APPROACH FORA RESPONSIBLE ESG MANAGEMENT
INTRODUCTION
INFORMATION ABOUT MERIDIAM
General ESG approach
Investor information
INFORMATION ABOUT THE MERIDIAM FUNDS
List of funds
ESG charter, code or label
ISO 9001 certification, version 2015
External ESG Audits
PRI Signatory
Certifications within the project companies
MERIDIAM’S ESG ANALYSIS PROCEDURES
Main ESG criteria
Internal ESG analysis and monitoring
Analysis methodology
Integration in the investment process
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INTRODUCTION
Socially responsible investment is an essential part of the strategic positioning and management of Meridiam funds. Since its creation in 2005 and the launch of its first fund, Meridiam has ensured that its investments achieve the highest environmental, social and governance (ESG) objectives. This document outlines how ESG criteria are taken into account in Meridiam’s investment and asset management process.
More specifically, this document demonstrates how the Meridiam funds also comply with the regulatory requirements for the application of ESG criteria in France(1).
INFORMATION ABOUT MERIDIAMGENERAL ESG APPROACH
Meridiam places consideration of environmental,
social and governance quality issues (ESG) at
the heart of its activities, due to the very nature
of its investments, and their sustainability. As
rigorous risk identification is a fundamental
step in the project evaluation process, Meridiam
commits itself only when these are in line with
its commitments and the general interest of the
communities for which they are intended.
Since its creation, Meridiam has therefore
placed the consideration of ESG issues at the
heart of its priorities by adopting a Charter on
Sustainable Development focused on these
issues. In particular, the Charter on Sustainable
Development commits Meridiam to:
• Apply the rules of good governance
• Protect the environment
• Respect fundamental rights and develop
human capital
• Meet the expectations of the community
• Value the human capital of Meridiam
This global responsibility is also central to
Meridiam’s commitment to policy makers and
public institutions to promote and encourage
long-term investment.
These ESG priorities are translated into
operational terms by an ESG approach developed
by Meridiam and on the basis of which all
investment opportunities are analysed and
monitored. This approach is based in particular
on international standards, such as the UN
Principles for Responsible Investment (UNPRI)
and the Equator Principles, and takes into account
the ESG criteria of major development financial
institutions such as the International Finance
Corporation (IFC), the World Bank, the European
Investment Bank (EIB) and the European Bank
for Reconstruction and Development (EBRD). In
practice, Meridiam’s ESG approach to selecting,
analysing and monitoring investments enables
public authorities to better carry out and manage
their infrastructure projects. This approach, which
is part of Meridiam’s ISO 9001 system, includes
the following major steps:
• Identification of infrastructure projects
according to immediate and long-term needs;
• Global analysis of risks, whether financial,
operational, social or environmental, including
the exclusion of investments that do not meet
the requirements and performance criteria
established in the investment procedures;
• Development and implementation of ESG risk
management plans;
• Creation and management of companies
created specifically to manage projects called
project companies;
• Coordination of the development and
construction phases of projects;
• Long-term management of infrastructures with
and on behalf of the public authorities.
In addition, Meridiam applies strict compliance
and the principle of professional integrity to
the conduct of all projects, in accordance with
regulatory requirements. To this end, each
employee of Meridiam subscribes to the Code
of Ethics which includes strict reservations/
clauses on the issue of conflicts of interest.
Moreover, Meridiam ensures that all partners apply
zero tolerance to corruption issues,
in line with its anti-corruption policy.
(1)Decree No. 2015-1850 of December 29, 2015 applying Article 173 (paragraph VI) of the LTECV of August 17, 2015.
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Investor information
Investors are aware of Meridiam’s approach
to ESG procedures for the conduct of all of its
activities, as well as key ESG issues related to the
investments themselves. In addition, Meridiam’s
ESG commitments are public and accessible on
the website www.meridiam.com.
Meridiam takes into account investor concerns
in determining ESG criteria for its investment
and asset management process. Meridiam
ensures compliance with their requirements for
the production of follow-up reports, whether
these requirements are ESG indicators to be
documented or the frequency with which
information is disseminated.
In general, Meridiam issues a number of reports
at predefined frequencies, by which investors
are informed of the ESG indicators that are
monitored:
• A quarterly report is sent to investors, which
includes a specific note on ESG issues for each
asset.
• An annual ESG report is produced; called the
«Impact Report», which includes a presentation
of Meridiam’s approach and policy on these
aspects and an analysis of selected qualitative
and quantitative indicators (29) with a
monitoring of performance over time.
Other ESG monitoring reports are prepared
according to the requirements of certain
investors and for specific funds, as is the case for
the Meridiam Infrastructure Africa Fund. The ESG
performance of each project is presented, as well
as the ESG performance of the fund as a whole.
(2)Fund subject to Decree No. 2015-1850 of December 29, 2015 applying Article 173 (paragraph VI) of the LTECV of August 17, 2015.(3)Ibid .
MeridiamInfrastructure
SICAR2
MeridiamInfrastructure
Europe II3
Meridiam Infrastructure Africa Fund
MeridiamInfrastructure
Europe III
Meridiam Transition
Meridiam Infrastructure
North America II
Asset class
Year of creation
Duration of the fund
Geographicalarea
Types of projects
Infra Infra Infra Infra Infra Infra
2008 2012 2015 2016 2016 2012
25 25 15 25 20 25
OECD countries in Europe
and North America
Europe, including Central
and Eastern EuropeAfrica
Europe, including Central
and Eastern EuropeEurope
OECD countries in North America
and South America
Transport infrastructures
Socialinfrastructures
Transport infrastructures
Social infrastructures
Energyinfrastructures
Public utility services
and networks
Energyinfrastructures
Transport infrastructures
Socialinfrastructures
Transportinfrastructures
Socialinfrastructures
Publicbuildings
Energyinfrastructures
Public utility services
andnetworks
Energyinfrastructures
Transport infrastructures
Social infrastructures
Public buildings
Meridiam currently manages 7 funds, the details of which are presented below.
INFORMATION ABOUT THE MERIDIAM FUNDS
LIST OF FUNDS
Meridiam Infrastructure
North America III
Infra
2017
25
OECD countries in North America
and South America
Transportinfrastructures
Socialinfrastructures
Publicbuildings
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ESG charter, code or label
Meridiam does not manage specific labelled
funds. However, all investments have a dimension
that contributes to achieving ESG objectives. The
Meridiam Transition fund was created for the sole
purpose of financing energy transition projects.
Meridiam’s approach to environmental, social and
governance responsibility consists in involving
all members of the development and asset
management teams in the process of evaluating,
developing and managing the projects in which
the organisation invests. Each employee receives
training and awareness on ESG topics on an
ongoing basis, so that he or she takes ownership
of the procedure put in place for the responsible
consideration of ESG issues in all projects.
Some of the project companies in which Meridiam
invests also have a dedicated ESG team.
In addition, there is a procedure in place for
sharing knowledge and good practices with
project companies on various topics including
ESG.
ISO 9001 certification, version 2015
The importance of ESG issues is also reflected
in the continuous improvement of Meridiam’s
operational methodology, as illustrated by the ISO
9001 certification obtained in January 2012, the
first of its kind to be awarded to an investment
company. This certification is renewed regularly;
the last renewal was in January 2018.
As a reminder, the ISO 9001 certification is an
international standard for quality management
and provides guarantees in terms of organisational
quality within the company.
External ESG Audits
Meridiam conducts audits on Corporate Social
Responsibility (CSR) and calls on specialised
external consultants such as Vigeo Eiris, an
independent international research and ESG
agency offering services to private, public and
associative organisations and investors.
Vigeo Eiris has carried out several audits, the last
of which was conducted in December 2017 on the
basis of the ISO 26000 standard. The «Advanced»
rating awarded to Meridiam in 2017 reflects the
maturity of its organisation.
PRI Signatory
Meridiam has been a signatory of the United
Nations Principles for Responsible Investment
(PRI) since January 5, 2011. In 2017, and for the
third year in a row, Meridiam’s ESG approach
received ratings of:
• A+ (29/30) for the overall ESG approach
• A (27/30) on topics specific to infrastructures
Certifications within the project com-panies
Meridiam ensures that ESG issues are taken into
account by all companies created to manage the
infrastructure assets in which the organisation
invests. The achievement of performance
objectives often results in obtaining labels or
certifications of national or international scope as
is the case for the following examples:
• The project company for the A66 motorway
in Spain, i.e. the 49 km section between
Benavente and Zamora, received the Green
Energy certification for the use of renewable
energy for all of its energy needs;
• The Research Centre of the University Hospital
of Montreal (CRCHUM) in Canada obtained the
LEED Gold certification;
• The Long Beach Courthouse in California has
been LEED Gold certified;
• The student residence complex at the
University of Hertfordshire in England, which
includes 3000 housing units, common rooms,
a gymnasium and sports fields, obtained the
BREEAM Excellent certification.
Many project companies have put in place an
environmental management system that meets
the ISO 14001 standard.
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MERIDIAM’S ESG ANALYSIS PROCEDURES
Meridiam’s ESG analysis consists in an integrated
approach to responsible investment; it covers all
activities related to investment in infrastructure
projects, from identifying investment opportunities
to the long-term management of assets. The
analysis is based on an increasingly complete
control of the ESG components of a given project
as the investment process progresses. In the initial
phase of projects, the approach developed by
Meridiam focuses on ESG risk management. It then
makes it possible to optimise the positive effects
of the projects and improve their ESG performance
once the assets are in operation.
The main elements of Meridiam’s ESG approach
are described below. This approach is applied
both in Meridiam’s investment process and in
monitoring the funds it manages. Meridiam’s ESG
approach also meets regulatory requirements for
the application of ESG criteria in France4.
Main ESG criteria
A set of more than 45 ESG conditions and criteria
are used to analyse all investments, without
distinction by sector of activity or asset class.
This ESG analysis framework is used to identify
the ESG issues and risks that are associated with
investments and to determine the implementation
modalities for projects that will allow these
issues to be effectively taken into account. Each
condition/criterion must be documented during
the different analysis phases. Here are some
examples of analysis criteria.
ESG THEMES Examples of criteria for the evaluation of investments
WORKING STANDARDSFree from child labourFree from forced or compulsory labour practicesGood working conditions, in terms of health / safety and equality
LAWS AND REGULATIONSLegal context and complianceProcurement procedure
ESG CAPACITYClient’s ESG policy and proceduresESG policy and procedures of Meridiam’s Partners
ENVIRONMENTAL
ISSUES
Impacts on the physical components of the environmentImpacts on nature protection areas and biodiversityImpacts on fauna, flora and habitatsEnvironmental measures
SOCIAL ISSUES
Social impactsCultural heritageInterests of stakeholdersLand acquisition and resettlement
ENERGY,
CARBON AND CLIMATE
Vulnerability to climate changeContribution to the fight against climate changeCombined risk relating to the Energy and Carbon market and Climate risk
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In the asset management phase, i.e. during the construction and operation of the infrastructures, the ESG analysis is carried out on the basis of detailed criteria whose scope is adjusted according to the type of infrastructure and the issues it generates. More than 180 criteria are used to monitor the implementation of ESG measures and to evaluate the ESG performance of projects. The following table shows some of these criteria.
ESG THEMES Examples of criteria to analyse the performance of assets
GENERAL
ENVIRONMENTAL
POLICY
Environmental policyTrainingEnvironmental protection expenditureClimate change risk management approach
CONTROL OF
POLLUTION AND MANAGEMENT
ENVIRONMENTAL
OF WASTE
Air quality / emissionsWaterSoilNoiseWasteDischarges
SUSTAINABLE USE
OF RESOURCES
Energy consumptionWater consumptionResource consumption
ARCHAEOLOGY
AND CULTURAL HERITAGEArchaeological discoveries and presence of heritage sitesCommunication to the public
BIODIVERSITYProtected areas and speciesMinimization and compensationDeforestation
EMPLOYMENT
Job creationDiversityRepresentation of workersWorking conditionsManagement of complaints and grievances
TRAININGTraining policyTraining resultsPercentage of employees trained
SAFETYSafety procedures and programmesResults in terms of safety for workers and users
ECONOMIC AND SOCIAL IMPACT
Impact on local employment and the economyQuestions from stakeholders (employees, unions, suppliers, neighbouring populations, etc.)Relations with local development and support actors
MANAGEMENT Stakeholder involvement
COMPLIANCE Certifications / labelsSanctions / penalties
(4)Decree No. 2015-1850 of December 29, 2015 applying Article 173 (paragraph VI) of the LTECV of August 17, 2015.
ESG
ENVIRONMENTAL
SOCIAL
GOVERNANCE
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Internal ESG analysis and monitoring
A rigorous and demanding approach to ESG
standards and responsible investment is
embedded in Meridiam’s investment process.
This is reflected in the resources that Meridiam
allocates to the implementation of its responsible
investment policy as defined by the Sustainable
Development Charter.
Two ESG specialists are involved full-time in the
implementation of Meridiam’s ESG policy and
procedures. In addition, all staff are engaged
and proactive in integrating ESG elements into
projects and investment opportunities that are
controlled under Meridiam’s ISO 9001 system. In
order to ensure ownership of ESG procedures
by the teams and their commitment, training
sessions are organised on ESG topics and on the
mechanisms for integrating these issues into the
conduct of their activities. The participation of all
team members in official training sessions with the
Meridiam ESG Compliance Manager is mandatory.
The ESG requirements, including all procedures,
tools and details on the distribution of
responsibilities, are included in Meridiam’s ISO
9001 procedures.
In addition, all project development teams
carry out due diligence during the opportunity
assessment phase and the planning and
finalisation phase of projects, then during the
asset management phase. The ESG Compliance
Officer is involved in development strategies and
monitoring before decisions are finally made for
projects where the ESG risk is considered medium
or high. The teams are empowered and are
involved in the preparation of the quarterly and
annual reports.
Meridiam is an involved investor and asset
monitoring is done on three complementary levels:
• Representation on the Board of Directors:
Meridiam is represented on the Board of
Directors of each of the project companies;
• Staff of the project company: Meridiam
appoints full-time members to the
management team of each asset or provides
seconded staff;
• Active/involved management of assets
according to a local approach.
The proximity with its assets ensures that
Meridiam’s investments are managed transparently
in all areas, including for ESG aspects. Each
project company contributes to Meridiam’s
ESG reports via standard questionnaires to be
completed once a year. These questionnaires
were developed by Meridiam with the assistance
of experts in the field, compiling industry best
practices and additional components more
specific to its business.
Meridiam is also supported by external specialists
on certain ESG themes in order to benefit from
their expertise and to equip themselves with
powerful and evolving tools.
External audits of the certification processes take
place annually or every two years, led by external
certification or rating bodies, whereby Meridiam’s
ESG approach is evaluated. Thus, the organisation
seeks to maintain a certain standard in the quality
of its management and more generally in its
procedures.
Internal audits on compliance and ESG topics are
also organised on a recurring basis, for example on
an entire portfolio of Meridiam funds or a part of it.
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The ESG approach is generalised and systematically
integrated into Meridiam’s ISO 9001-certified
investment and asset management processes.
The ESG assessment and the establishment of
avenues for ESG improvement take place as soon
as investment opportunities are identified using the
criteria mentioned above.
In practice, each project is thoroughly assessed
through an initial due diligence analysis prior to
investment. When ESG topics are highlighted during
this process, risk mitigation procedures are included
in the project documentation and specific risk
indicators are identified for the implementation of
continuous monitoring.
In general, the methodology used in the ESG
analysis process for investment opportunities is built
around the following steps:
11. Verification of the eligibility of the project
against the exclusion list established by
Meridiam for its various funds
2. ESG framing of the project in regulatory terms
and needs for its development
3. Detailed analysis of ESG issues
4. Determination of ESG risks
5. Identification of the ESG mitigation and
monitoring strategy.
Four levels of risk can be identified for each ESG
element that will be assessed. The level of risk will
vary from «low» to «high».
The risk assessment itself takes into account
criteria such as the intrinsic value of the component
affected by the proposed project, the possibility
of implementing measures to control and limit the
impacts of the project on this component, the social
acceptability of the project, etc. The application
of this methodology not only makes it possible to
evaluate all the ESG risks of a project but also to
understand the context in which it is to take place. In
addition, by providing details of the issues related to
the project, the methodology allows for an efficient
transition to the implementation phase of the
project, namely the construction and operation of
the infrastructure.
Meridiam also conducts regular audits of the project
companies and, where appropriate, will require
audits on the ESG aspects to be carried out.
The ESG analysis and evaluation methodology is
based on the approach presented in the following
diagram.
Analysis methodology
ESG ANALYSIS AND RISK ASSESSMENT
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Integration in the investment process
All of Meridiam’s investment opportunities
are reviewed based on Meridiam’s ESG policy
including on the lack of controversial elements
and the opportunity to engage positively with
local stakeholders and authorities to develop a
sustainable project.
Indeed, when analysing the market and/or the
origination of projects, the prerequisite for the
decision to develop a project is based on a
typology of activity criterion. Meridiam has a list
common to all funds presenting the typology of
activities in which the organisation will not invest,
whether for reasons of environmental or social
impacts, or moral reasons. In addition, for certain
geographic regions and depending on the type
of investment funds, additional lists of excluded
activities are established. These exclusion lists
contain all the activities in which Meridiam
undertakes not to invest and are part of the ESG
procedures, which are themselves integrated into
the ISO: 9001 system that governs the conduct of
business activities.
Meridiam’s eligible investment universe is defined
after this first filter.
All funds managed by Meridiam integrate all
ESG criteria due to the nature of the investment
process. Nevertheless, no specific weighting is
defined for one category of ESG issues compared
to another. The relative weight of the categories
of ESG criteria, some examples of which are given
above, is therefore the same for each of them. The
decision to pursue the development of a potential
investment is based on the overall assessment of
ESG issues and risks; Meridiam must be confident
that it can effectively manage ESG issues to move
forward with a project.
In addition, at the end of COP 21, the Meridiam
Transition Fund was created; it is dedicated to the
development and implementation of projects in
the field of energy transition in Europe. The fund’s
portfolio is therefore based exclusively on ESG
criteria.
Once a project is eligible, each stage of the
investment process includes an analysis of ESG
issues as well as the analysis of other criteria,
including financial criteria. In practice, since the
initial phase of eligibility of the investment, the
investment process integrates the analysis of E, S
and G dimensions as follows:
• An initial classification of the risk. This
classification will determine the ESG risk
management process to be put in place;
• The risk classification will be reassessed
throughout the process, as shown in the
section describing the analysis methodology.
This reassessment will follow a series of actions
that development teams must undertake to
understand the detailed characteristics of the
project, the components of the environment in
which it is located and the environmental and
social impacts it generates.
• The definition of a strategy for managing ESG
issues and risks.
Specifically, as needed, the project development
team could conduct an additional due diligence
study to establish an environmental and social
action plan, or even initiate an environmental
and social impact assessment (or a study of the
deviations between an existing impact study and
international performance standards) or any other
required study. Depending on the scope of the
studies to be carried out, Meridiam will call on
external consultants specialised in environmental
and social studies.
It is also necessary to obtain confirmation that a
project complies with Meridiam ESG criteria for
validation. If the ESG issues are too significant
and/or unmanageable, or if the compensatory
measures prove to be insufficient, the investment
process is not continued.
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