Responsible Investment Report

Introduction

This shortened version of our Responsible Investment Report provides a summary of key ESG disclosures for the 2024 period. To access the full 30+ page report – which includes detailed climate scenario analysis, physical risk assessments, engagement activities, proxy voting, and performance against strategic targets – please contact the distribution team.

Despite recent policy headwinds and ESG rhetoric challenges, we maintain our conviction that environmental, social and governance factors represent material risks and opportunities for infrastructure companies. We believe companies demonstrating strong sustainability and governance practices deliver superior long-term returns while creating value for multiple stakeholders.

We also recommend reading our quarterly ESG updates available on the Maple-Brown Abbott website for an up to-date view of our latest ESG integration and stewardship activities.

Key highlights

Climate analysis & energy transition

Our climate scenario analysis continues to demonstrate significant valuation upside from the energy transition; particularly benefiting electric utilities, railroad infrastructure, and contracted renewable energy companies. While renewable energy faces near-term challenges from inflation, supply chain bottlenecks, and permitting delays, we remain optimistic about long-term prospects driven by growing data centre demand and energy sovereignty initiatives.

Physical risk management

With 2024 marking the warmest year on record and unprecedented climate events from Spanish flooding to successive US hurricanes, we have enhanced our climate risk assessments. We refreshed valuation model assumptions for US utilities and updated our Corporate Sustainability & Governance (CS&G) scorecards to account for these risks and opportunities.

Active engagement

Through constructive dialogue with investee companies, industry and policy bodies, we leverage engagement as both a risk mitigation tool and value enhancement mechanism, strengthening our investment understanding while driving positive outcomes. During the reporting period, we undertook 31 targeted ESG engagement activities with 18 entities, comprising 14 existing and prospective investee companies (50% of the GLI strategy) and four policy and industry bodies.¹

Performance progress

The GLI strategy’s weighted average carbon intensity (WACI) has meaningfully declined since 2020, tracking toward our 50% reduction target by 2030, primarily driven by emissions reductions from US utilities and strategic portfolio positioning.² We also report on other metrics such as Board independence, diversity and EU Taxonomy alignment.

Our approach to integrating climate change

Our climate integration framework operates across multiple dimensions. We incorporate climate considerations into every investment thesis, recognising that climate factors can be material value drivers rather than peripheral ESG considerations. When assessing a company’s transition potential, we consider the impact of climate change scenarios on company and industry valuations, capital expenditure allocation between low carbon and fossil fuel investments, potential product or infrastructure service substitution with a faster energy transition, and/or opportunities for asset optionality to support the energy transition.

The GLI team undertakes climate change scenario analysis on all companies considered for the Approved Stock List (ASL). This analysis feeds into our proprietary Corporate Sustainability & Governance (CS&G) scorecard, which represents a material weighting in our overall stock scoring process alongside traditional investment metrics. Each company receives a transition score based on perceived valuation upside or downside relative to an accelerated energy transition pathway.

Corporate Sustainability & Governance Scorecard (CS&G)

Beyond scoring and ranking, climate considerations directly inform our valuation models. Each company model contains scenario analysis that stress tests assumptions under different energy transition pathways. This might involve adjusting terminal value assumptions for energy infrastructure with potentially elevated stranded asset risk, modifying terminal growth rates for gas utilities operating in warmer environments where the electrification of heat is viable and economic, and/or incorporating carbon tax impacts on airport passenger volumes.

Our climate assessment also feeds into our stewardship activities. We engage with companies where climate transition plans appear insufficient despite elevated transition risks, or where strategic commitments to energy transition opportunities are not adequately reflected in executive remuneration.

Climate scenario analysis

Climate scenario analysis forms the analytical backbone of our climate integration approach. Rather than attempting to forecast any particular energy transition pathway, we use scenario analysis as a stress testing exercise to explore the extreme ends of the energy transition and consider what this could look like for the GLI strategy under specific circumstances.

We ground our analysis in the International Energy Agency’s (IEA) World Energy Outlook, leveraging their transparency of underlying model data, frequency of updates, and global perspective with regional-specific insights. The IEA’s scenarios provide three distinct transition pathways: the Stated Policies scenario (our base case) reflecting current policy settings, the Announced Pledges scenario assuming full implementation of government climate commitments, and the Net Zero Emissions by 2050 scenario representing an aspirational pathway requiring significant action by all countries and sectors.

The IEA World Energy Outlook 2024 shows how the energy transition has the potential to be transformational for infrastructure fundamentals. According to the IEA, fossil fuel demand is projected to peak before 2030, driven by increasingly competitive renewable technologies, tightening emissions legislation, and accelerating electrification adoption. Electricity demand continues to grow significantly faster than overall energy consumption, with data centres representing a critical new driver requiring substantial grid investment.³

Our portfolio positioning reflects these structural shifts. The analysis indicates the GLI strategy could see material valuation upside under accelerated transition scenarios, with a significant portion of holdings estimated to benefit from moderate to high valuation opportunities in a net zero emissions pathway. Electric utilities, contracted renewable energy, railroads, and multi-utilities could also emerge as the greatest beneficiaries of a faster energy transition, reflecting their roles as enablers of renewable energy, grid modernisation and modal shift in transportation.

According to our analysis⁴

Our scenario analysis informs investment decisions and portfolio construction. Companies positioned as transition enablers may warrant premium valuations despite current higher carbon footprints, while those facing potential demand destruction require careful assessment of stranded asset risks and strategic repositioning capabilities. The analysis helps us identify where the energy transition creates genuine investment opportunities versus where it poses material threats to long-term value creation.

Physical risk

Physical climate risks represent an increasingly material and immediate concern for infrastructure assets, requiring active monitoring, assessment and engagement to ensure risks are appropriately accounted for and companies have sufficient mitigation strategies in place. The warmest year on record occurred in 2024, with major climate events ranging from catastrophic flooding in Spain to multiple hurricanes in quick succession across the US. The scale of impact is escalating rapidly – the US alone experienced 27 individual weather and climate disasters causing at least US$1 billion each in damages, collectively resulting in approximately US$182.7 billion in total losses.⁵

For infrastructure companies, particularly those operating critical electricity, water, and transportation networks, physical climate risks create both immediate operational challenges and long-term strategic imperatives.

However, physical climate risks also create substantial investment opportunities, particularly for regulated utilities. When utilities invest in infrastructure improvements such as undergrounding power lines, installing fire-resistant poles, and enhancing grid monitoring systems, these capital expenditures are typically added to the utility’s rate base on which they earn regulated returns. Investments in extreme weather hardening and resiliency help reduce the frequency and duration of outages, leading to improved service reliability and justifying the associated costs through customer rates.

Our physical risk assessment approach recognises that effective risk management extends beyond infrastructure hardening to encompass crisis management and stakeholder communication. Companies that demonstrate superior crisis management – including clear customer communications, efficient restoration processes, and proactive community engagement – typically experience better regulatory and political outcomes following extreme weather events. Conversely, poor crisis management can lead to regulatory scrutiny, political backlash, and potential cost disallowances that impact shareholder returns.

We conduct targeted assessments of physical risk exposures as part of ongoing risk monitoring, focusing particularly on companies with heightened exposure to climate-related events. This assessment examines both the quantitative impacts on valuations and the qualitative factors that determine a company’s resilience and response capabilities. The analysis informs our CSG scorecards and guides our engagement priorities, helping ensure that GLI strategy companies are appropriately prepared for the physical realities of climate change.

Engagement Activities

Active engagement forms a cornerstone of our responsible investment approach. As long-term investors in essential infrastructure assets, we believe constructive dialogue with investee companies can enhance the sustainability of our clients’ returns while driving better ESG outcomes across the strategy.

Our engagement strategy is targeted to focus on the most material, achievable and constructive outcomes. This multi-dimensional approach is evidenced by our 2024 engagement activities, which comprised 31 targeted engagements involving 18 entities – 14 of which were with prospective and GLI strategy companies (50% of the GLI strategy) and four with policy/regulatory and/or industry bodies. We employ multiple engagement forms – from dedicated company dialogue and formal letters to company boards, to collaborative initiatives with other investors and feedback to policy and regulatory bodies.

Environmental topics dominate our engagement priorities, with more than half of our engagement objectives relating to environmental topics and 44% specifically focused on emissions, transparency and disclosures, and climate-related risks. Customer affordability and corporate governance, including board independence and remuneration frameworks, represent other key themes reflecting our belief that strong governance practices are essential for long-term performance.

We employ graduated engagement strategies, beginning with constructive dialogue and escalating through formal board correspondence and proxy voting when progress stalls. The majority of our engagement efforts are outcomes-driven, focused on addressing material deficiencies, risks or controversies that warrant engagement. We track progress meticulously to ensure our engagement efforts remain focused and effective, with meaningful progress achieved where companies develop and implement credible strategies to address the specific issues raised.

Proxy Voting

We vote on all eligible proxy voting ballot items with each GLI Investment Analyst assessing proxy voting items as part of their stock coverage. Each item is closely scrutinised, and we do not default to any third party research provider recommendations when casting votes. Final decision making resides with the Portfolio Managers with input and guidance from the team’s ESG Analysts.

The GLI team regularly votes against management on matters related to remuneration, board independence, shareholder alignment and value, and gender/racial diversity. We support some, but not all shareholder resolutions, carefully evaluating proposals for public benefit corporations, scope 3 emissions inventories and governance reports on their individual merits.

Emissions Management & Targets

In 2020, we became a signatory to the Net Zero Asset Managers initiative (NZAMi) and set an interim emissions target of a 50% reduction in the Weighted Average Carbon Intensity (WACI) of the GLI strategy by 2030 (vs December 2020).⁶ The GLI strategy has made substantial progress toward this target, putting the GLI strategy on track to achieve the interim emissions objective.

Our focus is on the strategic transition potential of a company. We may invest in companies that may, at this point in time, have a higher carbon footprint, but over the long-term are key to facilitating decarbonisation and economic growth. This approach recognises that some of today’s higher-emitting infrastructure assets are essential enablers of tomorrow’s low-carbon economy.

The vast majority of GLI strategy companies have established net zero targets, however, the quality and scope of these targets varies considerably. We use established frameworks including the Science-based Targets initiative (SBTi) and the Paris Aligned Investment Initiative (PAII) to assess net zero targets and their accompanying transition plans.

Science-based targets have been a consistent theme in our stewardship activities over the years. Ultimately, we want to help mitigate greenwashing risk and encourage genuine decarbonisation among GLI strategy companies.

1 Based on average position weights of a representative fund of the GLI strategy between 1 January 2024 to 31 December 2024, excluding cash.
2 S&P CapIQ. WACI is calculated as tCO2e/USD million revenue. Measured between 31 December 2020 and 31 December 2024.
3 IEA World Energy Outlook 2024.
4 Ibid. A representative fund of the Maple-Brown Abbott Global Listed Infrastructure strategy has been used as a proxy for the analysis. Three water utilities have been excluded owing to low materiality. This analysis should not be construed as investment advice or a forecast of future valuation impact. As at 31 December 2024.
5 National Oceanic and Atmospheric Administration (NOAA), ‘2024: An active year of U.S. billion-dollar weather and climate disasters’ (10 January 2025).
6 S&P CapIQ. WACI is calculated as tCO2e/USD million revenue. Measured between 31 December 2020 and 31 December 2024.

Disclaimer
This GLI Responsible Investment Report is issued by Maple-Brown Abbott Limited ABN 73 001 208 564, Australian Financial Services Licence No. 237296 (“Maple-Brown Abbott”). Maple-Brown Abbott is registered as an investment advisor with the United State Securities and Exchange Commission under the Investment Advisers Act of 1940. This presentation does not constitute advice of any kind and should not be relied upon as such. This information is intended to provide general information only to professional investors, and does not have regard to an investor’s investment objectives, financial situation or needs. Before making any investment decision, you should seek independent investment, legal, tax, accounting or other professional advice as appropriate. This presentation does not constitute an offer or solicitation by anyone in any jurisdiction. This information is confidential and the recipient agrees not to release or reveal it to any third party. The information in this presentation is not an advertisement and is for wholesale investors only (as defined by the Corporations Act 2001 (Cth)) and is not directed at any person in any jurisdiction where the publication or availability of the information is prohibited or restricted by law. These materials discuss general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Certain information contained in these materials has been obtained from published and non-published sources prepared by third parties, which, in certain cases, have not been updated through the date hereof. While such information is believed to be reliable, Maple-Brown Abbott has not independently verified such information, nor does it assume any responsibility for the accuracy or completeness of such information. The opinions and estimates herein constitute Maple-Brown Abbott’s judgment and should be regarded as indicative, preliminary and for illustrative purposes only. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “seek” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue,” “believe,” the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the strategy may differ materially from those reflected or contemplated in such forward-looking statements. Past performance information given in this document is given for illustrative purposes only and is not a reliable indicator of future performance. Future performance is not guaranteed and the value of investments and the income from them can fall as well as rise. No investment strategy is without risk and markets influence investment performance. Investment markets and conditions can change rapidly and investors may not get back the amount originally invested and may lose all of their investment. Returns are volatile and may fluctuate quickly and significantly. Douse Associates (registered in England under No. 10837002 and authorised and regulated by the Financial Conduct Authority) is authorised to distribute this marketing communication to certain UK investors. Hyde Park Investment International Limited (incorporated in Malta, company reference number C 44733) is authorised to distribute this marketing communication to certain UK and EU investors. To the extent permitted by law, neither Maple-Brown Abbott, nor any of its related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained herein, or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. This information is current as of 31 December 2024, unless otherwise stated, and is subject to change at any time without notice. © Maple-Brown Abbott 2025.