An M&G Investments case study
In 2012, Infracapital acquired a 35% stake in Affinity Water (formerly Veolia Water), the UK’s largest regulated water-only company by revenue serving more than 3.5 million people in south east England. Given the essential and regulated service that Affinity Water provides, we place significant focus on ESG factors and considered its governance, environmental practices and community interactions in depth prior to investment.
We have continuously implemented best practice governance standards at Affinity Water, including improvements to risk management and reporting protocols with respect to ESG issues. We ensure the company works closely with regulatory bodies such as DEFRA, the Environment Agency and the Drinking Water Inspectorate to ensure best practice, as well as abiding by performance targets set by the Water Services Regulation Authority (Ofwat). Affinity Water adheres strictly to relevant legislation and continuously sets new objectives and targets. We regularly review the company’s progress and challenge management on any ESG issues that arise.
The firm regularly reviews its Code of Governance and has altered the composition of its board such that independent non-executive directors now constitute the largest single group. It has pledged to create a working environment that achieves zero harm and improved wellbeing for its employees.
In 2008, prior to our investment, the company extended its environmental management system (EMS) and achieved ISO 14001 certification for all its production and supply sites. The EMS exhibits a high level of commitment to mitigate environmental impact and ensures that appropriate controls are in place. As part of this, the company is undertaking proactive conservation schemes, such as in Herefordshire where in conjunction with Middlesex Wildlife Trust it is restoring the Springwell reed-bed, an important breeding habitat for bird species.
Affinity Water seeks to be the leading community-focused water company and has conducted projects that aim to reduce flood risks, minimise water wastage and inspire local schools. The company recognises the importance of opening its land for recreational use by the public and has partnerships with angling and sailing clubs who regularly use its reservoirs. It has also established a customer scrutiny group that ensures it is accountable towards the communities it serves.
This investment provides our clients with a stable, inflation-linked income stream underpinned by a regulatory pricing regime, backed by a firm that is committed to delivering a sustainable and responsible essential service to its customers.