finance, supported by long‑term availability‑based payments. Should there be any changes to procurement models, or attractive opportunities through the MIM regime, the Company would consider investment opportunities alongside its broader capital allocation policies.

Impact

26,196 - School places at portfolio assets¹

SDG alignment

SDG 3 - GOOD HEALTH AND WELL-BEING

SDG 4 - QUALITY EDUCATION

1. Data at 30 June 2024 to facilitate data inclusion in the annual report.

GCP Healthcare 1A

The Company has issued a loan note secured against subordinated debt in the New Queen Elizabeth II ('QEII') Hospital in Welwyn Garden City, and six Local Improvement Finance Trust ("LIFT") projects in the South East and Midlands. The primary counterparty for each project is the local Primary Care Trust ("PCT"). PCTs are statutory NHS bodies responsible for the delivery of health services. The LIFT assets are underpinned via a head lease with Community Health Partnerships ("CHP"), a Department of Health and Social Care owned company.

The New QEII hospital in Welwyn Garden City is the largest asset, a day hospital that opened in 2015 replacing the original Queen Elizabeth hospital that opened in 1963. It provides a range of outpatient clinics and services including blood tests, as well as an urgent treatment centre which is open every day.

The hospital was designed to be sustainable and environmentally friendly; the shape and layout of the building creates natural shading, the window glass prevents the building from getting too hot and a planted green roof encourages biodiversity.

The underlying loan is financed from the subordinated cash flows that arise from the projects, with the investment returning an IRR of 7.7%. The loan allows the Company to earn an attractive yield from a portfolio of mature, well‑performing PPP/PFI projects that benefit from Government-backed cash flows without taking equity risk, and therefore fits the Company's investment strategy. The nature of the underlying projects (non-acute healthcare services) is at the stable and secure end of the infrastructure spectrum of asset types.

The Company's portfolio comprises loans secured against 40 healthcare projects representing 9% of the portfolio by value.

Sustainability indicators

Environment

C

Average EPC rating¹

Governance

8

Governance policies implemented¹

Financial

£2.8m

Valuation at 30 September 2024

1. Data at 30 June 2024 to facilitate inclusion in the annual report.

Investment portfolio

Portfolio performance

The Company is exposed to a portfolio of 50 investments with a weighted average annualised yield¹ of 7.8% and an average life of eleven years. The portfolio has performed materially in line with expectations during the year. The priority for the Investment Adviser has been executing the capital allocation policy, as it actively works to refinance or dispose of investments to achieve its stated aims.

During the year, the Company announced the disposal of its interest in loan notes secured against Blackcraig Wind Farm, a 52.9MW onshore wind farm located in Dumfries and Galloway, Scotland. The wind farm benefits from ROC subsidy support and has been operational since 2018. The disposal occurred at a 6.4% premium to the valuation at 31 March 2024 and generated cash proceeds of £31.4 million.

The disposal was supportive of the Company's assessment of its conservation approach to valuation methodology for the renewable energy assets in the portfolio. In line with the objectives of the capital allocation policy, the proceeds of the disposal were used to prepay drawn balances under the Company's RCF.

From an operational perspective, the renewables portfolio is performing in line with expectations, with the Company benefiting from diversification in technologies across varying weather patterns. Across renewable energy assets, wind speeds have been below long-term averages nationwide, combined with a number of electrical faults and elevated curtailment in Northern Ireland, which has impacted performance. Solar irradiance has been below budget, as the UK has suffered from less sunshine hours than average over the last twelve months. The hydro portfolio benefited from higher than average rainfall levels in the winter period.

Previously, the Company reported ongoing challenges at a portfolio of gas-to-grid anaerobic digestion projects in Scotland. Significant progress has been made, completing grid upgrade works to provide a more reliable method of injecting biogas into the gas grid and reducing the likelihood of curtailment. Further development to implement carbon capture and storage capability at the projects is in process, with planning permission granted on two of the three sites, and the third application submitted for approval.

A portfolio of solar investments continues to be exposed to the outcome of ongoing Ofgem audits relating to the accreditation and ongoing compliance of eight ground-mount commercial solar projects accredited under the RO. The Company had no further contact from Ofgem during the year. Three projects in total in the portfolio have had their ROCs revoked. Eleven projects have been audited and retained their ROCs, while a further eight remain subject to audit.

A claim has been filed in connection with the Company's rights under the original investment documentation in respect of the losses it has incurred due to the revocation. The aggregate provisions in connection to the circumstances relating to the audits total £6.9 million, which were recognised at 30 September 2023.

The Company remains confident that it will be able to either solely or cumulatively: (i) address Ofgem's queries to prevent or mitigate any negative impacts on the further eight assets that remain under audit; (ii) successfully challenge any adverse decision by Ofgem on other assets under audit; or (iii) recover losses it incurs from third parties in relation to a breach of investment documentation across all affected assets.

The Company made follow-on investments in respect of these assets during the year, seeking to preserve and enhance value by performing repowering and funding additional works or exploration. The total quantum of these investments was £0.75 million.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Portfolio summary

Portfolio by sector type

Portfolio by income type

Portfolio by annualised yield¹

Portfolio by average life (years)

Portfolio by investment type

1. APM - for definition and calculation methodology, refer to the APMs section below.

Top ten investments

Key

1              Project type

2              % of total portfolio

3              Cash flow type

1 Cardale PFI Investments¹

1              PPP/PFI

2              12.7%

3              Unitary charge

2 Gravis Solar 1

1              Commercial solar

2              9.7%

3              ROC/PPA/FiT

3 GCP Programme Funding S14

1              Biomass

2              5.4%

3              ROC/RHI/Merchant

4 GCP Bridge Holdings

1              Various²

2              5.0%

3              ROC/Lease/PPA

5 GCP Programme Funding S10

1              Supported living

2              4.5%

3              Lease

6 GCP Programme Funding S3

1              Anaerobic digestion

2              4.4%

3              ROC/RHI

7 Gravis Asset Holdings H

1              Onshore wind

2              4.4%

3              ROC/PPA

8 GCP Biomass 2

1              Biomass

2              4.1%

3              ROC/PPA

9 GCP Social Housing 1 B Notes

1              Supported living

2              3.8%

3              Lease

10 GCP Green Energy 1 Ltd

1              Onshore wind/Commercial solar

2              3.7%

3              ROC/FiT/Merchant

1. The Cardale loan is secured on a cross-collateralised basis against 18 individual operational PFI projects.

2. GCP Bridge Holdings is secured against a portfolio of six infrastructure investments in the renewable energy and PPP/PFI sectors.

Portfolio overview

In the reporting year, the valuation of the portfolio decreased from £1,046.6 million at the prior year end to £960 million. The principal value of the portfolio at 30 September 2024 was £965.3 million (30 September 2023: £1,001.1 million). Investments made and repayments received during the year are summarised in the chart below:

Investment analysis for year ended 30 September 2024

Capital structure

As part of its investment portfolio, the Company has targeted investments across a number of asset classes and within different elements of the capital subordinated or equity.

Discount rates

The independent Valuation Agent carries out a fair market valuation of the Company's investments on behalf of the Board on a quarterly basis. The valuation principles used by the independent Valuation Agent are based on a discounted cash flow methodology. A fair value of each asset acquired by the Company is calculated by applying an appropriate discount rate (determined by the independent Valuation Agent) to the cash flow expected to arise from each asset. Further information is included in note 19.3 to the financial statements.

The weighted average discount rate used across the Company's investment portfolio at 30 September 2024 was 7.95%, compared to 7.69% at 30 September 2023. Increases to discount rates were applied by the independent Valuation Agent during the year as a result of the changes in gilt and wider credit markets, and with reference to market transactions. The third party independent valuation of the Company's portfolio at 30 September 2024 was £960 million (30 September 2023: £1,046.6 million). The principal value was £965.3 million (30 September 2023: £1,001.1 million) at the year end.

The valuation of investments is sensitive to changes in discount rates and sensitivity analysis detailing this is presented in note 19.3 to the financial statements.

Performance updates

The specific factors that have impacted the valuation in the reporting year are summarised in the table below.

Valuation performance attribution

1. Refer to commodity swap below.

2. The derivative financial instrument is utilised to mitigate volatility in electricity price movements as detailed above, refer to note 18 for further details.

Pipeline of investment opportunities

The Company's focus this year has been on executing its capital allocation policy, however, it continues to engage with market participants to stay informed of transaction activity and potential investment opportunities across existing sectors and emerging technologies. With the current elevated Bank of England base rates, the cost of debt from banks, offered at a margin over SONIA, is higher than it has been historically, which means the Company is more competitive than it would be in a low-rate environment. Current market opportunities offer the potential to reinvest at a lower risk-adjusted return, or to seek out significantly higher returns. The Company also has potential follow-on investment opportunities in the existing portfolio, benefiting from the known credit of existing counterparties.

Portfolio sensitivities

This section details the sensitivity of the value of the investment portfolio to several risk factors to which it is exposed. A summary of the overall investment portfolio risks, and the Investment Adviser's view of the changes in risk, can be found above. Sensitivity analysis to changes in discount rates on the valuation of financial assets is presented in note 19.3 to the financial statements.

Renewable valuations

The table below summarises the key assumptions used in forecasting cash flows from renewable assets in which the Company is invested, and the range of assumptions the Investment Adviser observes in the market.

The Investment Adviser does not consider that the market compensates such differences in assumptions by applying a higher or lower discount rate to recognise the increased or decreased risks respectively of a valuation, resulting in potential material valuation differences. This is shown in the sensitivity of the Company's NAV to a variation of such assumptions in the table below, on a pence per share basis.

1. Lower valuations updated to reflect the Afry Q3 2024 Central-Low curve, compared to the previous year which used the Afry Q3 2023 curve.

Inflation

A total of 47% of the Company's investments by value have some form of inflation protection. This is structured as a direct link between the return and realised inflation (relevant to the supported living assets and certain renewable assets) and a principal indexation mechanism which increases the principal value of the Company's loans outstanding by a share of realised inflation over a pre-determined strike level (typically 2.75% to 3.0%).

The table below summarises the change in interest accruals and potential NAV impact associated with a movement in inflation.

Electricity prices

A number of the Company's investments rely on market electricity prices for a proportion of their revenues. Changes in electricity prices may therefore impact a borrower's ability to service debt or, in cases where the Company has taken enforcement action and/or has direct exposure through its investment structure, it may impact overall returns.

The Company continues to account for the impact of the UK Government's Electricity Generator Levy on energy generators. However, power prices have softened significantly since the charge was implemented and are not forecast to be greater than the benchmark level (£75 per MWh) consistently in the future. As such, the impact on the Company's portfolio has been minimal. More broadly, the Company's approach of using the quoted futures price for the three year period immediately after a valuation date, and the Afry average thereafter, has not changed year-on-year.

Over the course of the year, both near-term futures prices and longer-term Afry projections have softened, and have displayed considerably less volatility than in recent years. In the short term, healthy European gas supplies have helped reduce price expectations, with levels significantly more stable than they were this time last year. In the long term, ambitious decarbonisation targets from the new Government, and the potential for new policies to incentivise deployment, have the potential to significantly change the future generation mix. The shift away from traditional thermal generation in the medium to long term and decreased technology costs have reduced the margin price of the system. Recent geopolitical developments in the Middle East and the continuing conflict in Ukraine have the potential to increase oil prices, which could feed through into electricity prices.

The table below shows the forecasted impact on the portfolio of a given percentage change in electricity prices over the full life of the forecast period, the impact on hedging arrangements in the period to expiry (31 March 2025), and the subsequent net impact on a pence per share basis. Further information on the Company's hedging arrangements is detailed below and in note 18 to the financial statements.

Hedging

As further detailed in note 18 to the financial statements, the Company continues to engage in a hedging strategy, entering financial derivative arrangements to hedge a portion of its financial exposure to merchant electricity prices on a seasonal basis. The Company continues to lock in attractive electricity prices by fixing prices under PPAs at an asset level, as well as mitigating volatility through hedging arrangements at a Company level. During the year, the Company engaged with an additional hedge counterparty, diversifying its pool of potential hedge providers and optimising the rates offered.

The Investment Adviser and Board will continue to review the hedging strategy on an ongoing basis with the objective of mitigating excessive NAV volatility and managing risks relating to hedging, including credit and cash flow impacts.

Financial review

Financial performance

It has been a challenging financial year for the Company, with investment revaluations driven by electricity prices and inflation negatively impacting profitability. This year has seen a material cooling in both factors. Refer above for analysis of valuation movements.

Total income generated by the Company was £38.3 million (30 September 2023: £51.7 million), comprising loan interest of £87.3 million, net unrealised valuation losses on investments of £51.8 million, net realised gains on investment disposal of £1.9 million and other income of £0.5 million (30 September 2023: loan interest of £80.8 million, net unrealised valuation losses on investments of £51.6 million and net realised gains on investment disposal of £0.1 million). Refer to note 3 for further information.

Net gains on derivative financial instruments at year end were £0.5 million (30 September 2023: £12.9 million), reflecting the electricity price hedging arrangements which locked in attractive price levels for the Company. Refer to note 18 for further information.

Total income was offset by operating costs for the year of £11.3 million (30 September 2023: £11.4 million) which include the Investment Adviser's fees, the Administrator's fees, the Directors' fees and other third party service provider costs.

These, and other operating costs, have remained broadly in line with previous years.

The Company remains modestly geared at the year end, with a loan to value¹ of 6.2%. Finance costs have decreased year-on-year to £7.5 million (30 September 2023: £9.4 million), due to the reduction in the drawn balance of the RCF following the net repayment of £47 million during the year.

Total profit and comprehensive income has decreased from £30.9 million in the prior year to £19.5 million. As previously noted, the year‑on‑year reduction was primarily attributable to investment revaluations in the year.

1. APM - for definition and calculation methodology, refer to the APMs section below.

Revolving credit facility

The Company has credit arrangements of £150 million across four lenders: Lloyds, AIB, Mizuho and Clydesdale. At year end, £57.0 million was drawn and the terms in place are summarised below:

The RCF is due to expire in March 2027. The Investment Adviser completed the refinancing of the previous facility in March 2024, reducing total commitments by £40 million, in line with the Board's stated intention to reduce leverage by the end of 2024.

The total drawn balance of the facility has reduced from £104 million at 30 September 2023 to a materially reduced level of £57 million at year end following repayments of the RCF throughout the year.

Further details are disclosed in note 15 to the financial statements.

Net assets

The net assets of the Company have decreased from £956.6 million at 30 September 2023 to £913.1 million at 30 September 2024. The Company's NAV per share has decreased from 109.79 pence at the prior year end to 105.22 pence at 30 September 2024, a decrease of 4.2%. This is primarily due to downward revaluations of investments as detailed above.

Cash generation

The Company received debt service payments of £129.0 million (30 September 2023: £136.8 million) during the year, comprising £65.1 million of cash interest payments and £63.9 million of loan principal repayments (30 September 2023: £58.8 million and £78 million). The Company paid cash dividends of £60.8 million during the year (30 September 2023: £61.8 million). The Company aims to manage its cash position effectively by minimising cash balances, whilst maintaining the financial flexibility to pursue a pipeline of investment opportunities. This is achieved through the active monitoring of cash held, income generated from the portfolio and the efficient use of the Company's RCF.

Hedging

The Company entered into two separate arrangements to hedge its financial exposure to electricity prices during the year. The Investment Adviser recommended hedging c.75% of the Company's exposure to the GB market for the summer 2024 season at a fixed price of £62 per MWh and the winter 2024/25 season at a fixed price of £82.20 per MWh. The mark‑to-market of the hedge at 30 September 2024 was a liability of £0.1 million. Further details on the Company's electricity price exposure and hedging strategy can be found above and in note 18.

Share price performance

The Company's total shareholder return¹ was 28.4% for the year (30 September 2023: -25.2%) and 101.8% since its IPO in 2010. During the year, the Company's shares have traded at a discount¹ to NAV, with an average of 32.4% for the year and a discount¹ of 25% at the year end. The shares have traded at an average premium¹ of 3.8% since IPO (30 September 2023: 7.9% premium¹ since IPO). The share price at 30 September 2024 was 78.60 pence per share (30 September 2023: 67.70 pence).

Further details on share movements are disclosed in note 16 to the financial statements.

Dividends

The Company aims to provide shareholders with regular, sustained, long-term dividends. For the year ended 30 September 2024, the Company paid a dividend of 7.0 pence per ordinary share (30 September 2023: 7.0 pence).

The Board and Investment Adviser do not believe there have been any material changes in the Company's ability to service sustained and long‑term dividends since the assessment in early 2021 that established a dividend target² of 7.0 pence per share. As such, the Company has set a target² at the same level, 7.0 pence per ordinary share, for the forthcoming financial year.

1. APM - for definition and calculation methodology, refer to the APMs section below.

2. The dividend target set out above is a target only and not a profit forecast or estimate and there can be no assurance that it will be met.

Dividend cover

In determining the dividend target¹ for the forthcoming financial year, the Board and Investment Adviser reviewed the sustainability of the dividend level against various metrics, most notably the APM based on interest income accruing to the benefit of the Company from the underlying investment portfolio, which is; loan interest accrued².

The Board recognises there are various methods of assessing dividend coverage. The Board and the Investment Adviser consider this metric to be a key measure in relation to the ongoing assessment of dividend coverage alongside earnings cover² calculated under IFRS. The loan interest accrued² metric adjusts for the impact of pull‑to‑par, which is a feature of recognising earnings from the investment portfolio presented under IFRS.

Further analysis on dividends is shown in note 9 to the financial statements.

1. The dividend target set out above is a target only and not a profit forecast or estimate and there can be no assurance that it will be met.

2. APM - for definition and calculation methodology, refer to the APMs section below.

3. Includes 2023 fourth interim dividend of 1.75 pence per share paid in the 2024 financial year.

4. Principal repayments are excluded for the purpose of calculating dividend cover.

Sustainability

Statement from the Chair of the Sustainability committee

Dawn Crichard

Chair of the Sustainability committee

I am pleased to present the sustainability report for the Company for the year ended 30 September 2024. As Chair of the Sustainability committee, I am excited to share the progress the Board has made against the Company's ESG objectives as described in the 2023 annual report, as well as our plans for the future.

This year, the Company introduced a formal ESG policy, which formalises its ESG processes. The Investment Adviser also obtained B Corp certification, formalising its sustainable and long-term business model, and providing a rigorous framework against which to benchmark its sustainable activities. The Investment Adviser improved its PRI score for the second consecutive year, highlighting its commitment to continual improvement in its ESG focus and reporting. Both achievements complement the Company's Green Economy Mark from the LSE, which was awarded in 2020 in recognition of the Company's contribution towards driving a greener economy.

Infrastructure has a positive purpose and the Company's assets have a strong social and environmental impact. The Board aims to enhance the integration of ESG criteria in the Company's operations, ensuring that the portfolio not only addresses the current needs of stakeholders, but is also able to adapt to future challenges and needs. The Company finances infrastructure which benefits end users in society and its portfolio contributes to the generation of renewable energy. The Board is committed to creating a positive social and environmental impact through the Company's investments.

With the election of the new Government in July 2024, it is evident there may be greater opportunity for private investment in the renewable energy infrastructure sector.

The new Government has pledged to work with the private sector to double onshore wind, triple solar power and quadruple offshore wind by 2030, with increased spending across the renewable energy infrastructure sector. The Company's investments in financing renewable energy assets are pivotal to this journey, with 62% of the portfolio generating 1,320 GWh of renewable energy this year, sufficient to power 488,842 average households¹.

The Company's investments in the supported living sector provide support for vulnerable adults, helping those in the community that need it the most. These properties blend specially adapted residences with purpose-built facilities, facilitating the delivery of high-quality supported living services.

PPP/PFI assets in the Company's portfolio are integral to the functioning of UK society, and provide long-term partnerships with the public sector. Within this sector, the Company's investments span education, healthcare, waste, leisure and housing. Highlights include investments secured against 49 schools which offer 26,196 school places and 40 healthcare facilities providing beds for 1,649 patients.

There is no doubt that investing in clean energy infrastructure is key to protecting our planet from climate change. The Company aims to build a sustainable and positive future through its investments in renewable energy, supported living and PPP/PFI projects. This is a future that combines social responsibility with environmental stewardship.

1. Source: Ofgem, average gas and electricity usage.

ESG policy

The Company has strong ESG credentials, demonstrated through the positive impact of its portfolio. The Company invests in assets that are integral to society, including those that contribute to a greener economy. As a result, the Company aligns with certain SDGs, which promote sustainable development globally through social, economic and environmental initiatives.

This year, the Company implemented an ESG policy to formalise its ESG processes and ensure its responsible investment practices align with the Investment Adviser's Responsible Investment policy.

The ESG policy addresses three key areas, outlined below:

Investment policy

The Company seeks investment opportunities which generate sustainable returns whilst simultaneously having a positive environmental and social impact. This is achieved through positive and negative ESG screening, detailed ESG due diligence and comprehensive ongoing monitoring and engagement.

Corporate governance

The Board is committed to undertaking its activities in a carbon-neutral manner, utilising carbon offsetting measures where necessary.

The Board seeks to govern the Company in accordance with all applicable laws, rules and regulations, as well as corporate governance best practice.

The Board has established a Sustainability committee responsible for developing, implementing and monitoring the Company's ESG policies and procedures.

The Board aims to fully comply with the recommendations of the TCFD and consider other similar initiatives.

Activities of key service providers

The Company seeks to influence its main service providers to ensure they are following best practice regarding ESG matters.

The ESG policy is split into seven sections, covering screening, ESG due diligence, monitoring and engagement, corporate governance, modern slavery, corporate ESG initiatives and ESG frameworks.

The ESG policy can be found on the Company's website.

Q&A with Dawn Crichard, Chair of the Sustainability committee

How does the Company approach climate change risk, and what specific measures has it taken to reduce the carbon footprint of its portfolio?

The Company includes climate change risks within the emerging risks category of its risk management framework. Climate change risks are both physical and transitional, and the Board considers climate change risks a long-term issue. The impact of climate change on the Company's portfolio is monitored by the Board, the Sustainability committee and the Investment Adviser. This includes monitoring and assessing the impact of changing Government policies on the investment portfolio and the Company as a whole. The Investment Adviser, on behalf of the Company, carries out an annual climate risk assessment for each underlying portfolio asset to assess the actual and potential impact of climate-related risks across the portfolio. The analysis considers both physical and transition risks for each asset and is supported by expert third party consultants.

The carbon impact of infrastructure contributes to a significant proportion of the UK's national emissions from a construction, operation and maintenance perspective. In many cases, the UK's existing infrastructure was not originally designed and constructed with global warming in mind.

The Investment Adviser has sought to encourage energy efficiency projects at portfolio assets where there are opportunities to do so; for example, the Company's 'SolarCatcher' initiative supported the installation of solar panels and electric vehicle charging points at schools in England to help reduce energy costs and incentivise increased electric vehicle uptake among employees.

As the Company is a debt provider that doesn't own or control 94% of assets in the portfolio, there are certain limitations in the Company's influence on portfolio assets. As such, the Company is limited in its capacity to reduce the carbon emissions of its assets but it can influence them by supporting energy-saving schemes.

What steps has the Sustainability committee taken to promote diversity, equity and inclusion ("DEI")? How does it maintain progress in these areas?

The Board considers DEI an important factor in ensuring all Board members have the right balance of skills, experience and independence to make informed and knowledgeable decisions. The right blend of perspectives is critical to ensuring the success of the Company. The Board monitors the DEI criteria of the companies it invests in through its annual data collection project.

The Board maintains 50% gender and ethnic diversity, with 49% gender diversity of SPV company boards, increasing from 36% in the previous year. The Board and the Investment Adviser recognise that gender diversity is a challenge in the investment industry, and that a concerted and collaborative effort is required to make the financial services sector more open and attractive for women at all levels of seniority. As such, the Investment Adviser supports the Young Women Into Finance Scholarship programme, a not-for-profit social organisation dedicated to the eradication of gender bias for new graduates entering the finance industry.

The Investment Adviser also participated in the 10,000 Black Interns programme this year for the second year, which offers paid internship opportunities across more than 25 sectors, along with training and development opportunities.

This commitment to paid internships reflects the Investment Adviser's passion for inspiring change and helping young people achieve a career in the investment industry.

What are the Board's expectations regarding ESG reporting and transparency from portfolio companies? How does the Investment Adviser ensure companies are meeting these standards and the data they provide is reliable?

The Investment Adviser carries out an annual data collection project to collect material ESG metrics from the underlying portfolio. The process involves the Investment Adviser's portfolio management team liaising with each asset operator to obtain relevant ESG data on the underlying portfolio assets. In addition, key relevant ESG indicators are monitored by the Investment Adviser's portfolio management team. The Investment Adviser seeks to engage with equity owners and/or operators of projects to understand the ESG factors relevant to those projects or properties, and, where possible, use influence as a lender of capital or investor to manage exposure to ESG risks.

This year, GHG emissions verified data was 74%, compared to 53% in the prior year. This increase in supporting evidence for Scope 1, 2 and 3 suggests that, with the support of the Investment Adviser, underlying assets are becoming more familiar with the data collection project. Changes in carbon footprint data are monitored over time and reported on in the annual report.

For the second year, the Company utilised the services of Aardvark, an independent external ESG certification service who provide independent and impartial auditing and certification services. Aardvark reviewed the outputs from the data collection project, verifying the calculated carbon emissions were correct and provided limited assurance. As part of this, Aardvark reviewed primary evidence supporting the data collection and, where this was absent, they reviewed the reliability of secondary data. Aardvark have also made recommendations on how the Company can improve its data collection so that it can prepare for a reasonable assurance process in future.

The Company engaged Terra Instinct, a sustainability advisory firm, to perform a gap analysis on the Company's TCFD disclosures and climate risk assessment. The gap analysis examined the Company's current approach to the disclosures and climate risk assessment, identifying specific areas for recommendations on how it could be improved.

In addition, new investments provide the opportunity to include data requirements as part of the loan documentation.

How does the Sustainability committee and the Investment Adviser ensure that the Company is capitalising on Government policy initiatives that support increased investment in sustainability?

Government policy supporting infrastructure investment is likely to grow with the new Government's ambitious decarbonisation targets. The new Government has ambitions to accelerate the deployment of renewable energy, which is expected to involve a massive overhaul of the UK renewable energy sector and is set to increase incentives for private investment in renewable energy infrastructure. As an experienced infrastructure provider, the Company is well placed to capitalise on Government policies that incentivise this investment.

As such, increased Government policy support in this area may incentivise the Company to expand into new areas for investment, and as part of this, the Sustainability committee works with the Investment Adviser to incorporate and monitor sustainability considerations into the investment process. In addition, the Investment Adviser is an experienced investor in new and existing green technologies and opportunities. This experience enables the Company to react quickly to new Government initiatives and the Board regularly reviews and monitors these opportunities.

What metrics or benchmarks does the Board use to measure the success of its ESG policies over time?

As the Company invests in infrastructure that is integral to society, the Company's  activities align with certain SDGs, as outlined by the UN. When developing the Company's focus areas, the Board considered the SDGs that have the highest materiality to the Company and sector and the SDGs that it may have an impact on, as well as those that have the highest impact on stakeholders. The SDGs are important to investors and there is a strong business case for investing in sectors aligned with the SDGs. The Company reports its alignment with the SDGs to highlight its responsible investment efforts. This reporting is key to building trust, transparency and accountability with stakeholders. The Investment Adviser also reports its responsible investment activities to the PRI through its annual assessment process. The PRI reporting process is the largest global reporting project on responsible investment. This year, the Investment Adviser improved its PRI assessment score, scoring an average of 80 points out of 100, with scores higher than the median in each category. Refer below for more information.

ESG integration

The Company and the Investment Adviser have made considerable progress with integrating ESG considerations across the Company.

Governance

2023

·      The Sustainability committee reviewed and updated the Company's Modern Slavery statement.

·      Blackcraig Wind Farm achieved a GRESB rating of four green stars and 90 out of 100 points.

·      The Investment Adviser achieved its aim of carbon neutrality by 2023.

·      The Investment Adviser considered the application of the SFDR to the Company and undertook training on the topic.

2024

·      The Company formalised and published an ESG policy, which encompasses all aspects of responsible investment.

·      The Investment Adviser achieved B Corp certification with a score of 99.4.

·      Biodiversity and DEI considerations were added to the ESG due diligence process, as well as a climate risk assessment for all new investments.

·      The Investment Adviser began a process which ensures each potential asset undergoes a credit risk assessment that incorporates ESG risk.

2025 (and further)

·      The Company and Investment Adviser to apply lessons learnt and best practice across the portfolio where appropriate.

·      Work with borrowers to understand where the Company can support them in their diversity ambitions.

·      The Company to consider further initiatives to reduce carbon emissions across the portfolio and at the Investment Adviser.

·      Continue to embed ESG considerations into the investment process more broadly, utilising third party consultants as appropriate.

·      The Company to consider publishing a separate Human Rights policy.

·      The Investment Adviser to continue reviewing responsible investment practices to improve its B Corp score over time.

Reporting

2023

·      The Company continued to develop its data collection project, and collection of ESG metrics and targets.

·      The Company appointed an external consultant to review carbon emissions data.

·      The Investment Adviser expanded its Responsible Investment report to include additional information under TCFD.

·      The Company broadened its TCFD reporting to include a partial 2ºC warming scenario under strategy c) disclosures.

·      The Company expanded its climate risk assessment to include opportunities and a partial 2ºC climate scenario.

·      The Investment Adviser reviewed the potential biodiversity impact for two portfolio assets and undertook training on biodiversity net gain opportunities.

2024

·      Engaged Terra Instinct to perform a gap analysis on the Company's climate risk assessment.

·      Expanded TCFD reporting to include all physical risks in a 2°C global warming scenario.

·      Continued to work with Aardvark to review the data collection project and verify the calculated carbon emissions data, working towards reasonable assurance in the future.

·      Analysed the UK's SDR and investment label rules.

·      Engaged Terra Instinct to perform a gap analysis on the Company's TCFD disclosures.

·      Terra Instinct undertook analysis to prepare the Company for future reporting under the ISSB published standards.

2025 (and further)

·      The Company to consider further ESG metrics and targets and improve data collection coverage and quality.

·      The Company to continue its project to obtain reasonable assurance over its carbon emissions data.

·      Continue to prepare to report under new ISSB standards that are applicable to the Company.

·      Consider recommendations from the ESG consultants with a view to implementing in future years.

·      Consider material and relevant specific ESG targets for the Company under TCFD metrics and targets c) disclosures.

·      The Company to continue developing its climate risk assessment in line with best practice recommendations.

·      Assess the feasibility of making the data collection process a half-yearly exercise and develop training in this area.

·      Consider reporting under SDR when the Company is brought into scope.

Awareness

2023

·      The Investment Adviser introduced biodiversity considerations into its investment process and ran biodiversity training for staff members.       

·      The Investment Adviser funded three ESG‑focused internships to support the work on the Company's ESG strategy and to assist with the data collection project.

2024

·      The Investment Adviser continued its involvement with the 10,000 Black Interns programme and the Young Women Into Finance programme.

·      The Investment Adviser participated in a mid-term review by Investors in People to review its status.

·      The Investment Adviser expanded its charity of the year scheme to include more charities and continued to offer paid volunteering days to employees.

2025 (and further)

·      The Company to implement biodiversity net gain reporting for portfolio assets.

·      The Company to produce a separate ESG report.

·      Improve the coverage of the Company's data collection project.

·      Continue to work with partners to offer further internships with the Investment Adviser.

·      The Investment Adviser to introduce a formal recruitment policy which incorporates DEI criteria where possible.

Responsible Investment

Investment process

The Investment Adviser has been a signatory to the PRI since 2019. The PRI, established in 2006, is a global collaborative network of investors working together to put the six principles of the PRI into practice. The Investment Adviser recognises that applying these principles better aligns its investment activities with the broader interests of society and has committed to their adoption and implementation. ESG considerations are integrated into the Company's investment decisions and are led by the investment team.

As part of its responsibilities as a signatory to the PRI, the Investment Adviser is required to report publicly on its responsible investment activities each year. In turn, it receives a PRI assessment report. The assessment uses the reported information of signatories and outlines how signatories' responsible investment practices compare year-on-year, across asset classes, and with peers at a local and global level.

This year, the Investment Adviser improved its PRI assessment score, scoring an average of 80 points out of 100 and four out of five stars for each category. Areas of improvement from this year's score were policy, governance and strategy, which improved by a total of nine points, and fixed income, which also increased by nine points. This was an improvement on 2022's score of an average of 76 points.

The Investment Adviser continued to score higher than the median in each category. The chart on page 64 of the full annual report on the Company's website provides further information on the Investment Adviser's results.

Investment Adviser PRI scorecard - year to 31 December 2023.

AUM coverage

Policy governance and strategy | 89%

Direct - Listed equity - Active fundamental >50% | 73%

Direct - Fixed income - Corporate >+10 and <=50% | 79%

Confidence building measures | 80%

Responsible Investment policy

The Investment Adviser's Responsible Investment policy is integrated into investment management processes and incorporates pre-investment, active ownership and governance processes, as detailed below.

Portfolio governance

Governance at the Company level is clearly managed and articulated to achieve the Company's investment strategy, including managing risks and creating a positive environmental and social impact. The Investment Adviser engages with the underlying assets' boards to enhance governance at the portfolio level. Investment documentation issued by the Company includes standard provisions to ensure effective governance within investee companies including compliance by these companies with applicable environmental, health and safety, anti-money laundering, know your customer and employment requirements.

During the year, the Investment Adviser continued to develop its climate risk assessment process for each underlying portfolio asset. The process assesses the actual and potential impacts of climate‑related risks and opportunities across the portfolio and considers both physical and transition risks and transition opportunities for each asset. Further information can be found below.

The directors and employees of the Investment Adviser sit on the boards of, and control, the SPVs through which the Company invests. The Company has delegated the day-to-day operations of these SPVs to the Investment Adviser through the Investment Advisory Agreement. The Company collects diversity data on new investment opportunities and the Investment Adviser includes diversity data in its responsible investment checklist, collecting data from potential borrowers that approach the Company. Diversity data is also collected from borrowers as part of the data collection project.

The Board and the Investment Adviser value relationships with borrowers, ensuring time is spent building and maintaining these relationships. Engagement takes the form of regular interaction with the borrowers by the portfolio management teams, including periodic site visits to the underlying assets and their managers. Site visits are an important aspect of the portfolio management role and have both technical and commercial benefits. They allow the Investment Adviser to assess the performance of both asset and contractor and investigate any important project issues that arise.

Furthermore, site visits give the Investment Adviser the opportunity to understand the operations and relationships important to each project and its long-term success. Where the Company is exposed to RPs that have been graded as non-compliant in respect of governance, the Investment Adviser has been working with the RPs to improve processes, people and systems in seeking to address the RSH's governance concerns. Refer above for further information.

In the financial year, 22 site visits were conducted, representing 25% of the portfolio by value and 24% of all SPV companies, including visits to the UBB Waste project (refer above), and renewables and PPP/PFI assets in various UK locations.

SDR

During the year, the Company analysed the new Policy Statement on Sustainability Disclosure Requirements ("SDR") and investment labels. This Policy Statement sets out the UK FCA's final rules on anti-greenwashing, a new labelling regime, naming and marketing rules, product and entity-level disclosures, as well as distributor obligations. As the Company is domiciled in Jersey, it is a non-UK AIF and is therefore unable to use a sustainability label at present. If HMT extends the SDR regime to overseas funds, the Company will consider the implementation of a label. The Company is currently in compliance with the anti-greenwashing rules issued under SDR.

Data collection project

This year, the Investment Adviser continued to improve its data collection project to collect material ESG metrics from the underlying portfolio for the twelve month period to 30 June 2024¹.

The process involves the Investment Adviser's portfolio management team liaising with each asset operator to obtain relevant ESG data on the underlying portfolio assets. The data points that are considered material by the Investment Adviser are detailed in the table below.

This year, environmental coverage increased from 72% in the prior year to 77% this year. This was primarily due to an increased response rate from borrowers.

Several challenges continued to be faced in respect of the availability of the data requested, insofar as the Company is a debt provider and does not own or control 94% of assets in the portfolio.

In the drive for increased transparency in reporting across the industry, the Company has actively sought to improve its data collection project by obtaining limited assurance of its carbon footprint data for the second consecutive year. The Company continued its engagement with Aardvark, an external ESG certification service who provide independent and impartial auditing and certification services. Aardvark reviewed the outputs from the data collection project, verifying the emissions calculations and data for covering Scope 1 and 2 with the inclusion of Scope 3 as far as is practically possible. It was found that a total of 74% of the assets by value had emissions calculations that were supported by primary or secondary evidence.

1. Period chosen to facilitate data inclusion in the annual report.

This was a marked improvement from the previous reporting year where just 53% of the portfolio-level emissions were supported by primary and/or secondary evidence. As part of this, Aardvark reviewed where the use of estimated data for the missing data would be useful or potentially inaccurate.

The Company continues to prepare for a reasonable assurance process in the future, with the assistance of Aardvark, who have provided valuable feedback regarding the Company's carbon emission metrics over the last two years, supporting ongoing enhancement.

Whilst 26% of the emissions data cannot be verified at this stage, the reporting and verification process by Aardvark has led to the development and identification of further steps the Company can take to improve this process in future reporting periods.

The Company also worked with Terra Instinct, an independent external consultant, to advise on the data collection project. This included advice on the ESG data collection approach based on industry frameworks.

They also conducted an independent review of the Company's TCFD disclosures for any significant inconsistencies and provided recommendations for areas where additional data could be presented.

Portfolio data coverage¹

Environmental 5%²

2024            77%

2023            72%

Social (1)%³

2024            73%

2023            74%

Governance (6%)⁴

2024            80%

2023            86%

Carbon footprint⁵

2024

Primary and secondary data 74%

Estimated data 0%

No data 26%

2023

Primary and secondary data 53%

Estimated data 31%

No data 16%

Impact (2%)⁶

2024            94%

2023            92%

1. Percentage of data entries for applicable KPIs per ESG area weighted by portfolio value.

2. Air pollutants emitted, water consumption, waste generated/disposed, energy conservation strategies and net habitat gain or loss.

3. Total FTEs, hours worked, satisfaction surveys, absenteeism rates, H&S metrics, community benefit fund contribution and key engagement initiatives with local community/stakeholders.

4. Gender diversity, Board reporting, ISO alignment/certification, green building certificates, governance and regulatory policies in place and audited accounts.

5. Fuel combusted, imported energy use, water, waste, biogenic emissions, mitigated emissions (landfill), renewable energy and biogas exported, buildings' EPC ratings and energy efficiency plans.

6. People housed, school places, hospital beds and renewable energy and biogas exported.

Corporate ESG initiatives

The Board promotes a positive dialogue with its key service providers regarding social and environmental areas. All key service providers, including the Investment Adviser and the Administrator, regularly report on their efforts and progress in areas such as diversity, the environment and social impact. Service provider initiatives include policies such as promoting paid rather than unpaid internships, charitable donations, volunteering days and encouraging low carbon office environments as well as business travel.

B Corp

In April 2024, the Investment Adviser was awarded a B Corp certification. This involved the Investment Adviser undergoing a 'B Impact Assessment', which measures a company's entire ESG performance. To achieve certification, B Corps must score at least 80 points, with the assessment evaluating a company's practices and outputs across five categories: governance, workers, community, the environment and customers. The Investment Adviser started the process in 2022 and received B Corp certification in April 2024, with a score of 99.4.

Carbon emissions

The Company and the Investment Adviser run their operations on a carbon-neutral basis to support the transition to net zero. As part of its corporate social responsibility, the Board supports the local Jersey charity, Jersey Trees for Life as well as using their scheme to offset its carbon emissions from flights to and from the UK. Whilst not a verified carbon offsetting assurance scheme, the offsetting benefits Jersey Trees for Life, which is the only charity that is dedicated solely to the protection and preservation of trees in Jersey. The charity's aim is to encourage the protection, preservation and planting of trees, and to foster an appreciation of trees through community education for their amenity, ecological preservation and social importance.

The Investment Adviser's premises in London hold a BREEAM 'Excellent' rating, meaning it scored over 70% in a BREEAM assessment, which measures the sustainability performance of buildings. The Investment Adviser encourages the use of public transport and minimisation of flight travel in its business travel policy and operates an electric vehicle scheme and a bike to work scheme.

The Investment Adviser fully offsets its carbon emissions by contributing to a portfolio which is run by provider Climate Impact Partners, whose aim is to reduce one billion tonnes of CO₂ by 2030.

Whilst the Board and the Investment Adviser do not consider offsetting to be by any means a perfect solution to the impact its activities have on the environment, both parties believe it is a useful starting point. The aim is to reduce emissions with the intention of continuing to investigate and follow best practice in this area.

Investors in People

In 2022, the Investment Adviser was awarded an 'Investors in People' accreditation. The Investment Adviser has committed to working with Investors in People over a three year time frame, with the aim of improving its accreditation level over that time. It encourages everyone in the business to reach their potential and provides regular training to staff, including funding for specific industry qualifications. The Investment Adviser also operates a range of measures to support the physical and mental health of its employees, including a private healthcare package and guidance on healthy working practices.

This year, the Investment Adviser held two training sessions for employees on improving mental health at work. It also offers hybrid working arrangements for all employees.

Investors in People carried out a review of the Investment Adviser's progress this year, which involved conducting a business-wide employee feedback survey and holding focus groups with a sample of 13 employees across the business. The survey had a participation rate of 82%. Feedback from the review indicated a positive shift in transparency across the business, as well as improvements in leadership. The review also provided the Investment Adviser with an action plan which identified areas of improvement and actions that can be taken to implement this over time.

Volunteering initiatives

The Investment Adviser operates a volunteering initiative which encourages employees to volunteer for charitable or not‑for-profit purposes by giving an additional two days' paid leave plus two days' unpaid leave per year. It continues to operate its charity of the year scheme, and engage with fundraising, events and through volunteering. This year, the charity of the year scheme was split between charities, including Street Child, Guide Dogs, and Trees for Cities. A total of 19 employees participated with more than 102 hours spent volunteering. This provided employees with an opportunity to work as a team and engage with the local community. The total amount raised for charities this year was almost £47,000.

Diversity, equity and inclusion

The Investment Adviser has a formal diversity policy, and holds diversity and equality training for all employees. The Investment Adviser also carries out an anonymous questionnaire to help understand the makeup of its workforce. This means the data can be monitored over time as the Investment Adviser strives for improvements in DEI, while also considering specific areas of focus.

Internships

The Investment Adviser also continued its participation in the 10,000 Black Interns programme this year, which offers paid internship opportunities across more than 25 sectors, along with training and development opportunities.

The Investment Adviser offered two paid internships as part of the programme, with both interns working across the Company. It also facilitated two paid internships for students as part of the Young Women in Finance programme, as well as hosting two students for work experience placement as part of the programme. Young Women in Finance is an organisation dedicated to the eradication of gender bias for new graduates entering the finance industry, with a goal of achieving a 50/50 gender split in graduate recruitment figures by 2030. One other internship was offered to an ESG masters student. The interns worked across teams at the Investment Adviser with a particular focus on the Company's climate risk assessment.

19

Employees volunteered

102

Hours spent volunteering

£47,000

Raised for charity

Gender diversity¹

Gender of employees

Female                    38.9%

Male                        55.6%

Prefer not to say    5.5%

Ethnic diversity¹

Ethnic group

White British          58.3%

Ethnic minority      36.1%

Prefer not to say    5.6%

1. As at 31 March 2024.

A day in the life of an intern

Morning:

As an intern at the Investment Adviser, my mornings are usually occupied with tasks like summarising initial investment opportunities and participating in team calls and meetings. These tasks offer a first-hand glimpse into the world of infrastructure investment, which I find very exciting. Occasionally, I get the chance to visit the Company's assets, which adds a different dimension to my experience.

Skill building:

Financial modelling is a critical skill in finance, and the Investment Adviser has a structured modelling programme in place for interns. This includes a financial modelling exercise that I work on week-by-week. It's a hands-on way to enhance my financial analysis skills and gain practical experience in asset management.

The team:

One of the highlights of my internship is informal coffee meetings with team members. These conversations not only allow me to understand their career paths and roles within Gravis but also provide opportunities to assist with any tasks they might need help with. It's a dual-purpose opportunity - learning and contributing simultaneously.

Regular check-ins:

I have regular catch-up meetings with my supervisor, where we discuss my current work, address any questions or challenges I'm facing, and delve into career-related advice. It's a mentorship opportunity that helps me navigate my internship and future career prospects effectively.

Presentation:

Towards the end of my internship, I was allocated time to work on a presentation for the team. The presentation centred around a regulatory update that had significant implications for asset managers, particularly regarding disclosure requirements.

In the last week of my internship, I presented to the entire infrastructure team in a collaborative session with several questions from the team. This experience was the highlight of my internship, as it offered a practical application of my skills, and allowed me to showcase my contribution to the team's knowledge and efforts in this area. I also introduced myself to the Board of the Company and explained what I had been working on, which included presenting my findings.

Governance

Disclose the organisation's governance around climate‑related risks and opportunities.

Compliance statement

The Company has voluntarily and partially reported against all four core elements of the TCFD and the eleven recommended disclosures, taking into account the TCFD 'Guidance for All Sectors', as well as the supplemental guidance for the financial sector.

This year, the Company has partially reported against 'Strategy (c)' in respect of different climate‑related scenarios, including developing its 2ºC or lower scenario, and has included more physical risks and improved its data sources.

The Company has omitted to report against 'Metrics and Targets (c)' as the Company continues to develop and refine its data collection exercise this year, including the use of external consultants. As a debt fund, the Board is committed to a thoughtful process of establishing material, accurate and relevant climate-related metrics and targets. It intends to continue developing its approach in the coming years, including its aim of obtaining reasonable assurance over its ESG metrics.

For this reason, the Company is not in full compliance with the TCFD requirements at this stage. It will continue to work towards full compliance.

A. The Board's oversight of climate‑related risks and opportunities

The Board is responsible for setting and monitoring the Company's strategy, which includes consideration of climate‑related risks and opportunities.

The Board is informed about relevant climate‑related issues as part of the quarterly reporting cycle by the Investment Adviser and the Company's own committees.

The Company's committees contribute as follows:

·      Audit and Risk committee: responsible for climate‑related disclosures and sustainability risk assessment

·      Sustainability committee: developing, implementing and monitoring ESG policies and activities

·      Investment committee: considering ESG impacts during the investment due diligence process

·      Management Engagement committee: ensuring key suppliers operate in a socially responsible manner

The Sustainability committee formally meets once a year and engages informally with the Investment Adviser and other service providers regularly, including participating in briefings and new initiatives. It formally reports to the Board at each quarterly Board meeting. This quarterly engagement includes relevant training and ESG updates for the Board, both regulatory and Company specific.

The Investment Adviser utilises external consultants as appropriate, and acquires expertise where needed, including through recruitment. This year, the Investment Adviser funded five ESG-focused internships to support the work the Board is doing as part of its ESG processes and to assist the Investment Adviser with the climate risk assessment and ESG policy. The internships enabled the Company to benefit from a fresh, more diverse perspective with enthusiasm and expertise across environmental matters.

B. Describe management's role in assessing and managing climate‑related risks and opportunities

The Investment Adviser has over a decade of experience in identifying assets with a core environmental and/or social benefit for the Company. The Investment Adviser's in-house expertise includes a Head of Private Credit who has significant experience in incorporating ESG factors into credit ratings. Members of the investment team also have significant experience in sustainable investing. Responsible investment processes are overseen by the Responsible Investment committee, which reports to the board of the Investment Adviser. Further information is provided on pages 106 to 109 in the full annual report on the Company's website.

Climate risks are considered at each stage of the investment process, including the initial deal screening of opportunities and investment due diligence processes. Risk assessment takes the form of both quantitative analysis and qualitative assessments which look at the ESG approach of investee companies.

Environmental impact assessments are carried out where appropriate as part of the due diligence process to identify potential transition and physical short, medium and long-term impacts on costs and viability across service providers and investments.

ESG risks are also incorporated in the credit risk management process. The Investment Adviser identifies relevant ESG risks which could materially impact the credit quality of borrowers. The relevance and materiality of those ESG risks are identified, recorded and assessed. The Investment Adviser assigns an ESG risk (low, medium and high) to each loan to reflect ESG risks potentially impacting the ability and willingness of the borrower to meet its financial obligations on a timely basis. The risk of an asset becoming obsolete because of the energy transition or physical climate risk (such as flooding or drought) or governance without the necessary controls in place, would be categorised as loans with a high ESG risk.

This information is presented to the Investment committee as part of the investment approval process with the Board directly or indirectly addressing climate-related risks and opportunities when evaluating and approving new investments. The Investment Adviser provides fortnightly, ad hoc and quarterly updates to the Board on asset performance, including the response of assets to climate events.

Following execution and investment, key relevant ESG indicators are monitored by the portfolio management teams. The Investment Adviser seeks to engage with investors to understand relevant ESG factors and to manage exposure to risks.

Strategy

Disclose the actual and potential impacts of climate‑related risks and opportunities on the organisation's businesses, strategy and financial planning where such information is material.

A. Describe the climate‑related risks and opportunities the organisation has identified over the short, medium and long term

The Investment Adviser, through its climate risk assessment, has identified, based on current climate conditions, that the portfolio is exposed to physical risks arising from extreme weather events; examples include Storm Eunice in February 2022, which caused damage to solar panels at a solar farm in the portfolio, and increased rainfall leading to flooding at an anaerobic digestion plant in the portfolio, which negatively impacted production at the plant until the end of 2023. However, the overall financial impact of these physical risks to the Company is not material and various mitigants are in place such as comprehensive insurance policies which cover physical damage due to weather‑related events. It is recognised, however, that such insurance policies may not always be available at a reasonable cost or at all and physical resilience or protection of assets is kept under review and action is taken when it is appropriate.

The Company defines short, medium and long‑term risk time horizons as follows: short term: zero to three years; medium term: four to eight years; long term: more than eight years. When considering materiality, the Investment Adviser considered the financial impact each risk could potentially have on the asset if it were to materialise. Further information can be found below.

The main short-term physical risk exposures for the portfolio are water damage and heat stress. However, there are mitigants in place.

For example, the likelihood of these assets experiencing damage at the same time is low due to their geographical dispersion.

The Investment Adviser has also implemented mitigation plans to strengthen the weather resistance of certain assets during the year. These involved improving drainage across anaerobic digestion sites and solar farms in the portfolio to avoid flooding risks. The portfolio assets have general maintenance regimes in place for assets to mitigate the impact of weather, which include applying galvanic paint to prevent rusting on steel structures. In addition, the Investment Adviser switched the fuel supply of a bio-power asset, meaning it can now source fuel from different waste transfer station locations to mitigate the impact of a climate event in one location impacting supply. The Investment Adviser will continue to monitor and review mitigation plans to avoid physical damage to the portfolio assets.

Medium to long term, more frequent extreme weather may place significant pressure on energy infrastructure, including renewables, and could cause damage to components, power lines and transmission grids, including potential disruption to supply chains. Significant impacts may arise in the social infrastructure sector, leading to localised strain on public services, and the potential closure of facilities. Higher temperatures may also impact key components of renewables projects and could also lead to the overheating of buildings, which can adversely impact vulnerable people.

The Company is also exposed to transition risks in the short term from sudden and unexpected changes to Government policy. An example of this is the Electricity Generator Levy in the UK, which taxes certain renewable energy generating assets until 2028.

In the medium to long term, any policy changes to the MEES would impact properties in the social housing sector. The ability to claim MEES exemption caps the maximum exposure to £10,000 per property. Overall, 49% of the social housing portfolio has an EPC rating equal to a C or above, whilst 36% has an EPC rating of D or below, with the remainder either unavailable or unrated. The obligation to improve the energy efficiency of the properties below a 'C' rating sits with the third party RPs under fully repairing and insuring leases, and this will be closely monitored with borrowers.

An increased focus on the ESG aspects of the investment process presents significant opportunities for the Company. At IPO, ESG considerations were not as prominent for investors as they have become in recent years.

Whilst many investment funds and companies are seeking to quantify and reduce their negative environmental and social impact, the Company finds itself in a position where all its investments have a positive environmental or social contribution, meaning sustainability is inherent in the Company's portfolio.

As the UK embarks on the largest transformation of its infrastructure in recent history as part of the transition to net zero, there will be a significant private sector investment requirement to support this, and public sector support will be needed across a range of asset classes. The new Government has pledged to work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030, with increased spending across the renewable energy infrastructure sector. The new Government's Green Prosperity Plan is set to 'partner with businesses' to invest in 'industries of the future', with the aim of creating 650,000 jobs.

B. Describe the impact of climate‑related risks and opportunities on the organisation's businesses, strategy and financial planning

The primary physical impact of climate change on the business will be experienced by the Project Companies the Company lends to: firstly, by increased operating costs or reduced revenues due to physical risks materialising.

In many cases, physical mitigation measures exist and there is a degree of contractual protection built into loan agreements from these increased costs.

Secondly, the credit quality of the Project Companies may deteriorate. For example, extreme weather events might materially increase the cost of insuring some assets, or they might make some assets uninsurable. These impacts, if material, may lead to a reduction in the valuation of the portfolio.

Regarding the Company's strategy, the portfolio benefits from its geographic, technological and market diversification. Conversely, opportunities may arise which enable the Company to deploy capital to a wider range of asset classes, providing further diversification into new sectors and thereby increasing revenues.

For financial planning, one potential transitional impact of climate change arises from the increased deployment of renewable power generation reducing the marginal cost of electricity and impacting revenue. A mitigating factor for this is the increased use of direct PPAs, which will thereby secure steady revenue streams. The Investment Adviser, on behalf of the Company, has successfully implemented a number of these agreements. Further information on the Company's electricity price exposure can be found above. Based on the climate risk analysis undertaken, referred to below, the Investment Adviser does not currently propose to make any changes to financial forecasts due to climate risk.

C. Describe the resilience of the organisation's strategy, taking into consideration different climate‑related scenarios, including a 2ºC or lower scenario

The climate change risk assessment carried out by the Investment Adviser has concluded that the Company's strategy is resilient to both the physical and transition risks associated with climate change. This year, the Investment Adviser increased the scope of its 2ºC or lower scenario to include analysis of changes in physical risks. In doing so, it has noted resilience to the identified physical risks associated with climate change, with heat stress the only score that increases in a 2ºC or lower global warming scenario. The other physical risk scores remained the same. Transition risks were not included in the assessment, due to difficulty in obtaining independent data points. However, the Investment Adviser will look to include these in future climate risk assessments as it works towards the Company achieving full compliance with TCFD.

The results of the assessment demonstrated that whilst there are physical and transitional risks in the context of the Company's diversified portfolio, the financial impacts were not material. For example, a storm might generate strong winds which could have a negative impact on revenue from wind turbines, causing them to shut down in stormy conditions, but would not necessarily have an adverse impact on other assets in the portfolio, illustrating the resilience of a diversified portfolio.

Risk management

Disclose how the organisation identifies, assesses and manages climate‑related risks.

A. Describe the organisation's processes for identifying and assessing climate‑related risks

The Board of Directors directly or indirectly addresses climate-related risks and opportunities when evaluating and approving new investments, including a climate risk assessment for each new investment.

As part of the Investment Adviser's due diligence process, climate risk assessments are carried out on each portfolio asset where appropriate. The Investment Adviser also carries out ongoing performance monitoring, including asset site visits by experienced personnel; further information is given above. Fortnightly updates and quarterly detailed reports on asset performance are also provided to the Board.

Climate change has become a key risk faced by infrastructure investors. The Company continues to focus on the potential impacts of climate change and the risk factors associated with rising global temperatures. As such, the Investment Adviser has conducted a detailed portfolio-wide climate risk assessment across each of the 473 individual assets in the portfolio. This risk assessment includes an analysis of the impact of a 2ºC or lower global warming scenario.

The risk assessment considers nine risk factors divided between physical and transition risks:

·      Physical risks: these are events that are driven by a shift in temperatures and weather patterns. The assessment considers five risks: flood risk; heat stress; water stress; fires and wildfires; severe winds and storms. These events have been chosen based on their materiality to the overall portfolio. Refer to the table below for further detail on materiality.

·      Transition risks: these are the risks related to the transition to a low-carbon economy. Four areas were considered: policy or regulatory; technological; market; and reputational risks.

External and internal data points were used to assess assets in the portfolio. Historic weather data was used to inform heat stress, water stress and severe wind. UK Government databases were used to obtain data for flood risk and wildfire data for all available sites in the portfolio. IPCC data was used to determine heat stress, water stress and severe winds in the 2ºC warming scenario. The Beaufort wind scale was used to assess the threshold at which wind speeds are considered high. EPC ratings were obtained from UK Government databases.

An asset-by-asset assessment was undertaken internally by the Investment Adviser's portfolio management team to consider the specifics of each investment and to understand the overall exposure to climate change and any mitigating factors. The results from the risk assessment form part of the portfolio management decision-making process and help identify further mitigation strategies, informing whether any changes are required to the underlying financial forecasts of the Company.

The climate risk assessment was completed by evaluating the impact and likelihood of a climate change event happening within the remaining lifetime of each asset, divided between physical and transition risks. The risk assessment scores were calculated by multiplying impact and likelihood metrics to form a total score for each asset.

For physical and transition risk, the impact metric indicates the financial impact each risk could potentially have on the asset. This metric is scored on a scale of 1 to 5, with 5 being the highest and 1 having a lower impact.

Each score indicates a specific financial impact as shown in the table below:

The likelihood score for physical risk is based on past Met Office data to determine the probability of a specific weather event happening, based on the specific location of the asset.

For transition risk, the likelihood score was rated between 0% and 100% based on the probability of a climate event happening within the remaining lifetime of the asset. This probability was converted to a score between 1 and 5 to keep consistency between the physical and transition risk likelihood scores, seen in the table below:

The impact and likelihood metrics were multiplied with each other to give a score for each risk identified, which led to each physical and transition risk metric being given a total rating out of 25. These individual ratings were then weighted by the portfolio valuation of each asset to give an aggregated score by sub-sector and sector. A final rating between 0 and 225 was obtained by combining total physical and transition risks scores.

The chart based on the weighted average rating for each sector on page 78 of the full annual report on the Company's website shows the output of this process, indicating the sectors that are most vulnerable to climate change. The placement of each sector highlights its risk exposure, with a low risk between 0-33%, medium risk between 33-66% and high risk between 66-100%. Each sector is plotted based on the risk percentage for each physical and transition risk.

Under physical risks, the biggest exposure is to fires/wildfires and water stress. An increase in the frequency of fires/wildfires is most likely to impact the social housing sector, while an increase in water stress is most likely to impact the renewables sector.

Wildfires are becoming a bigger threat in the UK, with England averaging 30,000 wildfires a year, according to data from the Forestry Commission. Water stress is also becoming a bigger issue, with global warming causing higher rainfall in the UK and making rising water levels a bigger threat globally. This year, the Investment Adviser refined its water stress analysis by mapping assets to their water providers to see if they were in an area of stress.

Under transition risks, the portfolio is most exposed to policy/regulatory change, as well as technological change. Within the renewables portfolio, biomass projects account for some 10% of portfolio value and are most likely to be influenced by regulatory and market changes. While the Investment Adviser views the biomass sector as well placed to benefit from the transition to net zero as a form of low-carbon baseload power, uncertainty around the possible participation in the UK ETS along with future power price caps for renewable generators, is reflected in the regulatory and technological risk scores. While the new Government included some provisions in their Autumn Budget for the introduction of the UK ETS, there is still some uncertainty about the impact it will have on portfolio assets.

The Investment Adviser also undertook the analysis of a 2ºC or lower global warming scenario on assets in the portfolio. This analysis concluded that the Company's strategy is relatively resilient to the physical risks associated with climate change.

In the 2ºC scenario, the Investment Adviser considered changes in the likelihood of the occurrence of physical climate risks and focused on the impact of a 2ºC change in likelihood scores in the physical risk section. Transition risks were not included due to difficulty in obtaining independent data points, as well as the assumption that transition risks will not be impacted in the same way as physical risks in a 2ºC warming scenario. The Company recognises it has further to go in achieving full compliance with a 2ºC increased temperature scenario because of this and is committed to including transition risk data points in future years.

The likelihood score for heat stress, water stress, severe winds and wildfires in a 2ºC temperature increase scenario was based on the probability of each metric occurring, using past Met Office data and UK Government data to determine the probability of a specific weather event and applying a multiplier for each physical risk. This multiplier was based on data from the IPCC, which is the United Nations body for assessing climate change. The Investment Adviser acknowledges this is a different data source than was used in last year's assessment; however, it considers it a more reliable data source from which to obtain future weather projections.

After running the 2ºC scenario, it was determined that physical risks mostly remained the same, with the exception of heat stress, which increased by 0.4 rating points. This has led the Investment Adviser to conclude the Company's strategy is relatively resilient to both the physical and transition risks associated with climate change.

The Investment Adviser and the Board recognise that the prioritisation of climate change requires a change of Government approach, primarily through regulation.

Regulatory changes through mechanisms such as the UK ETS, power price caps, energy efficiency standards and windfall taxes on renewable energy generators may further impact the portfolio.

Based on the analysis undertaken, the Investment Adviser does not currently propose to make any changes to its financial forecasts due to climate risk. As detailed above, in the medium to long term, any changes to MEES for buildings could impact certain assets, and these will be closely monitored with borrowers. The Investment Adviser also intends to closely monitor the impact of rising global temperatures on its investments, as the increasing likelihood of rising temperatures could impact the portfolio, as evidenced in a 2ºC rising temperature scenario. The Investment Adviser intends to update the climate risk assessment on an annual basis.

This year, the Company engaged Terra Instinct, a sustainability advisory firm, to perform a  review of the Company's TCFD disclosures and climate risk assessment. The review examined the Company's current approach to the climate risk assessment, providing recommendations on how it could be improved.

By partially implementing the recommendations, the Investment Adviser improved the reliability of its data source for the multiplier in the 2ºC warming scenario analysis in this year's reporting. The Investment Adviser will continue to work towards implementing further recommendations in future years.

For details on the portfolio exposures - climate change risk - refer to page 78 of the full annual report on the Company's website.

The Company will continue to refine its approach to materiality as the availability, completeness and accuracy of data improves over time.

Whilst the Investment Adviser has concluded that the portfolio is exposed to low physical and transition risk, the climate opportunities for each asset have not been quantified in this exercise. This is an area that will be considered further in future assessments.

The Investment Adviser has identified several transition opportunities for the Company. These surround optimisation, expansion and life extension opportunities for the portfolio following growing demand for renewable energy and energy security. This is expected to cause renewable energy demand to increase, driven by the decarbonisation of transport and heating amongst other factors.

While opportunities related to physical and transition risks have not been quantified to date, the Board and the Investment Adviser hope to include these in future reports.

The Investment Adviser aims to continue improving all areas of its climate risk assessment, including the data collection process, controls around this process and creating meaningful disclosures in order to help monitor and mitigate exposure to climate change. Areas identified for improvement include:

·      including transition risks in a 2ºC or lower scenario;

·      implementing further recommendations from Terra Instinct; and

·      combining climate opportunities into the assessment.

B. Describe the organisation's processes for managing climate‑related risks

The portfolio is diversified across a number of asset classes and ESG processes are embedded into investment decision making. The importance of the Investment Adviser's engagement and influence in helping portfolio companies improve their ESG performance is crucial. Further information is given in the risk section below.

C. Describe how processes for identifying, assessing and managing climate‑related risks are integrated into the organisation's overall risk management

The way in which the Company manages risk and principal risks and uncertainties is described below. The Board does not consider climate‑related risk a principal risk, however it does recognise climate-related risk as an emerging risk. Refer below for further information.

Metrics and targets

Disclose the metrics and targets used to assess and manage the relevant climate‑related risks and opportunities where such information is material.

A. Disclose the metrics used by the organisation to assess climate‑related risks and opportunities in line with its strategy and risk management process

The Investment Adviser includes an assessment of ESG characteristics in every investment proposal submitted to the Company's Investment committee for approval. Prior to the approval of a new investment, the Investment Adviser assesses how the investment rates against relevant ESG criteria, laid out in an ESG checklist tailored to the Company. The checklist typically covers the counterparty's commitment and capability to effectively identify, monitor and manage potential ESG-related risks and opportunities and, to the extent applicable, the availability of relevant policies and procedures, alignment with industry or investment-specific standards and ratings, and compliance with relevant ESG‑related regulation and legislation. Each asset undergoes a credit risk assessment that incorporates ESG risk, which reflects the potential for ESG risks to impact the ability and willingness of the borrower to meet their financial obligations in a timely basis.

During the year, the Investment Adviser carried out a climate risk assessment for each underlying asset. Further information on the methodology used to complete the climate risk assessment is included above.

B. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas emissions and the related risks

As an investment company, the Company does not have a significant environmental impact by itself.

With no employees or property and an outsourced services model, there are no Scope 1 (direct) and Scope 2 (indirect through power demand) climate‑related emissions to report, and as an investment fund specifically, its Scope 3 (other indirect) emissions fall under two categories within Scope 3 as defined by the GHG Protocol:

Category 1: Purchased goods and services

The emissions from services provided by the Company's top ten third party service providers and emissions from travel of the Board. The top ten third party service providers represent 92% of the annual expenditure of the Company and therefore these were deemed the most material in the context of the Company's outsourced service model.

The Company used a supplier-specific approach whereby expenditure for each service provider is multiplied by the service provider's organisational carbon footprint intensity in tCO₂e (market‑based Scope 1 and 2 plus upstream Scope 3 emissions) as disclosed through publicly available data. Using this approach, the Company was able to report attributable supplier emissions covering 98% of its annual spend across nine of its top ten suppliers.

Category 15: Investments

The emissions of the underlying portfolio. As this is only the third year a detailed data collection exercise has been undertaken, there are still plenty of challenges faced in respect to the availability of the data requested, insofar as the Company is a debt provider and does not own or control 94% of assets in the portfolio.

As such, emissions data points were obtained from 74% of portfolio assets by value. Estimated emissions data was not used this year, due to the increase in emissions data collected directly from portfolio assets. Further steps will be taken to improve this process in future reporting periods.

The Investment Adviser will continue to liaise with asset operators to improve and refine the availability of future ESG data which will continue to be collected and reported on an annual basis. Further information on the data collection exercise can be found above.

The Company has measured and disclosed the emissions from its underlying portfolio in accordance with the GHG Protocol. Emissions from investments (Category 15) comprise proportional Scope 1 and Scope 2 and limited Scope 3 emissions of the underlying portfolio and have been allocated based on the Company's proportional share of total enterprise value (total equity plus debt) in accordance with the guidance for debt investments and project finance.

The Company has not reported total projected lifetime Scope 1 and Scope 2 emissions of any new projects financed during the year. It will seek to include this information for future years where possible.

Greenhouse gas emissions

The Company has measured its emissions in accordance with the GHG Protocol. An operational control approach was used to define the organisational boundary and responsibility for GHG emissions. Emissions have been measured over the twelve month period to 30 June 2024. The period chosen was to facilitate data inclusion in the Company's annual report.