Investors

• To access a broad range of finance to obtain both the quantum and lowest cost compatible with the need for continued availability
• To manage our exposure to movements in interest rates to provide an appropriate degree of certainty as to our costs of funds
• To minimise our exposure to counterparty credit risk
  

• To provide an appropriate degree of certainty as to our foreign exchange exposure
• To maintain an investment grade credit rating for our regulated subsidiary Severn Trent Water Limited
• To maintain a flexible and sustainable balance sheet structure

We have developed a Sustainable Finance Framework to enable Severn Trent Plc and its subsidiaries to undertake future debt issues in a sustainable format.

The framework can be used to issue various funding instruments including, but not limited to:

• Committed facilities
• Green, social and sustainable bonds
• Private placements
• Finance leases

...and is based on existing international standards:

• The Green Bond Principles (GBP), Social Bond Principles (SBP) and Sustainability Bond Guidelines (SBG) as published by the International Capital Market Association in June 2018.
• The Green Loan Principles (GLP) and Sustainability Linked Loan Principles (SLLP) as published by the Loan Market Association in March 2018 and March 2019.

1. The Social Eligible Categories and Green Eligible Categories together form the Sustainable Eligible Categories
2. Eligible Social Investments and Eligible Green Investments are together Eligible Sustainable Investments
3. The Eligible Social Portfolio aggregated with the Eligible Green Portfolio forms the Eligible Sustainable Portfolio

• We will allocate an amount at least equal to the net proceeds from the issue of our sustainable funding instruments to finance, refinance or invest in the Eligible Sustainable Portfolio
• Given the nature of our expenditure we expect most of our assets and expenditure will be eligible
• When it comes to existing expenditures we will aim to refinance Eligible Sustainable Investments that have been completed or charged 3 years prior to the date of finance raised, although we reserve the right to finance older assets and expenditures starting at the beginning of AMP6

• All investments must follow the Group’s strict capital governance process
• Investments proposed through business cases, which are subject to approval as they progress through their life cycle
• An initial assessment of eligibility for the sustainable portfolio will be made as part of its business case
• A formal assessment for eligibility and inclusion in the Eligible Sustainable Portfolio will be made by the Sustainable Finance Committee (“the Committee”) at least once a year
• The Committee will comprise members of Treasury, Finance and Responsibility teams
• Given the nature of our expenditure it is expected that the majority of our assets and expenditure could be eligible in the Eligible Sustainable Portfolio

• Proceeds from any issuance under the Framework will be appropriately managed by our Treasury Function and will be wholly allocated to finance, refinance or invest in eligible projects
• Where any proceeds cannot be initially allocated the funds will initially be held or deposited in accordance with our Treasury Policy
• The net proceeds from the sustainable financing will be tracked using our internal reporting processes

• Our financial reporting team will report all expense recognised against eligible projects. All expenditure items will be tracked and managed accordingly to ensure no double counting occurs
• An analysis will be presented to the Committee at least annually and on request
• We intend that the amounts represented by the Eligible Sustainable Portfolio will exceed, or at least be equal to, the amount of finance raised under this Framework

• Amount of the financing raised has been allocated and to which sub-portfolio 
• A brief description of assets and expenses financed / refinanced with
  the proceeds and selected case studies if applicable
• The balance of the unallocated proceeds and type of temporary investments
• The division of the allocation between new financing and refinancing.

• The Framework has been reviewed by DNV-GL
• The Second Party Opinion confirms alignment with the Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines and the Green Loan Principles and Sustainability Linked Loan Principles