NextEnergy Solar Fund : NESF Sustainability and ESG Report 2023

Generating a more sustainable future

Sustainability and ESG Report

for the year ended 31 March 2023

Contents
1. INTRODUCTION	3
1.1. Foreword from the ESG Committee Chair	3

1.2. An introduction to NESF ESG achievements by Ross Grier, COO and Head of UK Investments, and Michael Bonte-Friedheim, CEO and Founder

of NextEnergy Group	4
2. PERFORMANCE HIGHLIGHTS	5
3. THE NESF APPROACH TO SUSTAINABILITY AND ESG	6
3.1. NESF Sustainability and ESG priorities	6
3.2. Keeping current	6
3.3. NESF Board ESG Governance	6
4. OPERATIONS	10
4.1. Where NESF invests	10
4.2. Where NESF operates	10
5. NEXTENERGY CAPITAL ESG EXPERTS	10
6. THE NESF SUSTAINABILITY AND ESG APPROACH	13
6.1. ESG risk and opportunities	13
6.2. Supply chain	14
7. ENVIRONMENT	16
7.1. Climate change	19
7.2. Biodiversity	21
7.3. Water	34
7.4. Physical, transition and supply chain risk	35
8. SOCIAL	36
8.1. Responsible sourcing and supply chain	38
8.2. Community engagement and social impact	42
8.3. Health and safety	44
8.4. Diversity and inclusion	44
8.5. The NextEnergy Foundation	48
9. GOVERNANCE	50
9.1. Our principles and policies	52
9.2. Our Disclosure and Reporting	52
9.3. Team and accountability	53
9.4. Investment decision-making	53
10. GLOSSARY	58
11. COMPANY INFORMATION	60

It is vital that as we make progress on climate change, we also drive accountability. The 2023 NESF Sustainability & ESG Report explains how NESF has taken action to deliver on its current priorities, and outlines the strategic review being undertaken to ensure that the Investment Manager's approach to Sustainability & ESG reflects the changing expectations of society and investors.

1. Introduction

1.1. Foreword from the ESG Committee Chair

the importance of transitioning to clean energy generation is increasing

The Report describes the comprehensive work that NESF is implementing to

improve biodiversity at its existing assets. It provides a detailed update on the work NESF

is doing on supply chains, to ensure that future investments meet the highest standards possible in responsible sourcing. And it also highlights the broader contribution NESF makes to society - for example, through

the direct funding to community initiatives it provides, and its

contribution to the NextEnergy Group charity, the NextEnergy

Foundation.

In 2022, the world emerged from the

pandemic, only to enter an energy crisis, against the backdrop of geopolitical and macroeconomic tensions. Simultaneously, the increasing impact of climate change continued to be felt, with a record-breaking heatwave across Europe, and the war in Ukraine making the energy trilemma more challenging to address.

In light of this, the importance of transitioning to clean energy generation is increasing. Solar PV and energy storage are vital to this. Both technologies contribute to global energy security and independence, while ensuring affordable power for homes and businesses. Policy developments have recognised this: the British government outlined an ambition for the UK to deploy 70GW of solar capacity by 2035 - to which the NextEnergy Solar Fund (NESF) will contribute - while the EU has declared a target of 600GW of solar by 2030.

The level of these targets is a welcome reflection of the importance of a clean energy supply. Furthermore, it comes with a responsibility to ensure the highest sustainability and environmental, social and governance ('Sustainability

• ESG') standards. For example, debates on land use and social standards in supply chains have accompanied the setting of these deployment targets, as policymakers grapple with how to expand the role of solar in the global energy system.

Our commitment to ensuring that our work reflects evolving international Sustainability and ESG standards is reflected in our wide range of public disclosures. This includes transparency on our ESG risk management and proprietary due diligence procedures, including our approach to investment decision-making and governance.

NESF is classified as an Article 9 Fund under the EU Sustainable Finance Disclosure Regulation, and has sustainable investment as its objective. In addition, its investments are fully aligned with the EU Taxonomy. Sustainability and ESG are central to NESF's mission, and I am confident that NESF will continue expanding on its positive impact into the future. As we look forward, the 2024 NESF Sustainability and ESG Report will present the findings of the strategic Sustainability and ESG review being carried out this year and how NESF's approach will evolve in light of this.

The NextEnergy Capital Sustainability and ESG team continues to drive NESF's Sustainability and ESG performance, and I would like to thank them for their hard work, passion and dedication to what they do, contributing to a sustainable future.

Josephine Bush,

Chair of the NESF Board ESG Committee

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1.2. An introduction to NESF's ESG achievements by Ross Grier, COO and Head of UK Investments, and Michael Bonte-Friedheim, CEO and Founder of NextEnergy Group

Over the last 12 months, the Fund progressed its pipeline of solar assets and expanded into battery storage, in line with our core mission to deliver new clean energy for society. We believe in showing the impact of this in detail and, as such, our new reporting and disclosure initiatives in 2022 included the publication of our first-ever dedicated NESF Sustainability and ESG Report.

The 2023 Sustainability and ESG Report illustrates that the breadth and depth of our Sustainability and ESG work continues to increase, and so we are delighted that the NextEnergy Capital ESG team which advises NESF has doubled in size and expanded its skillset and expertise. As well as ensuring that our ESG approach is best in class, the team is deeply involved in industry-wide projects, such as the Solar Stewardship Initiative, which launched publicly in October 2022. The purpose of this is to help ensure responsible sourcing across the solar supply chain, which NESF is driving through its comprehensive internal approach to supply chain Sustainability and

ESG management.

We have continued to develop our approach to biodiversity, with the expansion of our Universal Biodiversity Management Plan, that is improving the local environment

1 This refers to the EU Sustainable Finance Disclosure Regulation. See page 9 for more information.

there is a

direct link between biodiversity and climate change, so NESF's support to biodiversity

is crucial

around existing NESF assets. This is a voluntary initiative and demonstrates NESF's commitment to identify every opportunity to promote nature and the environment.

There is also a direct link between biodiversity and climate change, and so NESF's support to biodiversity is crucial to our mission to generate a sustainable future, by leading the transition to clean energy.

Further progress includes the continued development of our proprietary due diligence tool and screening processes. The tool is focused on environmental and social impacts and will be used to understand the nature-related, climate, and social impacts of potential NESF investments. We also continue to collect data on our emissions avoided, which is independently calculated by the Macquarie Green Investment Group.

As an EU SFDR Article 9 Fund1, we make all relevant disclosures for Funds that have sustainable investment as their objective. We have also updated the NESF website to include a dedicated Sustainability and ESG section, allowing easy access to the reporting and information that our investors need in order to understand our ESG approach in detail.

NESF goes from strength to strength, and we are excited to present further information on our current and future impact in this 2023 Sustainability and ESG Report.

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2. Performance highlights (as at 31 March 2023 unless stated)

ESG

Tonnes of CO2e	Equivalent to UK homes	Equivalent cars taken	Total emissions avoided
emissions avoided	powered for one year	off UK roads for one	since 2014 (ktCO e)2
per year		year	2

363,000	242,000
Total fossil fuel avoided	Community funding
since 2015	FY 2022-23 (through
	Special Purpose
	Vehicles)

c. 120,000	2,181
Donated to the	Universal Biodiversity
NextEnergy Foundation	Management Plan
FY 2022-23	(UBPM) sites

929.4	c. £104,000 £400,000 45
(kilotonnes of oil	15 more due by year end
equivalent)

Number of biodiversity	Total hectares of
exemplar sites	wildflowers across
in development)	portfolio
15.42
8 (completed or

Portfolio with enhanced biodiversity measures

63% Based on UBMP and Exemplar sites as a proportion of relevant UK ground-mounted assets

Operational

Total capacity installed	Total electricity	Operating solar assets	Generation above
	generation for the year		budget for the year
865MW	870GWh	99	3.8%
Financial

Gross asset value (GAV) Ordinary shareholders' NAV per ordinary share Net Asset value (NAV)

Dividends per ordinary share for the year ended 31 March 2023

£1,218m	£674.4m	114.3p	7.52p
Target dividend	Forecast dividend cover	NAV total return per	Ordinary Shareholder
FY 2023-2024		ordinary share	Total Return
8.35p	1.3-1.5x	7.3%	8.6%
Financial debt gearing	Total gearing
28%	45%

2 This refers to 'thousands of tonnes of carbon dioxide equivalent'.	5
NEXTENERGY SOLAR FUND LIMITED | Sustainability and ESG Report 2023