Applying Principle 3

ESG disclosure refers to investor monitoring and asset or company ESG reporting to investors, stakeholders and the general public. Some of the ways investors can implement Principle 3 are outlined below.

• Consistency throughout the investment process. Include ESG disclosure as a topic of engagement with portfolio companies and lead sponsors throughout the investment process: during due diligence, at the onset of the post-investment phase and as part of asset management and monitoring.

• KPIs. Identify ESG KPIs to monitor for each investment in dialogue with the management of the asset/project company, based on the material risks and opportunities identified in due diligence. Develop separate KPIs for greenfield and brownfield investments to reflect the differing risk profiles. Request regular reports on these KPIs for both shareholders and lenders. For example, they can be integrated within quarterly construction/ operation reports and annual financial reports.
• Board and risk committee involvement. Feature ESG performance monitoring as a regular agenda item at board meetings and discuss any material risks at risk committee meetings.
• ESG incidents. Set clear expectations for when and how the asset or project company should report material, adverse ESG incidents, as well as how these should be remediated. Provide examples to illustrate what you consider severe and what constitutes a material ESG incident.
• Climate-related financial disclosures. Where appropriate, encourage asset/project companies to disclose climate-related financial information in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.