LCM Partners SOLO VII SLP ESG Report August 2024 Final

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LCM Partners SOLO VII SLP

ESG Report | August 2024

Contents

Letter from the CEO

Good Governance

03/04

Partnership Updates

• Asset Finance

• Secured Real-Estate Backed Lending

Deep Dive Case Study

LCM Partners SOLO VII SLP | ESG Report

LCM Partners SOLO VII SLP | ESG Report | 02

LCM Partners SOLO VII SLP launched on 9th May 2023 under the SOLO 2 strategy. In particular, as the CEO, I am pleased that we have been able to work alongside you in creating a vehicle that

meets your requirements.

The launch of the second vintage of SOLO brings with it the formalisation of an ESG framework which allows us to support the Nuclear Liabilities Fund’s desire to make investments which are

aligned with the UN Sustainable Development Goals (“UN SDGs”). Each investment is mapped to the UN SDGs using an externally set taxonomy, designed by the Sustainable Development

Investments Asset Owner Platform. As part of the ESG framework for SOLO 2, we have updated our processes to combine both internal analysis and sign off with additional independent external

oversight. We have worked with our external ESG advisors at Sirsa and Reporting 21 to create an ESG monitoring and reporting platform to track ESG-related data on each Portfolio. This has

culminated in the creation of this document, our first ESG report for LCM Partners SOLO VII SLP and for SOLO 2 which we hope you find informative.

This report covers the investments made by LCM Partners SOLO VII SLP during 2023. As a reminder, while the Partnership is not an Article 8 fund under the EU Sustainable Finance Disclosure

Directive (EU SFDR), we have agreed to manage and report on the Partnership in line with the regulations which define an Article 8 Fund as one “which promotes, among other characteristics,

environmental or social characteristics, or a combination of those characteristics, provided that the companies in which investments are made follow good governance practices”. As a result,

this report is split into three sections:

• Good governance where we summarise the findings from our ongoing assessment of each origination partner’s governance practices

• Partnership updates where we provide an overview of each origination partnership and report on progress against their respective Key Performance Indicators (KPIs)

• An in-depth case study which provides further details on one of our origination partnerships in the United Kingdom.

As always, we are here to support you so please do let us know if you have any questions. We look forward to sharing our ESG progress with you in the future.

Paul Burdell

Chief Executive Officer | LCM Partners

Letter from the CEO

Good Governance

Overview

During the reporting period, LCM assessed each origination

partner for alignment with the LCM Good Governance

Policy. LCM utilised its proprietary questionnaire to assess

whether SOLO’s origination partners promote good

governance practices, including the following themes:

• Sound management and employee relations

• Audit, risk and transparency

• Compliance

• Legal; and

• the Environment

Upon receipt of the completed Good Governance

Questionnaires the origination partners were evaluated

against the required governance standards as stipulated

by the LCM Good Governance Policy.

In addition, LCM performed checks on the business

activities of our partners, either through due diligence or

representations and warranties in funding documentation.

No issues or areas of concern were identified during the

reporting period.

LCM also performed appropriate public database searches

(such as RiskScreen) and no relevant information or areas

of concern were identified during the reporting period.

Portfolios are assessed for alignment with the LCM Partners

Exclusions Policy on an ongoing basis with origination

partners reconfirming their adherence during the reporting

period.

Representations and warranties given by our partners in

relation to topics such as audit, transparency and reporting,

risk management and compliance with relevant laws were

repeated upon each relevant utilisation request during the

reporting period. No material breaches were identified

during the reporting period.

Sound Management and Employee Relations

Under the sound management and employee relations

assessment, LCM reviewed areas such as board

composition, fair pay and executive remuneration,

employee turnover and diversity and inclusion.

LCM assesses these areas in the context of the size and

nature of the businesses, with no issues identified.

Audit, Risk and Transparency

Our partners’ responses to the audit, risk and transparency

section of the assessment were in line with expectations.

Our partners conduct reviews on their controls and

processes to identify areas of improvement, and have

shared their financial statements with LCM. One

originator changed auditor during the period, although this

was not deemed to be a concern.

Portfolio

SOLO’s origination

partners

Good Governance

Assessed

Compliance

Within the compliance section, the assessment of our partners covered policies and procedures that they have in place,

ensuring they have adequate liability insurance and comply with relevant legislation. No issues were identified during the

reporting period.

None of our partners had any business ethics disputes in the last year or involvement in violations of the UN Global

Compact or the OECD Guidelines of Multinational Enterprises.

Legal

Our partners fully met the legal assessment criteria within the Good Governance Questionnaire. Our partners implement a

robust filing and record-keeping system, and there were no ongoing material breaches, prior convictions, or ongoing

litigation related to governance areas (excluding those within the normal course of business).

Environment

In line with SOLO 2’s ESG framework, all of the origination partnerships complied with the LCM Partners Exclusions Policy,

confirming amongst other things that none of our partners are directly involved in the manufacture or sale of controversial

weapons or fossil fuels. Moreover, during the reporting period all but one origination partnership qualified as an SDI

investment, defined as a Portfolio having more than 50% of its deployment into investments with positive ESG attributes

according to our externally set taxonomy. The remaining Portfolio deployed less than 50% of its capital into investments

with positive environmental attributes.

While not a requirement for Article 8 funds under EU SFDR, following feedback from Limited Partners, we also incorporated

both the Principle Adverse Indicators (PAIs) and the ESG Data Convergence Initiative (EDCI) questions within the Good

Governance Questionnaire. In most instances, our partners were not able to provide responses as they do not currently

report on metrics such as scope one, scope two and scope three emissions or conduct a carbon footprint assessment.

Moving forwards, we hope that more of our Portfolios can share these metrics. In the meantime, for Portfolio 16 where we

were able to collect some of the PAI and EDCI data, a deep dive case study has been included on Page 4.

100%

Adherence to the

LCM Partners

Exclusion Policy

100%

No material breaches by

our origination partners

LCM Partners SOLO VII SLP | ESG Report | 03

✓

As part of LCM’s assessment, Schoeller Allibert confirmed they:

✓ Consider the impact of their business on the environment and seek to minimise any negative effects

✓ Are not active in the fossil fuel sector

✓ Implemented carbon emissions reductions initiatives that are aimed at aligning with the Paris Agreement

✓ Do not have sites located in or near a biodiversity sensitive area where activities have a negative impact on these areas

✓ Are not involved in the manufacture or sale of controversial weapons

In addition, Portfolio 16 has the data available to share the following metrics:

Schoeller Allibert produce an annual sustainability report on their ESG programme which states that reducing greenhouse gas emissions is

one of the most important targets in their sustainability strategy. Schoeller Allibert established a 2020 baseline with the support of South Pole,

a climate advisor headquartered in Switzerland. Schoeller Allibert have released their 2023 GHG emissions data which is their fourth year of

collecting the required information, with continuously improved data collection and granularity.

Due to the energy savings made from operations and an increase in the use of green energy, scope 1 and scope 2 emissions decrease by 79%

compared to the 2020 base year.

In 2023, Schoeller Allibert took the next step in their emission reduction strategy by committing to align their targets with the Science Based Targets

initiative (SBTi). This includes assessing scope 3 emissions separately from scope 1 and scope 2, with their target defined as the following:

“Schoeller Allibert Services B.V. commits to reduce absolute scope 1 and 2 GHG emissions by 90% by 2033 from a 2020 base year. Schoeller

Allibert Services B.V. also commits to reduce absolute scope 3 GHG emissions from purchased goods and services, fuel- and energy-related

activities, upstream transportation and distribution, and business travel by 33% within the same timeframe.”

Good Governance

Case Study: Portfolio 16

Portfolio 16: Schoeller Allibert

Share of non-renewable energy consumption from non-renewable energy sources compared to renewable energy sources,

expressed as a percentage of total energy sources

60%

Share of non-renewable energy production from non-renewable energy sources compared to renewable energy sources,

expressed as a percentage of total energy sources

Emissions to water generated per million EUR

210 m3 / EUR (M)

Tonnes of hazardous waste and radioactive waste generated per million EUR

1.2 t / EUR (M)

CASE STUDY

The benefits of the programme from a waste reduction

perspective are demonstrated by Zero Waste Europe’s

study which compared 32 Life Cycle Assessment Studies to

evaluate the impacts of single-use and reusable packaging,

taking into account production, transport, number of cycles

and end of life. This study finds reusable plastic crates

produce 88% less emissions than single-use cardboard.

Portfolio 16 is our partnership with a European leader in

returnable transport packaging. Under the terms of the

agreement, SOLO is providing financing to support our

partner’s reusable plastic crate rental programme

offering a more sustainable solution for supply chain

logistics than single-use alternatives as these plastic crates

can be repeatedly used for 10-plus years. Indeed, our

partner is seeking to take a market leading position with

regards to sustainability.

Schoeller Allibert target the top of the waste hierarchy,

a concept which is utilised in EU policy and legislation,

through focusing on preventing and reducing waste to

protect people and the environment while also conserving

resources.

Single-use

wooden crate

Single-use

mixed materials

Single-use

cardboard box

REUSABLE PLASTIC CRATES

LESS EMISSIONS

THAN

64%

LESS EMISSIONS

THAN

88%

LESS EMISSIONS

THAN

Preventing waste and reducing

single use packaging

Producing reusable and

repairable packaging

Buy-back and take-back:

100% material recycling

Prevention/Reduction

WASTE HIERARCHY

SCHOELLER ALLIBERT’S

APPROACH

Re-use

Recycling

Recovery

Disposal

CALL ON EU: EMBRACE

REUSABLE PACKAGING

LEAST

PREFERRED

MOST

PREFERRED

Scope 1

4,538 tCO e

14,007 tCO e

413,962 tCO 2

Scope 2

Scope 3

Total tonnes of CO2e: 432,507

GREENHOUSE GAS EMISSIONS

LCM Partners SOLO VII SLP | ESG Report | 04

Scope 1: Emissions from stationary and mobile combustion and fugitive emissions.

Scope 2: Emissions from purchased electricity, heating and cooling.

Scope 3: Emissions from relevant purchased goods and services, fuel and energy-related

activities, business travel, waste, employee commuting, freight and the use of

sold products.

Partnership Updates

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Asset Finance

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Wavefront (Portfolio 8)

As a result of environmental concerns regarding

the effects of commercial vessels transferring

ballast water around the world, in 2016 the

International Maritime Organisation (IMO) made

it mandatory for every vessel over 400GT to be

fitted with an IMO approved Ballast Water

Management System (BWMS) from 2024.

Under the terms of the contract for Portfolio 8,

SOLO is partnering with a shipping and marine

finance specialist who has developed relation-

ships with Original Equipment Manufacturers

(OEMs) to provide new BWMSs.

Along with this, SOLO may also fund other

marine equipment including exhaust gas cleaning

systems or scrubbers, which are used to remove

particulate matter and harmful components from

the exhaust gases generated as a result of

combustion processes in marine engines.

Each transaction is being co-underwritten by LCM

with the partner typically entering into a financing

lease with the lessee which fully amortises over a

36-month period.

Overview

This partnership tackles the main issue with ballast water where non-local

sediments and microscopic organisms are transmitted into the water of their

destination port. This could cause native species to become extinct, potential

negative effects on public health and impact local biodiversity. As trade has

increased, the volume of ballast water has grown significantly and so is an

increasingly important area.

The utilisation of filtration systems, which the IMO have made a legal requirement,

protects marine life. SOLO provides the financing which enables ships to be properly

equipped as the BWMS reduces marine pollution and focuses on preventing water

pollution.

With our oceans covering two-thirds of the world’s surface and the greatest number

of marine creatures living in coastal areas, this is a critical aspect of marine

management. International Maritime Organisation (IMO) research states that 80%

of world trade is carried by ships and 10 billion tonnes of ballast water are

transported per year which would fill 4 million Olympic sized pools.

The IMO emphasises the importance of utilising BWMS systems as 7,000 species

are transferred in ballast water every hour of every day and there is one new

invasion every 9 weeks.

Example of what BWMS can prevent - Asian Kelp (Undaria pinnatifida):

•

Better known as wakame, this edible seaweed is commonly used in Japanese

and Korean cuisine

•

While native to cold-water coastal areas of Japan, Korea, and China, it has found

its way to New Zealand, France, Great Britain, Spain, Italy, Argentina, Australia,

Mexico and the US

•

Asian Kelp’s rapid growth and large size means it competes with native sea-

weeds for space and light, changing the local marine ecosystem

•

Aggressive measures are underway to remove the plant from harbours on the

western seaboard of the USA

KPIs

Capital deployed

€4,382,095

Total number of ships with a BWMS fitted

Number and sizes of ballast tanks funded during the period

1 x 600 cbm/h

5 x 1,000 cbm/h

Total number of Ballast Water Management Systems (BWMS) funded

% of customers set to meet D2 standards by 2024

100%

Ship documentation - % Management Certification

100%

Ship documentation - % Ballast Water Management plan

100%

Ship documentation - % Water Record Book

100%

Number of exhaust filters financed

Total number of ships with an exhaust filter fitted

Adherence to LCM’s Exclusion Policy

Yes

UN SDG Alignment:

LCM has assessed Portfolio 8 for alignment with the UN SDGs. This investment is

aligned with the following:

LCM Partners SOLO VII SLP | ESG Report | 07

SDG 14: Life Below water

14.1 Prevent and significantly reduce marine pollution of all kinds

Key Performance Indicators (KPIs)

LCM Partners SOLO VII SLP contributed to the financing of six Ballast Water Management Systems during the period.

•

This carries a total of 5,600 cbm/h of ballast water and is broken down as follows:

O 1 tank with a capacity of 600 cbm/h

O 5 tanks with a capacity of 1,000 cbm/h

•

Importantly, 100% of customers are set to meet the D2 standards set by the IMO, which specifies the maximum amount of viable organisms allowed to be

discharged, including specified indicator microbes harmful to human health.

•

No exhaust filters were financed during the period.

Rural Asset Finance

(Portfolio 9)

Portfolio 9 is a funding arrangement with an

experienced asset finance originator in the UK

focused on the farming sector in the East of

England. Under the terms of the agreement, SOLO

is providing financing for new and used

agricultural equipment as well as loans secured

against agricultural land and properties.

Overview

Farmers apply to Rural Asset Finance to obtain credit for new and used agricul-

tural equipment, buildings and land with a focus on smaller scale farmers. The

support of these farmers is of particular importance at the moment as banks have

retrenched from the sector since the Global Financial Crisis, and farmers in the UK

are also facing increased challenges post-Brexit, as their subsidies from the Basic

Payment Scheme (BPS) finished at the end of 2023.

An opportunity exists for SOLO because:

•

Large banks have retrenched from the market

•

Banks (post-financial crisis) no longer have local agricultural specialists who

solely manage farmers

•

Historical perceptions about farming incomes mean most main banks will

only lend on land, leaving equipment and other capex to leasing specialists or

new lenders in the market

Total new agricultural machinery purchases in the UK are in excess of £3 billion per

annum and our partnership with Rural Asset Finance provides financing services to

small scale farmers to support them in obtaining agricultural equipment.

SOLO’s funding includes equipment which allows farmers to produce food in a

more resource-efficient way as well as having the potential to increase quantity

and quality.

KPIs

Capital deployed

£14,673,577

Total number of individual lends

153

% investments in renewable related equipment (capital deployed)

27%

% investments in renewable related equipment (#)

22%

Adherence to LCM’s Exclusion Policy

Yes

LCM Partners SOLO VII SLP | ESG Report | 08

UN SDG Alignment:

LCM has assessed Portfolio 9 for alignment with the UN SDGs. This investment is

aligned with the following:

SDG 2: Zero Hunger

2.3 Double agricultural productivity of small-scale food producers

2.4 Sustainable food production systems and resilient agricultural

practices

SDG 7: Affordable and Clean Energy

7.2 Increase substantially the share of renewable energy in the

global energy mix

SDG 9: Industry, Innovation and Infrastructure

9.4 Upgrade infrastructure and retrofit industries to make them

sustainable

Key Performance Indicators (KPIs)

LCM Partners SOLO VII SLP deployed £14.7m into Portfolio 9 during the reporting period which represents 153 individual lends. The table below shows the

Portfolio’s KPIs, with the main points to highlight as follows:

•

The majority of lending was to support food production (59%), which aligns with UN SDG 2: Zero Hunger

•

This was followed by farmers diversification activities (including renewables and sustainable tourism) at 30%, with 12% of capital deployed in other activities

59%

30%

12%

Capital deployed by activity type (£m)

Lending to support food production

Diversification (renewables / sustainable tourism etc.)

Other

52%

28%

20%

Number of investments by activity type (# lends)

Lending to support food production

Diversification (renewables / sustainable tourism etc.)

Other

Investments funded during the period include:

Tractors | Trailers | Grain Drills | Loaders | Cultivators

Robotic transplanters | Solar panels | Sprayers

Spreaders | Harvester | Excavators | Balers | Telehandler

CHP units | Milking robots | Agribuildings | Land

Crew Transfer Vessels

(Portfolio 11)

Portfolio 11 primarily provides financing to the

owners and operators of Crew Transfer Vessels

(“CTVs”) with the vessels focused on servicing

offshore wind parks.

Portfolio 11 is an example of SOLO building

relevance in the renewables space by funding

more granular assets and service equipment

rather than the large ticket infrastructure assets

themselves.

Overview

By providing finance for the funding of Crew Transfer Vessels the facility

enhances the reduction of fossil fuel use as these assets are a pre-requisite for

both the construction and maintenance of Offshore Windfarms and their

production of renewable energy.

As Europe decarbonises its electricity generation capacity, offshore wind plays a

vital role in this process. The UK leads the way and is one of the largest offshore

wind electricity producers and continues to dedicate resources to grow generation

capacity through this form of generation.

CTVs play a critical role in both the construction and maintenance of offshore

windfarms and as such are critical assets in the industry. During the construc-

tion of a new offshore wind farm, the owner will most likely need about one CTV

for every five new turbines. During the operation and maintenance phase, one

vessel is required for every 10-15 turbines. Effective covenants ensure CTVs are

being used exclusively for offshore renewables during the life of the investment

(typically 5 year contracts).

Generating power via wind power produces less CO2e than

alternative energy sources

Source: https://www.forbes.com/sites/christopherhelman/2021/04/28/how-green-is-wind-

power-really-a-new-report-tallies-up-the-carbon-cost-of-renewables. Statistics referenced in the

article are compiled from the following sources: National Renewable Energy Laboratory, Vestas,

Siemens Gamesa Renewable Energy and Bernstein Research estimates. Carbon dioxide

equivalent (CO2e) is the number of metrics tonnes of CO2 emissions with the same global

warming potential as one metric tonne of another greenhouse gas. This is a standard metric

for CO2 footprints.

99%

Lower

Emissions

Than

Coal Power

21%

Lower

Emissions

Than

Solar Power

98%

Lower

Emissions

Than

Natural Gas

Power

KPIs

1. Cwind: Total number of CTVs funded: 4

CTV Name: CWind Pioneer

Type of CTV

Hybrid

Vessel activities

Windfarm maintenance

Clean energy generated (kWh)

390,000

Reduction in CO2 emissions versus solar power (kWh)

12,870,000 g/ CO2e

Reduction in CO2 emissions versus natural gas (kWh)

171,217,800 g/CO2e

Reduction in CO2 emissions versus coal power (kWh)

385,710,000 g/CO2e

CTV utilisation during the period

83%

Adherence to LCM’s Exclusion Policy

Yes

CTV Name: BF Hurricane

Type of CTV

Diesel

Vessel activities

Other – search

and rescue

CTV utilisation during the period

100%

Adherence to LCM’s Exclusion Policy

Yes

CTV Name: CWind Tornado

Type of CTV

Diesel

Vessel activities

Windfarm maintenance

Clean energy generated (kWh)

390,000

Reduction in CO2 emissions versus solar power(kWh)

12,870,000 g/CO2e

Reduction in CO2 emissions versus natural gas (kWh)

171,217,800 g/CO2e

Reduction in CO2 emissions versus coal power (kWh)

385,710,000 g/CO2e

CTV utilisation during the period

83%

Adherence to LCM’s Exclusion Policy

Yes

CTV Name: CWind Typhoon

Type of CTV

Diesel

Vessel activities

Other – search

and rescue

CTV utilisation during the period

100%

Adherence to LCM’s Exclusion Policy

Yes

2. Diverse Marine: Total number of CTVs funded: 2

CTV Name: Stockbuild 1

Type of CTV

Diesel

Status of the CTV

Under construction

Adherence to LCM’s Exclusion Policy

Yes

CTV Name: Stockbuild 2

Type of CTV

Diesel

Status of the CTV

Under construction

Adherence to LCM’s Exclusion Policy

Yes

3. HST: Total number of CTVs funded: 1

CTV Name: HST Millie

Type of CTV

Hybrid

Vessel activities

Windfarm construction

Clean energy generated (kWh)

1,197,936,000

Reduction in CO2 emissions versus solar power (kWh)

39,531,888,000 g/CO2e

Reduction in CO2 emissions versus natural gas (kWh)

525,917,862,720 g/CO2e

Reduction in CO2 emissions versus coal power (kWh)

1,184,758,704,000 g/CO2e

CTV utilisation during the period

100%

Adherence to LCM’s Exclusion Policy

Yes

4. NR Marine: Total number of CTVs funded: 1

CTV Name: NR Predator

Type of CTV

Diesel

Status of the CTV

Under Construction

Adherence to LCM’s Exclusion Policy

Yes

Under Portfolio 11, we are also providing funding to Coastal Workboats to

allow them to build and deliver a new electric powered ferry which will be used

by local residents off the remote Shetland Islands in Scotland.

5. Coastal Workboats: Total number of workboats funded: 1

Type of ferry funded

Electric

Status of the ferry

Under construction

Adherence to LCM’s Exclusion Policy

Yes

Key Performance Indicators (KPIs)

During the reporting period, the partnership deployed £13.6m into Crew Transfer Vessels to support with both the construction and maintenance of offshore

windfarms across Europe. In total, 8 crew transfer vessels received financing and five of these were operationally active during the period with further details included

in the table below.

LCM Partners SOLO VII SLP | ESG Report | 09

UN SDG Alignment:

LCM has assessed Portfolio 11 for alignment with the UN SDGs. This investment

is aligned with the following:

SDG 7: Affordable and Clean Energy

7.2: Increase substantially the share of renewable energy in the

global energy mix

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