Where theres green, theres growth Green Economy Report 2021 An LSEG BusinessGreen Economy Mark 2021: highlightsconomy 4 Contents Introduction 7 COP26: a moment and momentum 10 LSEG: supporting the global sustainable finance ecosystem 12 What is the green economy? 15 Green Economy Mark: key themes and trends 18 Green Economy Mark companies and funds list 30 Case studies 37 Guest article: Leading the green energy revolution with Green Economy Mark company ITM Power 55 Conclusion 58 Methodology 34As companies make the transition to a greener, net-zero future, they need support from their customers and employees, from government, regulators and wider stakeholders. Equally importantly, they need support from investors and capital markets, which themselves have sustainability at their core. A convening venue, stock exchanges play a pivotal role in mobilising this support. As one of the worlds largest capital markets and sitting at the heart of the global financial system, London Stock Exchange enables long- term investment and capital raising to support the rapidly growing green economy and the greening of the overall economy. Since joining London Stock Exchange this year, I have been deeply struck by the commitment across the organisation to support the transition to a greener, more sustainable economy and by the way LSEG (London Stock 3 Green Economy Report 2021 Exchange Group) uses its convening power to bring together investors, issuers, policy makers and regulators to drive action on climate change. It is crucial that the capital markets are oriented towards long-term sustainable development. The pace of change and innovation in sustainable finance in London has been remarkable over the last few years. Our Sustainable Bond Market has recently reached an important milestone of 300 active bonds listed, which have helped companies and institutions to raise $100bn+ in sustainable financing. Having been the first exchange in the world to launch a dedicated Green Bond Segment, in 2021 we became the first exchange to launch a Transition Bond Segment, designed to support companies to raise debt finance to support transition projects. The Green Economy Mark is an important example of the support that London Stock Exchange provides to companies on their green journey. Foreword It was launched to increase the visibility of listed companies and funds on Londons markets that are contributing to achieving positive environmental objectives, such as climate change mitigation and adaptation, waste and pollution prevention, and the transition to a circular economy. Im delighted to welcome this second Green Economy Report, which introduces the 101 companies and funds now accredited with the Mark. They are tangibly and measurably playing a vital role in accelerating the transition to a low-carbon or net- zero carbon economy, and we should applaud and continue to support their achievements. Julia Hoggett CEO of London Stock Exchange plc4 Green Economy Report 2021 Green Economy Mark 2021: highlightsGreen Economy Mark 2021: highlights 5 Green Economy Report 2021 increase since its launch in October 2019 now hold the Green Economy Mark equity issuers listed on Main Market quoted on AIM 36% This represents a 120% increase from the combined amount in 2020. combined market capitalisation 148.5bn Year-to-date, five issuers qualified for the Mark at IPO: AMTE Power Aquila Energy Efficiency Trust Foresight Group Holdings musicMagpie VH Global Sustainable Energy Opportunities corporates closed-end fundsGreen Economy Mark 2021: highlights 6 Green Economy Report 2021 Green Economy Mark issuers account for: of issuers with the Mark are international 25% of UK issuers with the Mark generate international revenues 48% largest sector on equity markets in the last 24 months 1 to fund further innovations, R&D and to build capacity in growing green markets. raised by Green Economy Mark issuers 8.86bn Representing a 5% outperformance of the FTSE All-Share Index. the year-to-date share price performance 2 +16% in 2021 year-to-date 2.6bn 27 issuers with the Mark have raised a combined 1 1 April 2019 to 31 March 2021 2 Weighted average 3 When grouped together as a sector, by issuance (both primary and follow-on) since 1st January 2020 9% of total capital raised in 2021 year-to-date 5% of the total number of equity issuersIntroduction The enormous scale of the environmental challenge facing our planet confronts us all. Politically, economically, socially, financially and technologically, the global landscape is taking on a greener hue. There is a deeper and more urgent understanding of the risks and repercussions of climate change to ecosystems, societies, markets and to companies. Green Economy Report 2021 7The June 2021 G7 Summit was unequivocal in calling for an acceleration in investment towards climate change mitigation and adaptation. “Huge leaps in innovation are required to reach our net-zero goals, and infrastructure investment to reduce emissions and mitigate climate impacts still lags far behind,” they said, citing the OECD estimate that $7trn needs to be invested annually until 2030 4 . The G7 countries are moving towards making climate disclosures mandatory across their respective economies. This year, G7 finance ministers committed for the first time to embed climate change and biodiversity loss considerations into economic and financial decision making. They described it as “a major step towards ensuring the global financial system plays its part in the transition to net-zero, as investors better understand how firms are managing climate risks and can allocate finance accordingly 5 .” Introduction 8 Green Economy Report 2021 Green taxonomies are now being put into place, against which investors and, in some cases, companies, must report. Importantly, taxonomies enable investors to identify environmentally sustainable economic activities 6 . Central banks such as the Bank of England and the European Central Bank are attempting to future-proof their operations by running new stress tests of the banks exposure to the effects of climate change 7 .Introduction 9 Green Economy Report 2021 Investors Investors increasingly recognise the threat posed by climate change, to both the global economy and to their ability to meet the needs of their clients over the coming decades. But they also see the enormous opportunity for economic growth and investment returns presented by the transition to net-zero, and are acting accordingly. The 87 global asset managers who are signatories to the Net Zero Asset Managers Initiative and are committed to net-zero emissions by 2050 or sooner, are responsible for $37trn-worth of assets under management. The number of signatories to the United Nations-supported Principles for Responsible Investment (UN PRI) climbed 29% in the space of a year, rising to more than 3,000, with collective assets under management amounting to $103trn, according to PRIs 2020 Annual Report 8 . Investors plan to double their allocations to sustainable products over the next five years, according to BlackRocks Global Client Sustainable Investing Survey. One in five said that COVID-19 would accelerate their sustainable investing allocations and nearly 9 in 10 (88%) have placed climate-related risks at the top of their portfolio concerns 9 . With this sharpening focus on climate, investors are asking ever more searching questions about companies green credentials and climate transition strategies before they make their investment decisions. ESG fund flows The disruption caused by the pandemic has led individual and institutional investors alike to look for more sustainable and resilient business operations, practices and products, as well as tools to future-proof portfolios against climate risk. This has led to accelerating demand for environmental, social and governance (ESG) funds a demand that has also been driven by the performance of these funds, which have outperformed their non-ESG peers in seven out of the last ten years 10 . Sustainable funds attracted all-time high inflows of 120bn in the first quarter of 2021, representing more than half of overall European fund flows. Sustainable fund assets reached a record high of 1.3trn 11 . This trend is also reflected in the rapid growth of exchange-traded funds (ETFs), which have accounted for one-third of new ETF listings in London in 2021 to date. Trading in ESG ETFs has risen from minimal levels in 2019 and currently account for 4.8% of all trading on Londons markets, and they are set to be one of the London markets fastest growing financial instruments 12 . 4 g7uk/wp-content/uploads/2021/06/G7-Economic-Resilience- Panel-Key-Policy-Recommendations.pdf 5 g7uk/g7-finance-ministers-agree-historic-global-tax-agreement/ 6 EU taxonomy for sustainable activities | European Commission (europa.eu) 7 8 unpri/annual-report-2020/foreword 9 one/press-releases/blackrock-survey-shows-acceleration-of-sustainable-investing 10 Refinitiv Lipper data, cited by Reuters sustainable-business/sustainable-fund-inflows-hit-record-high-q1- morningstar-2021-04-30/ 11 morningstar.co.uk/uk/news/211923/sustainable-fund-flows-hit-new- record.aspx 12 exposure-best-execution-why-london-centre-global-securities-trading10 Green Economy Report 2021 COP26: a moment and momentum11 Green Economy Report 2021 COP26: a moment and momentum The global focus on the threat of climate risk to ecosystems, societies, markets and to companies will be at its sharpest at COP26, which is set to take place in Glasgow in November 2021. It is the most significant climate summit since the 2015 Paris Agreement. It is an important moment and one in which LSEG, as an organisation that is committed to playing a leading role in supporting the growing drive to a net-zero carbon economy, will participate. But beyond the moment is the momentum, as investors and issuers commit to accelerating the reduction of their carbon emissions in their own operations or in their portfolios. Here, LSEG will help to enable the transition to net-zero by bringing together the expertise and market participants around data and disclosure, growing the green economy, enabling economy-wide transition, and convening the markets.12 Green Economy Report 2021 LSEG: supporting the global sustainable finance ecosystem13 Green Economy Report 2021 LSEG: supporting the global sustainable finance ecosystem There are three key areas in which LSEG is driving action. We use our data, forward- thinking technologies and expertise to facilitate engagement between issuers and investors, and to help our customers to make sustainable investment and business decisions. Growing the green economy The Green Economy Mark, by recognising London-listed companies with 50% or more of their revenues derived from products and services that contribute to the global green economy, plays a central role in enabling the growth and development of green industries and investment. Driving ESG data and disclosure With data and disclosure, we are encouraging issuers to produce consistent, comparable and reliable global climate data. LSEG co-chaired the UN Sustainable Stock Exchanges advisory group developing Model Climate Disclosure Guidance, which launched in June 2021. Its aim is to help exchanges support issuers in publishing decision-useful climate disclosures and create climate-resilient markets. The working group was formed following a call for a global coalition of stock exchanges from David Schwimmer and Mark Carney. We offer one of the richest ESG databases in the industry and have been delivering ESG data and solutions for over 15 years through our heritage Refinitiv business. This now includes Lipper fund and portfolio ESG scores, sustainable financing deals, carbon pricing data and research from Point Carbon, and renewable energy projects through Infrastructure 360. Supporting the low-carbon transition We are supporting investment and capital flows to achieve the low-carbon transition across all sectors. LSEGs Data & Analytics division helps investors calibrate their requirements to achieve climate and other environmental, social and governance goals. The FTSE TPI Climate Transition Index was the first global index to enable investors to align a broad equity portfolio with climate transition and the goals of the Paris Agreement. Londons world-first Transition Bond Segment, an extension of its Sustainable Bond Market, enables issuers to raise the capital needed to transition to low-carbon business models.14 Green Economy Report 2021 LSEG: supporting the global sustainable finance ecosystem LSEG and net-zero: leading by example as a listed business LSEGs own environmental ambitions are underpinned by science-based targets, aligning with the Paris Agreement trajectory to achieve net-zero emissions. We have become the first global exchange group to commit to net-zero through the Business Ambition for 1.5C and are members of the United Nations Climate Change Race to Zero. We not only encourage issuers to report against Task Force for Climate- related Financial Disclosures (TCFD) through our reporting guidance, but aim to embed these standards into our own financial reporting - LSEG has been a supporter of the TCFD since its launch in 2017.15 Green Economy Report 2021 What is the green economy16 Green Economy Report 2021 What is the green economy? The greening of the global economy presents significant growth opportunities for companies and investors. However, to mobilise investment at scale, green business activities must be identified, categorised and measured in a systematic way, across diverse supply chains and asset classes. Amid growing concerns in the financial industry over greenwashing, it is integral that we set the bar high, and have a robust framework to determine green products and services that are recognised through the Green Economy Mark accreditation. It is also important to distinguish between businesses with good sustainability practices, social impact and governance, and those businesses that are contributing to the low-carbon transition by meeting environmental objectives. The Mark focuses specifically on the environmental element of ESG. It uses FTSE Russells Green Revenues 2.0 Data Model to identify companies providing green products and services, and classifies revenues based on the Green Revenues Classification System (see methodology). Globally there is a push by regulators, policymakers and standard-setters to ensure that investors can determine and identify investments that are genuinely sustainable. Policymakers are keen that capital is directed towards funds and companies that are reducing carbon emissions in line with the Paris Agreement.17 Green Economy Report 2021 What is the green economy? “By clearly defining which economic activities count as environmentally sustainable, the UK Green