NESF Annual Report

ESG, in this section:

NESF ESG at a Glance 2022/23
Sustainability and ESG
Risk Management and Strategy

Risk Management and Strategy

Risk management
ESG is integrated at every stage of NESF’s investment decision-making. This is based on a four-step process:

Identifying and assessing ESG issues from the initiation of a potential transaction.

Managing and acting on any risks and opportunities presented by the ESG due diligence process.

Reporting on ESG matters through the NESF website and other disclosures.

Engaging continuously on issues of material concern to NESF.

The NESF ESG risk management process is implemented by the Investment Adviser’s ESG team. This expanded to nine people in the reporting period, bringing additional expertise across biodiversity, carbon management, data analysis and mapping, supply chains, technical due diligence, and policy and public affairs. The team continues to be led by Giulia Guidi, the Investment Adviser’s Head of ESG and member of NextEnergy Capital’s Investment Committee for NESF, with the Board of Directors of NESF providing oversight of the Company’s ESG strategy, activities, and performance through the ESG Committee. Further details on NESF’s ESG risk management and disclosure are included in its standalone Sustainability and ESG Report.

In the reporting period, the Company monitored the development of the NextEnergy Group’s new Sustainability and ESG Framework, which it intends to adopt in the coming year. This was developed as part of a strategic review by the NextEnergy Group, conducted with the support of an independent advisor. The Framework sets out the Group’s continuing commitment to ensuring that its sustainability and ESG priorities are fully integrated in its development, investment, and asset management activities, including those implemented by the Investment Adviser to ensure the effective management of its funds, including NESF.

NESF also contributes to the NextEnergy Foundation, which supports a range of social and environmental projects around the world.

Risk Summary

ESG risks for NESF and its portfolio include physical and transition risks linked to climate change, nature and biodiversity topics, and social-related issues, such as health and safety, diversity and inclusion, community engagement, and human rights. NESF considers supply chain issues in respect of all these topics. These risks continue to evolve, and NESF’s risk management processes evolve in turn. Sustainability-related risks and opportunities are fully integrated into the Company's overall risk management process, and incorporated into the risk register as part of the enterprise risk management framework. Climate related risk management is aligned with the ISSB S2 standard.

No new material sustainability or climate-related risks were noted for the reporting period. No financially material climate-related risks were identified, in line with the ISSB S2 reporting standard.

Further information is available in the standalone 2024 NESF Annual Sustainability and ESG Report.