National Grid plc (NG) Earnings Call Transcript & Summary

Hello, and welcome to National Grid's ESG Virtual Seminar, and in particular, to those who may be joining a National Grid event for the first time. It's great to see so many new names with us today. I hope everyone is safe and well. For those of you who don't know me, I'm Nick Ashworth, and I head up Investor Relations here at National Grid. I would first like to draw your attention to the cautionary statement you will find at the front of the presentation pack. Now moving on to today's event. As you will see, we've set up 2 socially distant studios with presenters and crew adhering to all national and local rules and guidance. Following a short video, we will start presentations on the environment. Our CEO, John Pettigrew, will give us a group overview before our U.S., U.K. and National Grid Ventures leaders dive deeper into each of their respective businesses. Following Q&A on that section, we'll then have our presentations from our CFO, Andy Agg; Marcy Reed, President of our Massachusetts Business; and Andy Doyle, our Chief Human Resources Officer; on National Grid's role across the economies and communities we work in and our role as a responsible employer. There will then be another opportunity for questions across all the topics from the first 2 sections. Finally, after a short break, we will turn to governance, led by our Chairman, Sir Peter Gershon. A couple of housekeeping points from me. As you will see on your screen, below the video and slides are 3 tabs. This gives you access to the presentation pack as well as downloads, including our Responsible Business Charter and glossary of terms you'll hear us talk about today. But importantly, this is also how you ask questions. If you'd like to ask a question, please type it in the Ask a question box. This feature will be available throughout the course of the event, so feel free to submit questions at any time through the presentations, and you can also submit questions as many times as you'd like. If you'd like your question to be attributed to you, you'll need to say this in the question box. And if the question is for a particular speaker, also please make that clear. The questions will come to me to read out. Nobody else will be able to view them. At the end of today's event, all videos, slides and presentations will be available on our website. So without further delay, we're going to start with a short video before handing over to our CEO, John Pettigrew. [Presentation]

Thank you, Nick, and welcome to our virtual ESG seminar. Joining me today are our colleagues from the U.K. as well as from the U.S. Our objective is to share what it means to us to be a responsible business. This is a really exciting time in the energy sector and particularly at National Grid. We have a critical role to play in enabling the energy transition, which is why our vision is to be at the heart of a clean, fair and affordable energy future. We build, own and operate large-scale, long-life energy assets, primarily in electricity and gas networks that deliver fair returns and high societal value. Our regulated assets in the U.K. are at the high-voltage and high-pressure transmission level, while the majority of our U.S. regulated assets are at the local distribution level. Our commercial division, National Grid Ventures is focused on growing a portfolio of diverse clean energy assets that sit adjacent to our regulated portfolio across our geographies. As such, we sit at the center of the changing energy landscape. You'll hear us talk today about the huge challenges we face, but also the fantastic opportunities that we're seeing and the projects that we're developing and hope to develop as we move forward with the energy transition. We know climate change is one of the great challenges of our generation. We're developing our electricity networks to support the full decarbonization of electricity generation, we're enabling the electrification and decarbonization of transport, and we're working on new ways to deliver cleaner gas to people's homes and on decarbonizing heat, all of which will help to achieve our goal of net zero by 2050. But I'm also aware that it needs to be done in a responsible way, ensuring the transition is affordable and that nobody is left behind, which is why today's event is so important, and one where we articulate clearly what we stand for as a responsible business and how we play our part in delivering our climate change ambitions as well as the ambitions of the communities we serve. Last Thursday, we launched our Responsible Business Charter. This charter and the event today are the next milestones in our journey. It's also the next milestone in my own personal journey. I was brought up in South Wales in the U.K. in a coal mining community. As a result, I grew up seeing the importance of energy and the impact it can have on the environment and communities. So when I joined National Grid as a graduate back in 1991, I wanted to do something that could have a positive impact on both the environment and communities, in fact, a positive impact on all the people who are touched by the company, including customers, colleagues and their families. I've also got 2 daughters, and I'm well aware of the legacy I'm creating for them and for their children. This is my opportunity to personally make a difference, tackling the world's greatest energy challenges, but I'm not alone in tackling this. I'm fortunate here at National Grid to have thousands of talented engineers and colleagues who are hugely passionate about making a positive contribution. And I'm grateful for the efforts of everyone who's been involved in developing this charter. Our Responsible Business Charter describes our long-term goals across 5 pillars. On the environment, we're committing to achieve net zero by 2050 for our own emissions and enabling decarbonization across society with our new Scope 3 target to reduce these emissions by 20% by 2030. In our communities, we will focus on helping lower-income households and upskilling young people with STEM skills, aiming to help 45,000 people and amassing 0.5 million volunteering hours by 2030. For our people, mental health and well-being is paramount, and we'll talk about the work the team has been doing, particularly through COVID. At the same time, we're focused on meeting the challenge of diversity. It won't be easy, but we aim to lead from the front with 50% diversity in our senior leadership group by 2025 and in our new talent programs. And on the economy, our prime economic contribution to society is the safe and reliable delivery of energy. But our contribution is much broader, including committing $250 million of investment into smarter renewable technology that will benefit wider society. And we need to do all of this with the right culture, with the right governance, embracing diversity and inclusion and allowing all voices to be heard within our organization and across all our stakeholder groups. And I'm sure you'll be interested in following our progress. So next year, we'll launch our first responsible business report alongside our annual report. This will show how we're getting on against the commitments and ambitions laid out in our Responsible Business Charter. And Andy Agg, our CFO, will tell you more about this later this afternoon. The charter in today's event bring together the work we've done so far as we develop our businesses to meet the challenges of the changing energy landscape. So I hope today's event will give you a much greater understanding of the challenges the energy world is facing, but also the solutions we're developing, and a better understanding of the people within the business who are delivering this change. However, it's not just about what we can do within our organization. It's also about the critical role we play to unlock decarbonization, develop skills and drive positive change across our communities. Today's event will give you an overview, but we have much, much more to share with you as we embark on our net-zero journey. In the new year, we'll be launching our Grid Guide to... series, regular, short, virtual sessions, giving you a deeper understanding of today's themes and the innovative projects we're working on. There is where National Grid can make a real difference to the energy transition. Our first event in January will be the Future of Gas, sharing information about the projects we're working on to test our natural gas networks could be used to transport hydrogen as well as the work that we're doing on connecting renewable natural gas. Turning now to today's presentations. In the second section, you'll hear about our role as a responsible business across our economies, our interactions with our communities and the importance of people. It's been a challenging 6 months, as we've all learned to adapt to changing work patterns and the impact that COVID has had on everyday life. But as COVID has shown, the critical role we play in bringing heat, light and power to our customers and communities has never been more important. And we need to do this in a responsible way. But first up, we'll focus on the environment and our commitments and ambitions for the future. As an organization, we've been focused on reducing our carbon footprint for many years. We've already reduced our greenhouse gas emissions by 70% since 1990, with our current Scope 1 and 2 emissions at 6,500 tonnes per annum. But we're not content with this. Back in November 2019, we set our net-zero 2050 goal for our own emissions. And at full year results, we committed to an interim target of 80% by 2030 and 90% by 2040. This will mean a further reduction to emissions of over 1 million tonnes in the next 5 years to be on track to hit our 2030 target. In particular, Badar and Nicola will talk about what they're doing to deliver this target. But as I said, it's more than just what we alone can do as a company. The U.K. and U.S. states where we operate, emit about 650 million tonnes of greenhouse gases per year. Our emissions form only a very small part of this, which is why we're passionate about our role, enabling and inspiring people, partners and communities we work with in helping them deliver climate targets. You'll hear examples of what we're doing across our regulated businesses, but also some of the projects and ideas we have in National Grid Ventures. For example, our subsea interconnect knowledge can help connect the 40 gigawatts of offshore wind in the North Sea and 10 gigawatts in the U.S. Northeast that is being targeted by 2030. Our project to deliver an ultrafast EV charging network in the U.K. could enable 30 million EVs to be on the road by 2040. And our projects deliver clean gas and hydrogen through our gas networks could ultimately reduce emissions across the near 30 million homes in our U.S. and U.K. regions. The decarbonization of heat, in particular, is something we're working on across our businesses. It's fair to say that in the U.K., clean gas is fast becoming accepted as being part of the solution to decarbonizing heat. And this is perhaps evident with some of the pilots we're looking to deliver. However, we'll also talk about what we're doing with clean gas in the U.S., where it's gaining traction as part of a mosaic of solutions, and Badar will give more detail about this in his speech. Of course, these examples highlight that we don't know exactly what the energy system will look like in 30 years' time. But I do know we have the capability in our organization to work through the challenges and to seize the opportunities. We have a voice to shape the future, and we'll use this to influence others to deliver the right outcomes. Let me now hand over to Badar, Nicola and Jon. We'll have plenty of time for Q&A after the 3 have spoken, but first is Badar.

Thank you, John. I'm Badar Khan, President of the group's U.S. business. It's great to be with you today. In the U.S., National Grid delivers electricity, natural gas and clean energy to 20 million people. As John mentioned, we take energy from the transmission networks and distribute it to our end customers. We operate in New York, Massachusetts and Rhode Island, states that have some of the most progressive environmental targets throughout the United States. We also operate 4,000 megawatts of thermal generation on Long Island in New York. We're at a pivotal moment in the energy transition. Our vision is that by 2050, our customers, communities and stakeholders will recognize the leadership role that National Grid has played in getting the U.S. to the next chapter in its energy history. We're aware of the responsibility we have, and I'm proud of the progress we've made toward our environmental goal. I'm very excited about what we want to achieve over the next 30 years. So let me tell you what we've done so far, starting with our Scope 1 and Scope 2 emissions, those under our direct control. As you'll see in the chart, by the end of March 2019, we had reduced our own U.S. emissions by 75% compared to 1990 levels. This has been driven, in particular, by falling emissions from our Long Island generation portfolio, our largest source of emissions, which account for 57% of U.S. business emissions; falling methane emissions from our gas network as we progress our leak-prone pipe replacement program; reduced emissions of sulfur hexafluoride or SF6, a greenhouse gas that's used in insulating in electric networks; and we've reduced our current vehicle fleet emissions across our field workforce. We've also made significant strides in enabling the energy transition by helping to displace emissions in the states where we operate. For example, across our customer base, we've invested over $4 billion in energy efficiency and demand-side response measures since 2012. Over 1.3 million homes and businesses that we serve have benefited from energy efficiency upgrades, avoiding 8.5 million tonnes of CO2 emissions during that period. On this point, energy efficiency services are important to our customers because they reduce both emissions and energy bills. This has become increasingly important during the pandemic when so many of our customers are experiencing financial strain. In the last few months, we and our partners have completed over 12,000 virtual assessments for residential and small business customers. Elsewhere, over the last 3 years, we've added 1,400 electric vehicle charging ports across our service territories and have just received approval to add 16,000 more ports in Upstate New York. We've also partnered with major transit authorities to put more electric city buses on the road. And we’ve facilitated the interconnection of 2,025 megawatts of solar and 28 megawatts of battery storage. Having made such strong progress, our focus is now on the future and working towards our net-zero commitment. So beginning with plans for our Scope 1 and 2 emissions. Our leak-prone pipe replacement programs will continue to deliver on methane emissions reduction, whilst the rate of reduction will slow nevertheless, by 2030, we anticipate that pipeline emissions will have reduced by 80% against the 1990 baseline. To secure CapEx to maintain safety and operate cleaner networks, we'll continue to align our rate proposals with our state's clean energy goals. We'll ensure regulatory frameworks are in place that promote environmental objectives, such as incentives for peak demand reduction and beneficial electrification. Another key area for us will be in our generation business. Although our contract to supply power to the Long Island Power Authority continues until 2028, in time, we can transform our generation fleet by repowering or replacing existing thermal plants with newer, cleaner forms of generation, like renewables or battery storage. By 2030, we anticipate emissions from generation will have reduced by 85%. And we'll convert our own fleet to 100% electric by 2030 for our light-duty vehicles while pursuing the replacement of our medium and heavy-duty vehicles with low carbon alternatives by 2050. Finally, we'll continue to reduce our Scope 3 emissions to net zero by 2050. Let me tell you how. We've already signed contracts to procure over 200 terawatt hours of renewable energy for our Massachusetts and Rhode Island distribution customers, enough power to supply half our customers' consumption by 2026, with some contracts that will extend out to 2045. This will displace the equivalent of over 65 million tonnes of CO2 over the term of the contract. We'll invest in grid modernization to enable more distributed generation to connect, which will be complemented by investments in advanced meter infrastructure or smart meters, which will benefit all customers. We'll make significant investments in battery and other storage technologies to address intermittency issues, providing reliable, continuous and seamless service to our customers. We'll double down on our nation-leading energy efficiency programs for our customers' homes and businesses. In the most recent survey of top states for energy efficiency by the American Council for an Energy-efficient Economy, ranked Massachusetts, Rhode Island and New York, first, third and fifth, respectively, and our Massachusetts business, the top-ranked energy efficiency utility in the country. Finally, we'll advance clean transportation by preparing for make-ready investments to reinforce the grid and facilitate EV charging infrastructure where we have an agreement with regulators. Next year, we plan to file for Phase 3 EV infrastructure in Massachusetts, amounting to over $150 million of potential investment. I want to finish on what I consider to be one of our key priorities, the future of heat and the role of gas in the energy transition. In the U.S., our gas assets account for around half of our rate base and around half of our annual CapEx. So this is a key issue for us, and it's an issue that covers Scope 1, 2 and 3 emissions. We believe gas has an enduring role to play in a clean energy future. Gas is used for heating in our region by 60% of homes with electric heating penetration very low. Nearly 1/4 of households in our service territory, about 1.1 million customers still use fuels such as oil, and there's huge benefit in converting those to gas, lowering their bills and decarbonizing the environment. This could avoid 2.3 million metric tons of CO2 emissions per year. We believe the existing gas network can play a vital role in getting to net zero emissions in the Northeast. We can do this in an affordable and achievable way by providing customers with zero carbon natural gas RNG or hydrogen. For example, in New York, we've been successfully integrating RNG from the landfill into our gas systems since 1981, providing the heating equivalent of 4,000 homes per year. We're close to bringing online our Newtown Creek wastewater treatment plant, the largest wastewater plant in New York City. It will produce enough energy to heat an additional 5,000 homes, reducing annual emissions by more than 90,000 metric tons, the equivalent of removing 19,000 cars from the road. We intend to scale utilization of RNG from sustainable biomass feedstocks, including wastewater, landfills, food waste and livestock waste to help meet our region's climate goals. And then there's hydrogen. We believe that hydrogen can transform the energy industry, playing a major role in years to come. Here are some of the initiatives we're working on. In New York, we're excited to participate in a hydrogen blending study in conjunction with NYSERDA and Stony Brook University. It will explore the performance and use of our existing gas infrastructure to integrate and store renewable hydrogen into our system. We're including requests for funding of projects in our rate filings to ensure they're scalable in the future. For example, in our recent NIMO filing, we proposed a hydrogen demonstration project that will be the first of its kind in the United States. This multiuse hydrogen facility will be a partnership with Standard Hydrogen Corporation located at an industrial site. It'll produce hydrogen from renewable electricity, which could be used, stored, blended into the network or utilized for transportation enhancing power supply. While these initiatives aren't scalable today, we are working with regulators and stakeholders to help develop frameworks for these solutions. Low carbon fuels like RNG and hydrogen will play a more prominent role in our portfolio over time as we aim to achieve net zero emissions. We know the task ahead of us is expansive and challenging. We also know we cannot do it alone. To meet this generational responsibility, we must partner with organizations that want to take climate leadership on, reaching a clean energy future. Through innovation and meeting our net-zero goals, we will deliver the affordable, reliable and clean energy our customers want and deserve. We've created the foundation, but we must take the next step now, and I hope you'll take those steps with us. Thank you for listening. Now I hand over to Nicola on the U.K.

Thank you, Badar, and hello, everybody. I'm Nicola Shaw, the Executive Director of the Group's U.K. regulated businesses. It's a pleasure to be here with you today. As John said in his speech, we own the electricity and gas transmission networks in England and Wales. We're responsible for the safe and efficient delivery of energy at high voltage and under high pressure from where it is produced to the local distribution networks and major industrial customers. The U.K. government has set legally binding targets to achieve net zero greenhouse gas emissions by 2050. For the energy sector, achieving this is the job that can't wait. Already, this sector has achieved a lot. Great Britain regularly sees more electricity generated from zero-carbon sources than fossil fuels. In May and June last year, we helped the country achieve over 435 hours without coal for the first time since the industrial revolution. At National Grid, we enable this decarbonization of electricity. We also help address the decarbonization of transport and both the domestic and industrial heating sectors. We've got a critical role in supporting the U.K. on its pathway to net zero. Our U.K. electricity and gas networks businesses contribute about 1/3 of our group Scope 1 and Scope 2 emissions of 2.2 million tonnes CO2 equivalent a year. Hence, it is important that as well as enabling decarbonization from others, we're reducing our own environmental footprint. We've developed ambitious action plans as part of our regulatory submission to Ofgem for the next regulatory period, known as RIIO-T2. These plans support our 2030 and 2040 carbon reduction targets. We've committed to stop using greenhouse gas, sulfur hexafluoride or SF6 in our electricity network where there's an alternative, to replace our entire fleet of over 1,000 vehicles with alternative fuel vehicles by 2030 and reducing our Scope 3 emissions by delivering carbon neutral construction projects by 2026. I'm going to talk today about where we are across the U.K. regulated businesses. I'm going to highlight some specifics for each of those as well as a few initiatives we have underway to help our wider contributions. I'm incredibly excited about this journey and contributing to solving the challenge of our generation. National Grid's purpose of bringing energy to life is really powerful for me. Achieving our climate targets not only benefits the economy and society as a whole, but it's a really efficient way of doing business. We're in the process of building flood defenses for some of our substations. But wouldn't it be better to prevent the floods in the first place. Over the last 5 years, our emissions have reduced by 600,000 tonnes. We expect a further 1 million tonnes reduction by 2030 from various new actions. Our largest emissions come from line losses. These are the small amounts of energy that are unavoidably lost in the transmission process. So we're really focused on assisting renewable generation to reduce the emissions from those losses. As an example of our actions, we've streamlined the connection process through new digital platforms, allowing customers to connect to our network more efficiently, reducing their cost and their time to connect. A few moments ago, Badar mentioned the use of SF6 in our U.S. electric networks. We also use SF6 in our U.K. electricity business. It stops high-voltage electricity from arcing across contacts if the system trips out. However, it's also a very potent greenhouse gas, 23,000x more polluting than CO2 if it escapes to the atmosphere. So our ambition is not to put any new SF6 into our network from 2026, and to have totally eliminate it by 2050. How? Well, we've been working on innovations with our supply chain, and we've successfully trialed a substitute in our lower voltage assets, a world's first, and our first substation using this alternative gas is due to connect to the network next year. In National Grid Gas, we're working on several innovative projects to reduce emissions. For example, we use gas-powered jet engines, moving on methane through the network, and these require occasional venting to maintain their operational efficiency. So we've been planning the installation of recompression equipment, enabling us to recycle vented gas back into the network, saving it from venting to the atmosphere. Both businesses are also committed to reducing our indirect or Scope 3 emissions. We've set an industry-leading goal of net-zero construction emissions by 2026, which could remove 200,000 tonnes of carbon emissions by focusing on lean design, low carbon products and by continuing to recycle materials like concrete. Turning next to the huge amount we're doing to enable other businesses to help the clean energy transition across the U.K. in decarbonizing electricity, transport and heating. Over the last 5 years, we've connected about 5 gigawatts of renewable generation in England and Wales. Under RIIO-T2, we'll forecast, we'll connect a further 5.1 gigawatts, displacing up to 8 million tonnes of CO2 a year. Part of that is due to the connection of wind power off the East Coast of the U.K. The U.K.'s independent committee on climate change pathway to net zero, and the U.K. government's manifesto commitments include 40 gigawatts of offshore wind by 2030. To deliver this requires about 1,000 kilometers of onshore cables, of which 700 kilometers would need to be delivered by National Grid Electricity Transmission. So we're working with the U.K. government on the new planning bill due this year and with Ofgem to get the RIIO-2 framework right for delivering this infrastructure. This year, we also created a regional strategy for offshore wind, focusing on the East Coast. We've developed an innovative solution that will reduce the number of connections required over the longer-term when compared to a traditional radial structure for wind farms. This solution alone could connect the 14 gigawatts of offshore wind currently in the pipeline, a significant increase on the present 10 gigawatts of installed capacity, whilst also having less of an impact on communities and the natural habitat in these areas. Now let's look at how we're enabling the electrification of transport. Our research has shown that range anxiety is the third most prevalent reason why people won't buy an electric vehicle, and this is where we’ve focused our efforts. The other 2 reasons relate to choice of model and pricing, issues that car manufacturers will look to resolve. So earlier this year, the U.K. government made a GBP 500 million commitment to electrification of transport. Since then, we've been supporting the Office of Low Emission Vehicles with their review on how to deploy this fund and further announcements are expected this autumn. We've already identified a potential network of fast-charging stations, and we've submitted our views into the government's transport decarbonization consultation, which has evolved now to cover all modes of transport from buses to maritime and aviation, and we are uniquely equipped to support the significant demands on energy infrastructure and new emerging technologies. Low carbon HGVs, for example, need hydrogen. But since this isn't yet widely available, localized electrolysis could be required. That needs large capacity power connections of around 1 megawatt for each HGV, which could share the same transmission connection as fast electric vehicle charging at motorway sites. Hydrogen is also likely to be needed for the decarbonization of heat, and the scale of this is significant. Around 880 gigawatts of energy is transported annually through our gas transmission network, 3x more than the electricity transmission network. 40% of the gas we transport is used by the 22 million homes that burn gas for domestic heat. 87 million tonnes of CO2 come from providing heat to all buildings and 18% of the U.K.'s emissions come from domestic heat on its own. There are several potential alternatives to natural gas for home heating: electric heat pumps, renewable gas, or hydrogen. Given the nature of our housing and the speed we want to make these changes, it's likely we'll need a combination of all these solutions. Just to put it into context, we need to convert about 20,000 homes each week from 2025. Hydrogen has the potential to play a significant role in decarbonizing industrial applications, and we estimate moving to an interim 20% blend of hydrogen with natural gas. Nationally, this would remove 6 million tonnes of CO2. Through our own research and collaboration with transmission system operators across Europe, we're proving that we can safely repurpose many of our assets to carry hydrogen. Our gas transmission business is proposing a U.K. hydrogen backbone to facilitate the connection of the 5 largest industrial clusters, which contribute about 1/3 of the U.K.'s industrial CO2 emissions. National Grid is also partnering with National Grid gas networks and Fluxys to build a first of its kind offline hydrogen transmission test facility in the U.K. that will help us to understand how hydrogen could be used in future for home heating, to deliver greener energy to industry and to save cost for consumers by using existing infrastructure. Achieving our climate target is not something we can do alone. We need support from all of our stakeholders, including our regulator. We continue to engage with Ofgem at all levels, with open meeting scheduled for the 16th of October. We're hopeful that through this process, our recent proposals will be picked up and actioned in Ofgem's final determination. So I've given you a flavor of where we are on reducing our own CO2 footprint and the innovative projects we're working on to decarbonize more widely across society, including electricity, transport and heating applications. We're fully committed to supporting the U.K. on its pathway to net zero, and I'm excited too about the broader ESG commitments that National Grid has made, both here and in the U.S. You'll be hearing about those later. This is indeed the job that can't wait. I'm now going to pass you to Jon Butterworth, who'll cover the environmental achievements of our National Grid Ventures business.

Yes. Thank you, Nicola. Hello, everyone. I'm Jon Butterworth and I lead National Grid Ventures. We are the commercial division of National Grid, created 4 years ago to oversee a diverse growing portfolio of clean energy assets operating across the U.K. and the U.S. We invest in projects in jurisdictions we know well with technologies adjacent to our core regulated businesses. We've invested GBP 1.9 billion over the last 4 years, basing investment decisions on risk-adjusted returns compared to our regulated businesses. Over that time, we've grown our asset base to over GBP 2.8 billion, just under 6% of total group assets. Our role at National Grid Ventures is an enabler of decarbonization, delivering innovative solutions that's both affordable and sustainable for consumers. You will hear about the projects we're delivering that already bring cleaner energy as well as some projects that are in the early phases of development to help our regions achieve their climate change objectives. So let me start with the U.S. We've made our first meaningful step into renewable energy through acquiring Geronimo Energy in 2019. And given our history and network ownership, coupled with the fragmented renewable landscape in the U.S., we have a solid foundation on which to develop and grow a large-scale renewable business. Geronimo's team is well-regarded by landowners and communities, and brings extensive experience in onshore wind and solar energy projects. They really are a farmer-friendly business. Our U.S. renewables business now operates 359 megawatts of renewable energy capacity, and we estimate these projects alone will offset 18.6 million tonnes of carbon dioxide emissions during their first 20 years. Bringing transmission skills together with local farm management gives us confidence that we can deliver on our 6,000 megawatts of pipeline potential opportunities. They will pump hundreds of millions of dollars into local economies over the coming years, including the setup of charitable funds, adding to our commitment to date of $9.6 million. I am very proud of the Geronimo team. They are completely focused on developing renewables, but at the same time, utterly committed to looking after their communities, a great fit for National Grid. We're also enabling the wider decarbonization of electricity, transport and heating in the U.S. by providing the infrastructure necessary to support and integrate renewables. We have an option to acquire the offshore transmission connection for Revolution Wind, a 704-megawatt wind farm for Connecticut and Rhode Island, being developed by Ørsted and Eversource. Given our expertise in developing and operating subsea transmission in the U.K., as I'll talk about later, we are well placed to explore further offshore wind connections. Indeed, northeastern states have set targets to procure over 10,000 megawatts of offshore wind by 2030. So there's plenty of opportunity for us here. We're also building the New York Energy Solution to rebuild a critical electric transmission corridor in the heart of New York state. The 4-year project starts construction in spring 2021 and is expected to cost over $600 million. It will be the largest electricity transmission project in the state in over 40 years, improving reliability and facilitating the flow of clean energy. On Long Island, we co-own 2 of the largest lithium battery facilities on the East Coast. With the ambitious transition to clean energy on Long Island well underway, we're perfectly poised to develop future projects, helping to integrate offshore wind and meet peak demand. Let's now turn to the U.K. Our assets here are primarily focused on enabling the energy transition and facilitating the flow of clean energy, as well we're [ unable ] to invest directly in generation with our regulatory framework. Electricity interconnectors are helping build an interconnected European energy system and are, in many respects, the perfect technology. They enhance competition in the U.K. by bringing in lower-priced electricity from Europe, lowering the cost for consumers. As an example, the Viking Link interconnector will deliver over GBP 5 billion worth of consumer benefits over its lifetime. They also enhance system reliability and security of supply, and they ensure we use every spare electron of zero-carbon energy. We currently co-own and operate 4,000 megawatts of interconnection, linking Great Britain to France, Belgium and the Netherlands. Each year, we import over 15 terawatt hours of zero-carbon energy. The equivalent of powering 4.5 million carbon-free homes for a year. And by 2030, we forecast that electricity flowing into Great Britain via our interconnector fleet will be 90% carbon-free. Over the next 5 years, we're building 3 new interconnectors connecting the U.K. to Denmark, Norway and France. These interconnectors have a maximum carbon payback of 18 months and by 2023, when they are all operational, we'll co-own 7,800 megawatts of total interconnection. Looking forward, we have several projects in our business development pipeline to ensure we keep growing our renewable energy capabilities. We're working with our European partners to explore the concept of a fully connected North Sea Grid through the development of multipurpose interconnectors to connect offshore wind clusters to multiple countries. These innovative transmission solutions will maximize utilization of offshore generation and reduce the impact of infrastructure on coastal communities by reducing the required number of landfalls. Let me show you a short video of the concept. [Presentation]

We are also evaluating a project to decarbonize industry through carbon capture and storage, or CCS. We're at the forefront of researching and testing pipeline capabilities in preparation for the transportation and storage of carbon dioxide. The project could deliver the world's first net-zero industrial cluster in the Humber region by 2040, with the potential to safeguard 55,000 jobs in the region and deliver 44 million tonnes of carbon capture per year, almost 40% of the U.K.'s emissions. Finally, at our liquefied natural gas terminal in the southeast of the U.K., we're exploring opportunities to produce and supply hydrogen to decarbonize adjacent gas-fired power plants. This pathfinder project could see 180 megawatts of hydrogen flowing as early as 2026. I've been in the energy business for 41 years. I have seen many changes both in how we think and what we do. Throughout my career, we have always believed in the importance of being a responsible business and giving back to society and the communities in which we operate. We feel strongly that nobody should be left behind. Now we have the opportunity and privilege to make a real impact in a very small way, supporting the decarbonization of our planet. We're truly at the heart of the energy transition in both the U.K. and the U.S. We're someone people listen to, a trusted adviser. We're privileged to have a voice that's heard and respected by governments and other stakeholders, and we'll use that voice to shape the future. For me, being able to look back and know that we played our part in decarbonization and safeguarding jobs in industry is something we can be truly proud of and something our kids and their kids can be proud of, too. Thank you for your time and attention. I'll now hand back to Nick for questions.

Thank you, Jon. We'll now turn to questions. [Operator Instructions] So we've got quite a few questions coming in. We'll do our best to get through them in this session. There's also a bit of a Q&A session at the end of the next section as well. So bear with us because we have a few to get through. So John, I think we're going to start with an overview question, actually. What are the most important commitments you feel you are making in the Responsible Business Charter?

So thank you for the question, Nick. You would have seen in the Responsible Business Charter that we've set out 5 pillars. And within each of those pillars, we set out some really significant, I think, commitments and ambitions. But if I was to highlight a couple that I think are really, really important, first of all, our commitment to net zero by 2050. You would have seen that we made that commitment last year, but since then, we've reinforced that commitment with an interim target of an 80% reduction by 2030 and 90% by 2040. And today, we've added to that with a Scope 3 target of a 20% reduction. And that's significant, and we've got really good plans in place to be able to deliver that by 2030. The other area which I think is really important, actually in meeting the ambition that we have, but more broadly, society has around net zero is ensuring that we deliver the STEM skills that we need. And you would have seen in our responsible charter today that we set out a commitment to develop 45,000 young people across the U.S. and the U.K. And our aim really is to attract those people who wouldn't naturally be attracted to the energy sector and to give them the opportunities to develop the skills that we're going to need if we're going to deliver net zero.

Thank you, John. Okay. So let's move on to Long Island Power. So we've had quite a few questions on this from a number of different people. So thanks to Mark Freshney, Chris Laybutt and Maurice Choy as well. So I was going to ask one of them because they're all of a theme. The Long Island generation, it's oil intensive and has -- and is a relatively large source of CO2 emissions for the group. And it's raised some criticism from the community. So the contract, you say, comes to an end in 2027, we think, what are you going to do about this? And how do you replace it with cleaner generation?

So again, thank you for the question. So yes, the contract actually comes to an end in 2028. You will also be aware, for those that follow the market in New York, that there is a commitment to actually have zero-carbon generation in the New York by 2040. So National Grid currently owns about 4 gigawatts of the generation on Long Island. We actually operate it on behalf of the Long Island Power Authority, who choose when it runs and actually what fuel to use. So we are currently working with the Long Island Power Authority to really think about how we take the generation portfolio forward so that we can meet that New York commitment by 2040. And as you heard from Jon Butterworth earlier on in his presentation, we already started to develop some renewable generation on Long Island. We're in partnership with NextEra, where we just developed 10 megawatts of battery storage, and we will continue to take those types of developments forward as we work with the Long Island Power Authority over the next few years.

Okay. Thank you very much. So actually, I think we'll move to the U.K. next. So we've had a couple of questions on RIIO-T2 and how that could impact some of our commitments over the next few years. And so I guess the -- I could use Fraser's question from Bank of America. What extent are your internal ESG ambitions, particularly environmental, threatened by the recent T2 draft proposals?

Okay. Thank you for the question. Let me just talk about it at a high level, and perhaps I'll hand over to Nicola to talk a little bit more around RIIO-T2. With regards to the Responsible Business Charter that we published on Thursday, and we've talked about today, what I'm really pleased about actually is both in the U.K. and in the U.S., we have a very strong alignment from our regulators in terms of the environmental ambitions that we have, but actually across all of 5 pillars, there is absolute alignment. There is sometimes disagreement about the exact mechanisms by which we achieve that. But actually, we're in a very strong place, both in the states that we operate in the U.S. and in the U.K. around the commitments and ambitions we have specifically around the environment. So with that, I'll just hand over to Nicola to talk about RIIO-T2.

Thanks, John. So yes, one of the things we said in response to the draft determinations on RIIO-T2 was that there was a risk that this could slow down our delivery of net zero. And I'm pleased to say, I think that the engagement with Ofgem on this point has been very strong. There are sort of 3 broad areas in which we need things to move forward so it can be very effective. The first is in that point about connections to make sure we get paid a fair rate for doing the work for connections. The second is in relation to large-scale projects, making sure that the process that we need to go through is streamlined and aligned with the planning process and that it's really clear who's going to build these projects so that we've got the right level of staffing. And the final area, I think, is really on innovation. And we've got some really great projects, in particular, in hydrogen, but making sure that there is funding available for all of those projects to take forward so that we do make progress in this 5 years in relation to hydrogen because I think that's a slightly longer burn, but really important to do things now.

Thank you, Nicola. Thank you, John. Actually, so before we come on to hydrogen and RNG, and there's been a few questions asked on that. Actually, just a follow-up, I guess, on T2 and what we heard last week, we've had a couple of questions around the CMA, and so this one from Martin Young at Investec. Do you agree that CMA provisional determinations in water are a clear message to Ofgem, and this is following the lines around the investment that's going to be required to deliver the energy transition and net-zero ambitions?

Yes. So thank you for that question. As you can imagine, we're spending a significant amount of time at the moment just working through the detail of the draft determination by the Competition and Markets Authority. So those who haven't been following it closely, this relates to the water sector, but has some read-across for the energy sector and our own price control. In terms of working through, I think I'm really pleased to see the tone of the CMA determination, which is still in draft, but the tone of it was, I think, very positive around the need for investment and the need that investors and key stakeholders are supported in terms of the right returns and the need for supporting the -- some of the key pillars we talked about in our Responsible Business Charter today. Looking at the detail, clearly, there are some decisions in the draft determination, which align very closely with the arguments that we've been making to Ofgem since we saw our draft determination back in the summer. And as you'd expect, we will be using some of those arguments in our ongoing dialogue, which remains very positive with Ofgem, but we will use some of those arguments as we move forward into the final weeks of our discussions with Ofgem with the final determination due at the beginning of December.

Perfect. Thank you, John. So then moving on to hydrogen, RNG and some of the stuff that we said about getting to net zero, I had a couple of questions on that. So firstly, from Deepa at Bernstein. She asks a question for Badar; what percentage of gas for heating can be met by RNG versus hydrogen to get to net zero?

Okay. I'll hand that over to Badar, as Deepa was asking Badar directly. So...

Yes. So I think -- first thing to say, I think, we believe that the gas business has an enduring role to play in the energy transition. And so in the short term, that's about methane leak reduction that we've been progressing for many years. And we've seen, I think, as you see on the slides, a significant reduction in methane leaks. But also going forward into the future, with respect to decarbonizing heat, we expect the conversion of a significant number of customers that use heating oil, converting them to gas, which is both affordable and a practical solution. But in the long term, I think, Deepa, you're right, we expect to see the gas business and gas networks being utilized for both RNG and hydrogen. We do expect to see electrification of heat as well, but I think there are also some practical limitations. With respect to what percent of heating is provided through RNG and hydrogen, I think it's too early to say. As you've heard from the speech, we're working on pilots and projects on both the RNG side and the hydrogen side that's testing the practical considerations, affordability considerations and blending considerations into the network. And I think once we've progress those studies, we'll be able to continue that dialogue. And this is all dialogue we're having with our regulators. They're very supportive in the conversations we're having around decarbonizing heat in each of the states that we do business in.

Yes. Thanks, Badar. I mean the only thing I'd add to that, Deepa, is, as you heard in one of our speeches, I think today, we think it's likely there's going to be a mosaic of solutions. So when you look at things like biogas, and the capacity, whether it's in the U.K. or the U.S., there probably isn’t enough for a totally biogas solution. And therefore, our view is, as we work through some of these pilot projects that we're developing, is that we're going to end up with a mosaic and a mixture, potentially natural gas would offset hydrogen, biogas as well as electrification. So it's one of the challenges we have at the moment is working out exactly what the road map looks like, and we need to spend the next couple of years, both National Grid and the industry more broadly, just working out exactly what that road map will look like for decarbonization of heat.

Thanks, John. And actually, as a follow-up from Deepa, and it's to Nicola and Badar, and you touched on this just now actually. So she says Nicola talks about heat pumps, hydrogen, RNG as solutions for U.K. heating, while Badar mentioned hydrogen, RNG for U.S. heating. Is there a difference in the role that heat pumps can play? Is that intentional? Or can we have a little bit more information around that if possible, please?

Okay. Well, so I don't think it's intentional, but I'm going to hand over to my colleagues who will give us their view. I think as we think about the road map for decarbonization of heat, we're at a point where we need to explore the technology, the price curve as well as what from an engineering perspective is achievable. Obviously, we've got different geographies and also different climates as well and things like heat pumps have different effectiveness and efficiency in the winter. And in the northeast of the U.S., as you know, we have some really cold winters, and therefore, the effectiveness of heat pumps is perhaps less effective than in the U.K. So I think we're not trying to make any differentiation at this point, but let me just check, and I'll hand over to Nicola and then perhaps Nicola can ask Badar.

Yes. No, John, that's absolutely right. I'm not seeking to make a distinction. I think we should be using -- we should be looking for all solutions to come together. As I said, I think there's a significant change that's got to come to all parts of the heating system. The RNG point, I think, is -- John has well made, which is there's a lot of competition for RNG. A lot of other sectors will be needing to use RNG as part of their decarbonization pathway. So one of these things we're trying to identify and work through is what works best for heating and how do we make that change effectively. I guess by about 2023, we'll know what the U.K. government wants to do for our heating pathway, and that will be really helpful in identifying how to move forward. And all of the work we're doing, all of the innovation bridge we have really lead up to that to help with that process. Of course, there is an opportunity for blending hydrogen in earlier than that, and I think that might be an early start. Badar?

Thanks, Nicola and John. I think John captured it quite well. There's likely to be a mosaic of solutions for decarbonizing heat, and we are pursuing all pathways. We just need to ensure that they are affordable and practical. You've heard about the practical considerations around air source heat pumps in a very cold climate. Geothermal, clearly also has some practical considerations in terms of landmass that it needs in a dense urban environment. And so we are pursue -- but we are pursuing electrification as well as pathways that involve, as you've heard already, RNG, biogas and hydrogen. In Massachusetts, as a for instance, we've got a very successful energy efficiency program that you've heard us talk about. And in recent years, we've expanded the incentives in that energy efficiency program to include beneficial electrification. In other words, incentives for air source heat pumps. So that's just an example of one of the many things that we're doing in pursuing multiple pathways.

Thanks, Badar. And actually, just staying with U.S. and with gas, I've had a question in from Dominic Nash at Barclays. And he asks, what's the current state of play with your gas strategy in New York following -- given the governor and his desire to restrict gas imports and reduce emissions? Could we have an update on that, please? Has COVID-19 changed supply/demand? Do we think that could be permanent? And what proportion of your medium, long-term gas into New York could be renewable and/or created locally?

Okay. Well, if I take the first question, and then I'll hand over to Badar to take the second and third. So in terms of where we are, Dominic, with regards to Downstate New York and the discussions we've been having with the governor over the course of nearly a year now, I'm delighted to say that at the beginning of this year, we published a report looking at the long-term position for New York in terms of demand and supply, which was one of the requests that the governor gave of us. And in that, we set up the options that were available, both in terms of things like energy efficiency and demand management as well as transmission pipeline. Since then, you would -- you will be aware that Williams, who were looking to build the transmission pipeline, did not get permits to do so. And therefore, we are now progressing the other alternative that we set out in that report, which is a mixture. It's a mixture of increased capacity in our LNG facilities in Downstate New York as well as increased use of energy efficiency and demand management. And we're progressing that and are actually in discussions as part of the KEDLI and KENDY rate filings, which are currently ongoing with the PSC. Badar, if you'd like to pick up the second and third?

Sure. I think the second question was around demand. And so, we clearly, I think, have seen some demand reduction as a result of COVID. And I think it's too early to say, quite honestly, whether that demand reduction is a permanent reduction. Clearly, it's an impact this year and could continue beyond this year. We factored in a reduction in demand in now, as John said, in our long-term supply and demand forecasts. And we have an option that comprises distributed infrastructure solutions that John talked about, together with energy efficiency and demand response to meet the growing gas demand -- growing demand for connections in Long Island. With respect to renewable, I think we expect to see, I think, as we said, more energy efficiency on the gas side and demand response programs to levels that we have not seen before. And we're working with the regulator to ensure that those get funding as well as funding for the distributed infrastructure solution.

Thanks, Badar.

Thank you, Badar. So moving slightly actually to maybe Jon Butterworth, NGV. So I've had a question in from -- actually, it's a similar one actually from Mark Freshney at Credit Suisse and from Jenny Ping at Citi. So what are your latest thoughts on the potential for a subsea transmission network that offshore wind farms can plug into rather than point-to-point connections as is currently the case? Could access to East Coast bootstrap similar to the West Coast one? And can you talk a little bit around how competition would fit into all of that? And what the various rule changes will be required to allow this to happen?

Great questions. I mean, first of all, I think the sort of point-to-point interconnector, what's great is that both the regulator, government, industry, network companies, generators, we're all aligned that we need to find a way for this to happen. So in terms of a direction of travel, we've got massive support from Ofgem and from bays and from our colleagues on the other side of the North Sea who are running network companies there. So we see that a point-to-point interconnector is sort of the first part of the journey, the pathfinder, if you like, to create a grid in the North Sea because we just need to prove the regulatory regime so we can see that if it needs tweaking slightly, we can get it right for the bigger, longer-term grid in the North Sea. Because if we can make it happen, then the potential is just fantastic because you could end up with just plug-and-play in the North Sea for generators, far less landfills, less than half the number of landfills, which is really helpful. And you could see the North Sea becoming the green battery of Europe. And everybody is aligned behind it, which is the first time in my career I've seen every stakeholder wanting this to happen. So first of all, to answer the question, multipurpose interconnectors, we see them working. And they'll be the pathfinder projects in the first early cables that become the fabric and the network of a grid in the North Sea. But for sure, we're working really hard in National Grid with everybody who's involved. And we see that our multipurpose interconnectors will be the first stage of what will become a grid in the North Sea.

Thank you, Jon and Mark. I would just add a couple of points. So first of all, I think we're really pleased to see that BEIS has launched the review of offshore transmission and how to really take forward the offshore wind, both between now and 2025 and beyond. Some of you may have seen that last week, our electricity system operator published a consultation around offshore wind and the connections, and I'd recommend you have a look at that. Actually, we've got the consultations out to the end of the month. But in it, it sets out some significant consumer benefits for the U.K. if there was increased coordination and as John mentioned, about a 50% reduction in the number of connections into the onshore, if we just have more coordination going forward. And then finally, with regards to competition, our position hasn't changed, National Grid is keen to get clarity on competition going forward, both onshore and offshore, and we continue to encourage Ofgem and BEIS to pass the legislation, so we've got that clarity going forward.

Thanks, John. Let's stay with offshore wind. And so Jenny Ping at Citi again had a follow-up. So it's a question around -- well, it's a 2-part question, I guess. One is around our option on revolution wind transmission assets. So if you can elaborate a little bit there what National Grid brings to that? And then also, I think, John, you mentioned upfront in your overview presentation that the 10 gigawatt of offshore wind that the U.S. East Coast is targeting. How can we -- how can National Grid play a part in that? And who are we talking to and what are we doing in that space at the moment?

Okay. Well, why don't I take the first question and then Jon or the two of you take the second? So with regards to Revolution Wind, it's an option that we've had in place for a couple of years now, which basically allows us to work with Ørsted on ensuring that we deliver an efficient connection. What National Grid brings to it, of course, is we've got detailed understanding of the onshore transmission and distribution, so the ability to connect offshore wind into the network. And of course, we've got a huge amount of experience, probably more than any other utility in developing offshore transmission lines. So we're bringing some of that capability into the project. It's not our project, but we do have the option to buy the link when that construction is complete. Jon, do you want to pick up the second one?

Yes, thanks. Good question. Yes, in terms of offshore Northeast, our business development team are exploring the opportunity for National Grid with several different partners because we have that skill set we've built up in Europe and particularly in the North Sea on subsea cables, and it's in our backyard, so to speak. So at this stage, we're involved with lots of potential partners to look at the opportunity, but for sure, interested in it.

Thank you, Jon. If we can -- actually, we had a couple of questions on SF6, actually. So I've got one from Verity Mitchell, HSBC and another one as well. So why is your SF6 elimination target so far out at 2050? And what are the constraints that prevent you doing it earlier? And then as a tag on to that, we have another question, which is what alternatives are there? And how long could it take to eliminate? So questions around SF6.

Nick, I'll take that up, shall I? So by 2050 is the target for our high-voltage electricity network in the U.K. And the reason it's not earlier is that we don't have any alternative gases that we could use at the moment or any alternative ways of putting in the necessary protection at the moment. What we've done in, as I said, our world's first, is find ways to do that as a low voltage. So that's a big step forward, and it gives us confidence that the various projects we're working on to synthesize something that will work at the higher voltage are also feasible for 2050, and we have a range of activities in place. So the reason not -- not before 2050 is that we don't yet know how to do it, lots of work to go on. And of course, if we figure that out and it is feasible, we could bring that forward. And the alternatives really are mostly in the synthesized gas space. So what can we do to create something that can work in the same way as SF6 have? You could, of course, put all these substations out into the open air, but really difficult to do when they take up so much space for air separation. So really, we want to be able to have them in the buildings, and we want to be able to use something, but there's just a bit of time to do the development work. Already, we're saying at low voltage, we will replace all of our SF6 in the next 10 years. So we've got a very high target. It's the higher voltage that's the problem. I wonder whether Badar wants to add anything from the distribution perspective.

Thanks, Nicola. I think the only thing that I would add, it's the same conversation on this side of the Atlantic is that, we're in a partnership with the electric power industry and the EPA in finding solutions to the challenge that's before us here with SF6. So it's not something that we're doing our own. We're working with a number of industry partners both in the U.S. and in the U.K.

Yes. And the only thing I'd add to all of that is, whilst we're looking at the technology opportunities for an alternative, rest assured, SF6 is only an issue if it leaks. And therefore, we are very focused on making sure that we minimize the leakage of SF6 on our existing equipment as well to protect the environment.

Thanks, John. Moving back to the U.S., we had a couple of questions on oil to gas heating. So the question is the switch from oil to gas heating in the U.S. is a theme that National Grid has been highlighting for several years now. Is there anything structural slowing this down? Are local regulators incentivizing it enough?

So why don't I just give some high-level comments and then hand over to Badar? I mean I think in certainly my history at National Grid, the thing that has influenced most people moving from oil to gas has been the differential in the price. So when we've seen very high oil prices, then people are looking to make the investment that's needed in the new equipment they'll need in their homes in order to take advantage of the lower prices. Obviously, some people are looking at it from an environmental perspective as well these days. But that has been the driver in terms of the volumes that we've seen certainly over the last 5 to 6 years. But Badar, if you'd like to add anything from a local perspective?

Sure. Thanks, John. I mean I think it is a significant opportunity for -- in reducing emissions. 25% of customers in our territories, at least, are still using oil for heating, and we have been on that journey for some years. I think the question for us that we're working with stakeholders, regulators and other companies is, how can we go the extra step so you'll go beyond gas. And whether it's electrification opportunities that we talked about with customers or into the renewable gas or hydrogen space. And so those are -- that's where the conversation really is. But it's clearly in the near term, the most effective way of reducing emissions in terms of decarbonizing.

Nick, if you could just take one more question, and then I suggest, we're going to move on to the second section on social. So one more question, please.

Not a problem. We have a few. Keep sending them in. As I said, there would be plenty of time after the next section to ask them as well. So thank you very much for them so far. So let's finish with a hydrogen question because they keep coming in. This one is from Bartek at SocGen. Should hydrogen -- if hydrogen plays out into the future, what do you think will be the size of incremental infrastructure investments in both the U.K. and the U.S. to make your gas infrastructure hydrogen ready?

Okay. Thank you for that question. So I think the simple answer at the moment is, we don't know. So as I said out earlier, I think, the focus over the next 2 to 3 years is to really undertake some of these pilot projects that have been mentioned to get a really good understanding of what are the investments that are going to be needed if we look to repurpose our transmission and did our distribution network to either take a blend of hydrogen or actually pure hydrogen. So you heard Nicola talk about a project that we're working on in the U.K. where we're taking a piece of actually of the transmission network, and we're going to test it while putting, I think, it's 5%, 10% and then ultimately, 100% hydrogen through it. For those who are more tactical, you'll know that the hydrogen molecules interact with steel in a different way and are a different size. So it will require investment in order to do -- to safely be able to transport hydrogen, but that, in effect, is what these projects are really looking to explore. And similarly, Badar mentioned some of the projects that he's got regulatory support for at the moment to test the distribution system as well. So I think over the next 2 to 3 years, we're going to get a much clearer view of what investment is needed to -- in both the distribution and at transmission level. So with that, Nick, I suggest that if we could save the remaining questions on the environment and start the next section, which is all around our social commitments in our responsible business charter. So I'm going to hand over to Andy Agg.

Thank you, John, and welcome to the next section of this event. I'll start with how National Grid plays its role across the economy. Then you'll hear from Marcy Reed, President of our Massachusetts Business and Head of U.S. Policy & Social Impact; and Andy Doyle, Chief Human Resources Officer, on what we're doing in our communities and on the importance of our people. I've been with National Grid for 12 years, and over that time, I've seen our culture and commitment evolve to embrace a wider societal responsibility. National Grid's core purpose is to deliver safe and reliable energy. In fulfilling this, we support and act for a variety of stakeholders, including customers, employees, supply chain partners, regulators, governments and investors. Our investment program is at the core of what we do. We expect our CapEx levels to remain at least GBP 5 billion per year, driven by the crucial needs to maintain our existing assets and the exciting opportunities that net zero brings. Alongside this, we've also committed $250 million of investment for our National Grid Partners' innovation firm, which will enable start-ups at the intersection of energy and emerging technology to grow, helping to deliver a smarter renewable future. As a responsible employer, our capital investment program, together with the energy transition, have the potential to create and support many more green-collar roles, both for experienced engineers and for young people across our communities. As a responsible business partner, we're proud that our investment program supports a large and diverse supply chain of 9,000 companies. Our payments to the supply chain sustain employment across many economies. And in FY '20, over GBP 2 billion of this spend was with small and medium-sized businesses and other diverse enterprises. We expect the companies we work with to uphold and live our values as we do. For example, we require all businesses in our supply chain to share our commitment to respecting, protecting and promoting human rights. This includes alignment with the principles of the United Nations Global Compact, the U.K. Modern Slavery Act, the U.S. Trafficking and Violence Protection Act and for our U.K. suppliers, the requirements of the Living Wage Foundation. Furthermore, we also expect our principles to be cascaded onwards into our contractor supply chains, in line with our Global Supplier Code of Conduct and the U.K.'s Prompt Payment Code of which we're signatories. As a responsible community partner, our goal is that no one gets left behind in the transition to a clean energy future. Therefore, a real focus for us at National Grid is to work hard to protect our vulnerable customers. Our financial strength allows us ways to do this. For example, in the U.K., we established a GBP 150 million warm homes fund, a major private sector investment in providing affordable heating solutions to fuel poor households, designed to support local authorities and registered social landlords and partnerships to help approximately 50,000 households suffering from fuel poverty. In the U.S., between our corporate programs and the National Grid Foundation, we provide over $10 million annually to community organizations, helping customers facing disconnections. Our geographic footprint means that our economic contribution is felt in lower-income communities. They can truly benefit from the ripple effect of our local presence, from rural communities in New England and New York to the U.K., where most of our investment program takes place outside London. Which is why over the last 6 months, we've continued to broaden our offerings to customers and to the communities we serve. In the early days of COVID, we suspended customer collections in our U.S. service territories and looked at other ways to help ease financial burdens on customers. In the U.K., we agreed with Ofgem to defer recovery of system and balancing charges that we were owed, providing support to U.K. suppliers, but we've also gone further. We helped to stand up field hospitals in Massachusetts, New York and Rhode Island, with accelerated service and backup generation. In the U.K., we donated to the National Emergencies Trust and Trussell Trust and across our U.S. jurisdictions to community-based charities to provide help and support to the people who needed it most. I'm really proud of the way our teams have stepped up to meet the challenge of COVID. In addition to our role as a responsible employer, business partner and community partner, we are committed to sustainable financing. Our treasury team has issued over GBP 1 billion in green bonds and also agreed a green loan backed by an export credit agency. One of our largest bond investors, PIMCO, recently published an annual ESG investing report and stated National Grid has acted as a leader in environmental risk management and climate commitments among regulated utilities. We're members of the B team, an organization of leaders from business, civil society and government developing better ways of doing business, a plan B, in effect, prioritizing the well-being of people and the planet. And today, I'm proud to announce we've pledged to endorse the B team responsible tax principles, which aims to establish an approach to taxation that allows companies to demonstrate responsibility and to play their part in creating a stable, secure and sustainable society. And in our pension schemes, the trustees of the National Grid U.K. scheme are developing a climate-friendly vision for their asset portfolio, with the target to be carbon net zero by 2050. Alongside sustainable financing, sustainability reporting is something I've taken a personal interest in advancing at National Grid, and I'm proud to be a member of the accounting for sustainability, CFO leadership network, sponsored by His Royal Highness, The Prince of Wales. This is a network I've been involved with throughout my time with National Grid, reflecting how I believe finance can and must contribute to sustainability alongside the whole of our business. We've introduced sustainability into the planning process through our annual 10-year business plan as well as our quarterly internal reporting cycles. Our management information is now expanded beyond the purely financial, so that decision-makers have information on broader value drivers. This includes areas such as our greenhouse gas emissions, helping to drive behavioral change across the business. The diversity of our workforce and leadership as we aim to reflect the communities we work in and community support, and Marcy will shortly go into the great work we're doing across our communities. And also the development of skills required for a net-zero workforce, which you'll hear more on from Andy later. We embed these broader values into everything we do. And whilst this has formed an element of our performance management framework in the past, we expect this to become a more formalized part of it in the future. Jonathan Dawson will talk later in more detail about how the remuneration committee is thinking about this topic. With sustainability embedded in our decision-making, as John mentioned, we're proud to be publishing the first annual responsible business report alongside our annual report next summer. This will build on our ESG data book and include new areas of reporting, such as how we'll improve our natural environment and the work we're doing on biodiversity. We'll look towards leading practices and standards for sustainability reporting and disclosure frameworks when designing the information contained within it. I'm also pleased to announce that a number of our KPIs will be externally audited, providing further assurance to all our stakeholders. We launched this from a strong base. For example, our greenhouse gas emissions are currently included in both our annual report and in our carbon disclosure project submissions, where we've been on the climate change A-list for 4 consecutive years. We're also committed to implementing the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosure, or TCFD, and the FY '20 annual report contained our third year of disclosure. But we recognize we can and must do more. Embedding sustainability into our reporting and getting it right will lead to huge benefits to us as a company to our colleagues and communities and to the energy sector as a whole. It will help lead to improved safety performance, sustained reliability of our networks, leading to enhance customer satisfaction, a greater focus on delivering the environmental goals our stakeholders want, developing skills and creating jobs, which will lead to closer ties to the communities we work in. Ultimately, this will be a positive for all stakeholders. I'm proud of National Grid's culture and our commitment to embracing this wider societal responsibility. ESG is no longer an exception. It's an expectation and one which will have long-lasting climate and business impacts. So thank you. And now let me hand over to Marcy.

Thanks, Andy, and hello, everyone. Communities we serve are very important to us. After all, we're physically connected to each and every one of them. We take our obligation to serve and our position as a large corporate citizen very seriously. We have a role to play in ensuring the economic vitality of the communities where our customers and employees live. Not only will this help provide a strong backbone for our customers, but it's simply the right thing to do. It's the way a responsible business should behave in its marketplace. Supporting efforts such as the UN Sustainable Development Goals, offer us an opportunity to address challenges we face, like poverty, inequality and climate change. It's also a great way to make an impact on developing the workforce of the future. So what exactly do we do? Some of our actions and programs are big and obvious, while others are more modest and local. We have hundreds of partnerships across our U.S. service territory and in the U.K. that provide services to customers, ranging from skills development and employability to basic needs like food and shelter. We provide funding. We sit on their boards. We volunteer in their programs, and we're proud to do so. And our commitment to our communities is enshrined in our Responsible Business Charter, which John covered earlier. You'll see that our charter includes healthy ambitions to provide access to skills development for 45,000 people by 2030. And in so doing, we hope to supply 0.5 million employee volunteering hours in that same time frame. Andy has already talked about the support we've provided to our most vulnerable communities through COVID. The area I want to focus on today is one of our greatest areas of community involvement, education and employability. Grid for Good is a prime example. In this new flagship community investment program, we cast our net more widely to access and serve disadvantaged youth, ages 16 to 24. These young people come to us from hard-to-reach corners of our communities that need us the most in both the U.S. and U.K. And we've already helped 300 young people through this program since it began just last year. Our structured pathway approach gives young people insights into our industry. It offers practical opportunities for them to build confidence and provides mentoring and employability skills in our industry as we progress toward our net-zero ambition. Through Grid for Good we'll be instrumental in affecting lives, bolstering our workforce and offering employees even more volunteering opportunities than currently exist. Already 250 employees have given some 2,000 volunteering hours to this program. Grid for good came to life for me when a small group of us met Gabriel, a 22-year-old then resident of the Birmingham England YMCA. He had his share of challenges along the way, but that didn't dampen his enthusiasm and drive to become in his own words, a social media mogul. You needed a hand up, not a handout, and Grid for Good was there for him, right when he needed us. In our pilot phase, we brought Gabriel through the program and even succeeded in getting a paid internship in our marketing department. This is what it's all about, helping all the Gabriels out there who need a little coaching and a few good role models. Another example of our impactful community investment work is Girls Inc., a national organization in the U.S. that focuses on young girls' education. Since 2017, we've provided over 4,000 young ladies, opportunities to learn and experience our summer STEM program. The programs are in Massachusetts and New York, serving communities with more than their share of disadvantaged neighborhoods and kids looking to catch a break. Each summer, we sponsor over 1,000 girls through this effort. My favorite day is when we show up in their parking lot with a bucket truck, and a half a dozen or so local line electric workers. I, of course, ensure there's always at least one female line worker. It's important for these impressionable girls to see themselves and represented in our workforce. We teach the girls about electric safety, electric generation and distribution, and we just discuss renewables and our passion about the climate. We're told it's one of the girls' favorite parts of their summer STEM program, and our employees love being engaged in the community too. In the U.K., we also focus on STEM subjects as they support our future talent recruitment and our desire to see young people gain meaningful employment. Through our skill-sharing volunteering program in fiscal '20, we arranged over 1,700 quality interactions with young people on STEM subjects. And through other partnerships, we support charities such as City Year to help recruit more volunteer mentors and extend their outreach across the U.S. and U.K., supporting even more children from disadvantaged backgrounds as they transition through education into the world of work. There are lots of other forms of impact we have in our communities. In the U.S., we support veterans' organizations in the form of counseling, training, jobs and grants to benefit our community. We support Troops to Energy, a program through our involvement in the Edison Electric Institute, and we love it when these hard-working vets come to work for us. And since 2013, we've increased our veteran hires from 100 to 435. The Employability programs in the U.S. and U.K. offer internships for young people with special educational needs and disabilities. I've met some of these young people, and I'll tell you firsthand that the chance to bring them on board as employees is truly a special treat. The Employability program in the U.K. began in 2013 as a partnership with an educational needs school in work. In that first year, we offered internships to 5 students at our nearby office. We saw an enormous transformation in each of the shy and nervous students who first arrived as they grew in confidence and self-belief, often for the first time in their lives. Since then, we've reached our 100th intern, which is a significant milestone, and we're now in partnership with 11 special schools with many interns successfully achieving paid employment. In the fiscal year ended March 2020, our financial contribution to local community initiatives was GBP 10 million. This includes funding for sponsorships, donations, education and employability programs, among others. We support our communities. They thrive economically, and that's good for our business. Our employees boast with pride, which is good for our company and our communities. Our chances of improving the diversity of our workforce are enhanced to the partnerships we create. Our elected officials and other key stakeholders notice that we're a responsible business, and that proves our claim that we are a socially conscious and public service-minded company. Some may think that simply providing vital energy service to society is enough to be deemed socially responsible, that may be true. But we know there's so much more we can and do provide: access to reliable gas and electric networks, strong customer service, award-winning energy efficiency programs and dependable restoration after a storm will never be enough for us. It's our genuine care for the residents of the communities we serve that fuels our actions. Within our Responsible Business Charter, all of these many actions and efforts will sure we meet our targets for touching 45,000 lives and providing 0.5 million employee volunteering hours. I'm proud to work for a company that gets it, one which looks out for its customers, employees, shareholders and the world around us. I never really thought about National Grid doing the good that it does as an obligation or to check a box. Rather, you do this because it's right. We've been involved in many of these programs and partnerships for decades. It's just who we are. Thanks for listening. We're now going to play a short video that shows our contributions to the communities we serve over the last few years before my colleague, Andy, will pick up the reins. [Presentation]

Thanks, Marcy, and good afternoon, everyone. I'm Andy Doyle, I'm Chief Human Resources Officer. I'm going to spend the next 10 minutes or so on how we're enabling the people to make possible the energy systems of tomorrow. Now our vision is to build and develop a safe and inclusive culture with a diverse workforce that's fully representative of the communities we serve. So we're committed to looking after our colleagues' safety and well-being, developing the skills that are needed for the future, building an inclusive culture and a diverse workforce; and finally, providing equal opportunities and remuneration for all our colleagues. I want to start with the safety and well-being of our people, our top priority. Since joining National Grid last year, I've been hugely impressed by our proactive approach to safety. Our colleagues act and behave in a way that protects everybody, ensuring that everyone goes home safely at the end of every day. We have the policies, procedures and training in place to make sure -- to ensure we maintain this and make use of the leading indicators to anticipate where incidents might occur and take preventative action to avoid them happening. The remuneration of our Executive Directors is also aligned to the group's safety performance, with Jonathan Dawson, the Chair of our Remuneration Committee, who will discuss in more detail later. Over the past year, we've significantly increased our focus on mental health and well-being. We've built greater awareness through the -- through education and training, recently signing up for the Mental Health at Work Commitment, helping further improve standards of mental health care among our workforce. We've enhanced our employee assistance program to provide greater financial, legal and psychological support for all our colleagues as well as additional training courses on building resilience and mindfulness. COVID-19 has challenged us all in new ways. We've mobilized our office-based teams to work remotely from the outset, and rapidly enforced measures to make it safe and secure for those working in the field. We kept in regular contact with our people, doubling down on communication and hosting virtual events, such as our virtual well-being week. We have seen the tremendous dedication and commitment from all our colleagues who have been instrumental in keeping the lights on and the gas flowing. To share just one example, volunteers from our network control centers in both the U.K. and the U.S. moved into temporary accommodation at their office location for weeks on end to maintain the day-to-day balancing of our systems. From those volunteers, our facilities teams and our partners who supported them, the effort and commitment from all of those involved has been truly admirable. Now each year, our engagement survey provides us with vital feedback to identify specific areas for improvement. And we've regularly asked our colleagues for feedback throughout the pandemic to ensure that what we're doing -- to ensure that we're doing our best to support them. And we've seen a noticeable upward trend in overall engagement over the last 9 years. And we're working hard to maintain this going forward. We're also committed to developing and equipping the organization for the evolving needs of the future. Last year, we released our net-zero impact report, which identified that we needed 400,000 jobs in the U.K. energy sector alone to help society reach net zero emissions by 2050. Critical to ensuring this is the bringing in of new talent and inspiring the next generation of engineers and business leaders. So last year, we launched the award-winning Job That Can't Wait campaign to attract new talent. We saw a sevenfold increase in applications to our U.K. Advanced Apprenticeship scheme and started a national conversation about the importance of STEM. It's really great to see so many young enthusiastic individuals committed to shaping the future of energy. We're also supporting and promoting STEM in schools, encouraging children to pursue careers as engineers and scientists and technologists of the future. Over the last 5 years, we've grown the number of quality interactions with young people significantly. This year, we're focusing on leading through the Energy Leaders Coalition, which looks to evaluate, benchmark and collaborate with member companies regarding their STEM programs. Now for the last 10 years, we've hosted 200 interns annually in the U.S. This year, we ran the program virtually, encouraging our 171 Gridterns to join us for a virtual internship, and we've successfully welcomed many of those to the company across a variety of roles. Whilst we're putting significant efforts into recruiting the workforce of tomorrow, we're also investing millions every year in the training of our current colleagues. We are investing in new technology platforms to deliver virtual instructor-led training and have fully equipped training centers to offer a range of technical, professional and leadership development programs. In the U.S., we have 6 training centers. And in the U.K., we have our Eakring learning center, graded outstanding in the last 3 inspections by Ofsted. They are home to nearly 350 apprentices and graduates and boast an array of immersive learning environments, including virtual reality suites and fully functional electricity and gas training facilities. We also offer comprehensive leadership development programs, which aim to equip our future leaders with behaviors and qualities needed to successfully lead their strategic delivery for the future. We are committed to building and developing an inclusive culture with a diverse workforce that's fully reflective of the communities we serve. Currently, around 18% of our workforce have declared themselves to be a minority racial or ethnic heritage, and 16% of our managers are. Women account for nearly 25% of our workforce and almost 33% of our managers globally. So whilst our performance compares favorably within the industry, we know there's more to do to fully represent the communities in the U.K. and the U.S. John has already mentioned our ambition to lead from the top with 50% diversity in our senior leadership team by 2025. It's vitally important that our senior leadership teams reflect society and provide visible role models for all of our colleagues. We are also ensuring that our entry-level roles are equally diverse, aiming to achieve 50% diversity in all our new talent programs by 2025. That's why we're increasing new hires and promotions from diverse backgrounds as well as assisting colleagues to achieve their full potential. We start from a positive place, working to strengthen our diversity teams within the organization, auditing ourselves for unconscious bias in our people process and systems and being transparent about people data where we can. We're investing heavily in training and awareness and taking active steps in the development of all our colleagues. We are encouraging wider participation in an open and honest dialogue between leaders and their teams across the business. I recognize the challenge of talking about diversity as a middle-aged white man who has not experienced the bias and exclusion that many have. I guess it's by listening to our colleagues and listening to at times, some uncomfortable truths that we have collectively focused on our efforts to continue to drive a positive change at National Grid. We are a progressive employer, committed to doing the right thing, one of our core values. Our Diverse Leaders Program has been specifically designed to help our ethnically and racially diverse populations reach their full potential. Feedback from those who have attended the program has shown they feel more confident to take the next step on the promotional ladder. Our employee resource groups for race and ethnicity have been invaluable in informing, supporting and champion our efforts in both the U.K. and the U.S., with members of these groups having attended meetings with our Board to discuss candidly the experience of our diverse colleagues. National Grid has been recognized externally for the significant activity underway to ensure we have an inclusive workplace. Recently, for example, Forbes included National Grid on the list of Best Employers for Diversity in 2020. Over the last 3 years, we've had a number of colleagues featuring the top 100 of the EMpower list, which recognizes and celebrates ethnic minority talent across the world. This year, we're delighted that one of our colleagues was named #2 on the list. We are proud of our achievements, but are acutely aware of our responsibility to continue to support these individuals and all our colleagues to reach their potential. We remain committed to providing equal opportunities and remuneration for all our colleagues regardless of their backgrounds. We're a living wage employer, and the gender pay gap is 3.7% in the U.K. amongst the smallest gap in the FTSE 100. We will continue to regularly review pay information by both gender and ethnicity, ensuring equality for all and aim to be as transparent as possible in providing additional disclosures in the near future. I hope that my presentation today has given you a taste of the work we've recently undertaken and our ongoing focus on safety and mental well-being. We are committed to developing the skills needed for the future whilst building an inclusive culture and being a diverse workforce at National Grid. We're fully committed to treating our colleagues fairly and equally and being as transparent as possible in all our reporting. I'm proud of the work that we've done and the bright future we continue to build. I'd like to thank you for your time. And I'd like to hand back over to Nick for any questions.

Thank you, Andy. So we're now happy to take questions on all the presentations that you've heard so far. [Operator Instructions] And so let's go straight into it. We've had a couple of questions on COVID and the impact given -- we've just been speaking about that in some of the presentations. So this one from Javier Garrido at JPMorgan. How is the COVID-19 pandemic changing your approach to protecting vulnerable customers? And do you think that U.S. regulators could change the way they look into bad debt that allows us following the increase in bad debt triggered by the pandemic? John?

So thanks for the question. So let me pick up the question with regards to our changing approach with vulnerable customers and perhaps Andy Agg can then pick up on the bad debt issue. So when we started to plan for our response to the COVID pandemic, one of the things we were very keen to do as well as protect the safety and well-being of our staff, was to ensure that we were protecting our customers. Of course, for us, that starts with delivering a safe and reliable service, but we were very conscious that some of our customers are going to struggle to pay their bills. So we took a very proactive approach. You will be aware that in New York, for example, we froze rates. But we also worked very closely with our regulators to ensure that customers who were struggling, first of all, weren't disconnected in the normal way. So no customers were disconnected in our U.S. business as a result of not being able to pay their bills. Nor do we put pressure on customers in terms of people who were building up bad debts by chasing them in the sort of normal way. So our approach to it was to be very empathetic to the needs of our customers during what has been a difficult time. And then to work closely with our regulators about how we can then recover those costs and continue to support customers over the medium term. Andy, do you want to pick up on the bad debt?

Yes. Thanks, John. I think as you said previously on this topic, we remain confident of recovering the vast majority of the amounts that was experienced, both in bad debts and also other sort of direct costs of responding to COVID. I think the combination that we have of existing mechanisms and regulatory precedent across our states indicates that. Having said that, obviously, we're cognizant of the affordability challenge in the states we operate in and more widely across the U.S. utility practice. And I think it's important as we work with our regulators to balance the investment needed, the recovery of certain costs like bad debt by making sure that through that, we work with our regulators to manage the impacts on the customer bill, and that's what we're focused on doing in the current discussions.

Thanks, Andy. What are the key ESG risks that you are seeing affecting the business? And what steps have you taken to mitigate these risks?

Yes. Thank you, Nick. I think I'll start by referencing. Actually, if you look in our annual report, you'll see that we set out quite extensively what we see as the principal risks for the business. And within that, right across those principal risk, you'll see that we've picked up different elements of ESG, including the impact that us not responding to the changing energy transition and the environment will have, but also how we adapt the business to the changing environment as well. But more specifically, if I think about risks associated with our ambition around ESG, one that I would highlight, I think, is our own technology. So as you've heard in the discussion today, in order to achieve net zero and to address key challenges like decarbonization of heat, then we need to see the development of good government policy and good regulatory frameworks actually to support the innovation that's going to be needed with regards to things like carbon capture and storage as well as developing hydrogen in a way that's going to be affordable for customers. So I think one of the risks that we face is not taking action fast enough and making sure that we've got the right business models and the right investment and innovation to achieve that ambition that we set, which is to support the net-zero agenda.

Perfect. Thanks, John. We had a couple of questions around our ambitions on diversity. So I guess the overarching one is, you have an ambition to reflect the diversity of the communities you serve. What does this look like? And how do you currently measure against this data?

Yes. So thank you, Nick. I think I'll hand over to Andy Doyle, who can walk through how we're measuring it and what that means in terms of our ambition.

Thanks, John. I wish I'd -- I normally like to say thank you for the question, but it's actually a very difficult question to answer. So one thing I think we're trying to do is to say, how do you look about measuring your diversity in an organization? What does it look like? So yes, we can take the U.K. -- the communities we serve in both the U.K. and the states in the U.S. and look at the gender and kind of the mix of ethnicity in both those states. Actually, in the U.K., we do slightly better. In the U.S., we're slightly far behind on ethnicity, but we've got a longer way to go on gender. So but I think it's trying to look at it in a very holistic way. And so trying to get our first target of 50% of people from a diverse background into our leadership population is our first step. It's a bold ambition, I think. We've got quite a long way to go on that. We're looking forward to the journey and trying to get there. But we've got pockets inside the organization, whether it's our field engineers, where we've got lots of work to do; whereas in our management layers, we did pretty well on both -- on women leaders in our management population.

Thanks, Andy.

Thanks, Andy. And again, we've had a few questions, I'm going to link them all up on Andy Agg's speech -- actually on the economy and some of our data reporting. And so I guess an overview one would be, how are you going to determine the scope and performance of the performance data within the ESG reporting? And then how are you going to ensure the integrity and the consistency of this data?

Okay. Andy, do you want to take that?

Sure. Thanks for the question. Yes, I think, as I said, we're very conscious, and I'm conscious when we think about reporting, there's a plethora of different standards and obligations being placed on us and different guidelines. And I think one of the things we support is initiatives that work towards the standardization of that. So for example, the recent requirements on EU taxonomy, anything -- any initiative that helps to standardize is a good progress for us. Clearly, we're focused on things like the SASB, S-A-S-B and the GRI, which I think is fair to say, emerging as 2 of the leading parts of coming together with standardization of reporting. But as I said earlier, I think we'll take into account all of these things as we pull together our first responsible business report next year. And we'll also look to make sure that we provide the information that our investors need to meet their own obligations as well. In terms of the assurance point, yes, we've already appointed one of our professional services firms to audit a subset of that data in the first year, that will build up over time, and we'll have then a combined assurance model internally as well. So we want to make sure that we're projecting that information with the added assurance of it being audited for all our stakeholders.

Thanks, Andy.

Thanks, Andy. So we have another COVID-related question. Can you provide an update on relations with the unions, particularly with respect to unionized employees, views of COVID safety precautions? Is there paid time-off for the employees who contract COVID?

So Nick, why don't I take it at a high level, and then I'll ask Nicola and Badar to talk about what's going on at local level. So one of the things that we needed to do quite quickly when the pandemic started was to actually stand back from our day-to-day operations and ensure that we can continue to deliver the operational activities we undertake, the maintenance activities and the construction activities in a safe way. And we work very closely with our union colleagues on that. So you may be aware that with regards to our control rooms, for example, we sequestrated our staff, and they were living and working at our local sites. With regards to our maintenance construction work, we took a pause to make sure that we could change our ways of working to ensure that when staff were going into different sites that they were able to work safely. And again, we work very closely with the unions on that. And with regards to people who are off sick, then of course, we support them right through that. So National Grid has not furloughed or made anybody redundant as a result of COVID. And we treat COVID illness like any other illness in terms of sickness. So we provide support to our colleagues. But with that, let me just hand over to Nicola, perhaps to talk about locally at the U.K. level.

Thanks, John. Yes, all of that's happened in the U.K. and really, I'm very grateful for the work the trade unions have done with us. We've had some joint communications from the management and the unions together to staff -- to make sure everybody is aware of how we're working safely, and it has been very helpful. So all of the things you would expect in social distancing. And in particular, making sure that our communities around us recognize that our guys are really key workers. So if you are out and about, and you are working for National Grid, you carry a letter with you that says, you're on a piece of work that's necessary for society so that -- which we saw more of at the beginning, I think, of the crisis. We saw more people challenging our staff on the streets, saying, what are you doing? And it was great for them to have a letter from the Secretary of State for Business and the Environment, who was keen to make sure that everybody recognized the standing of our staff as they were going about their work. And all of the procedures we've put in place have worked very well. And I'm really pleased to see the way that people have continued to work and deliver during what is quite a difficult time, but ...

Thanks, Nicola. I can tell you, I'm incredibly proud of the resilience, the support for each other, the support for our communities that our workforce has shown. I think over the last 6 months, we've shown that we can tackle these things together. In terms of the specific question, we -- as John has said, we put in place a significant number of safety protocols for the work out in the field. We have a significant amount of work that we were required to go into customer premises. So of course, we pulled back from all of that activity and have developed protocols with respect to starting up that kind of work. We get storms clearly here in the United States. We've had a number of storms over the course of the last several months already, and our people again have demonstrated fantastic support for each other with respect to safety protocol, social distancing, to ensure that we keep each other safe, and we deliver for our customers' journey storm. So I would say that our people have really shown, over the last several months in the way that they've managed through this COVID pandemic. And as a company, as John has said, we've done a lot of things to support our customers, our employees in terms of commitments to their employment as well as, of course, when they're off sick.

Thanks, Badar. So this is actually a bit of an overview question. It's from Royal London. So you've got some great E and S commitments and strategies. But how are you ensuring that they are interlinked? In particular, how are you ensuring you address the socioeconomic implications of our company's net-zero ambition and decarbonization strategies on workers, communities, supply chain and consumers in a way that mitigates negative impact and enhances the opportunities for the energy transition?

That's quite a big question, Nick, I think. I think what we've tried to do today, actually, is talk about the 5 pillars of what we believe is necessary to be a responsible business. And within that, talk very specifically about each activity and each commitment that we're making that we deliver across what we believe is a responsible business. So if I take the environment, we talked about our commitments in terms of reduction in CO2 emission. We talk about some of the commitments we're making as a company, but also as a key enabler. And I think it's as a key enabler we think about the role that we're playing that supports society, our staff and the economy more broadly. So as I said in my speech, Natural Grid scope 1 and 2 emissions are 6.5 million tonnes. But actually, that's a very small percentage of the total emissions that we see across the jurisdictions that we operate. But we have a much bigger role to play in society in enabling the transition of energy and the achievement of net zero. And we do that through things like the development of opportunities for the ultrafast charging network in the U.K. or the work that Badar has referenced that we're looking at decarbonization of feeds and energy efficiency in the U.S. So I think we think about all these different pillars of how they interact but our focus very much around the commitment that we can make as an individual company, but then the much bigger impact we can have as an enabler.

Perfect. Thank you, John. Actually, we've had a comeback on Andy Agg's answer around some of the -- around the responsible business report. So it's, Andy, when you say audited, do you mean limited assurance or full assurance of the RBR, the responsible business report?

Okay. That's definitely one for you, Andy.

No. Thank you. At this point, we're still working out the level of detail around all the different metrics, so it will vary. Some metrics we would expect to -- almost to a full external audit levels. Other metrics will be subject to a more limited assurance, and then that will evolve over time. So we're working through that program, but it will be in place to provide that assurance for the responsible business report next spring.

Thanks, Andy. And from Verity Mitchell, HSBC, why does National Grid not also have a Girls Inc. program in the U.K.?

So I'll hand over to Andy in a moment, but just to reassure. Actually, we have multiple programs running both in the U.K. and the U.S. I think Marcy gave just 1 example. But we've had a real focus actually over the last couple of years on how we encourage young girls, particularly the schools actually, to want to do STEM subjects because by encouraging them to do STEM, ultimately they'll going into university. And it's those types of skills that are going to be critical to us in the net-zero world. So we have a number of what we call STEM ambassadors in National Grid, both in the U.S. and in the U.K., that go out from work with schools and with young girls, in particular, to really encourage them to want work in the energy sector and hopefully, also for National Grid. But Andy, let me hand over to you.

I'd really just reinforce some of the comments that you've made there, John, that says, we kind of try and let people make local decisions around what programs that they support within the broad theme. We'll certainly have a look at that one in terms of the Girls Inc. for the U.K., but we're very committed to empowering young women in STEM subjects as well, and that's where a lot of the focus has been on, the school STEM subjects in the past.

Thanks, Andy.

Thank you very much for that. So please keep sending in questions on the S section, but I do know we had a lot of questions still coming on in the E section. So we may just go back to that for a question or 2. We've got a lot of questions still around interconnectors. So for example, this one from Fraser McLaren at the Bank of America. Can you comment on the recent capital floor parameters proposed for Viking and the investment case? And does your assumption around 90% low CO2 imports over all the links rely on maintenance of a premium carbon price in the U.K. versus the EU?

Okay. Let me just frame the captain floor with regards to interconnectors. Then I will hand over to Jon Butterworth to talk about the specifics. So National Grid has always been very sort of positive and supportive of the capital-floor mechanism. So for those who are not close to it, ultimately, our revenues and the interconnectors are delivered by the differential in energy prices between mainland Europe and the U.K. But in order to protect consumers from effectively very, very large differentials, which could lead to very large revenues for National Grid, but at the same time to protect National Grid against this investment if those differentials fall, we've agreed effectively a wrapper around those revenues with our regulator, which we call the capital floor. And they have worked very effectively for the investments that we've done most recently in the last couple of years. With regards to the specifics on Viking, I'll hand over to Jon, and also he can pick up on how he sees the carbon tax impacting going forward.

Yes. Thanks, John. Yes, I think particularly on the Viking interconnector and if you look at the investment case, when we talk about 90% lows or 0 CO2 imports, what we've done is we have a very comprehensive and detailed team that analyze all the policies over the next 10 years of all the generators that the interconnectors feed from in Europe and import across the North Sea into the U.K. and when you model all of that and model it and verify it externally, you get to 90% of CO2 imports will not have CO2 in them. They will be carbon-free. So that's when we talk about 90% low CO2 imports, what we mean is that, externally verified, the generation mix coming over through the link will be 90% CO2-free. And then we talk about your other question, carbon price. And the difference is that whatever we see, we will always see that differential when we model it looking forward for the next decade in terms of that CO2 tax. So whether it's U.K. or EU, you see a differential between the link on one side and the other. And so we always -- we will see that premium coming through for the next decade.

I mean the only other thing I'd add to that is when you actually look at the fundamentals of interconnectors, then the fact that our peaks are at different times to mainland Europe, we have different weather systems and the generation backgrounds are different, all of that also drives the price differential. So a low-carbon price can have an impact on that differential actually. Those fundamentals aren't going to change over the short, medium or long term.

Thanks, John. So a question from Mark Freshney. You talked about returns in ROEs in the U.S. and the U.K. coming down a little bit. But we're making improvements -- National Grid making improvements and talking about our commitments around ESG. So what practical examples can you give where having a higher ESG rating could allow for higher returns?

I will ask Andy Agg just to give his views on it in a minute, but let me just give a practical example of how focusing on ESG and particularly the environment can actually drive financial performance and a good outcome, both the environment and for our customers. So National Grid spent about GBP 5.4 billion last year on different capital investment programs across the U.K. and the U.S.A. A number of years ago, we considered how we could drive our supply chain to think about the environment. And at the same time, we were keen to also drive efficiency. So as part of the procurement process, we put in place that part of the weighting that we would consider is carbon. And by putting that weighting into our procurement process, it has driven not only a reduction in carbon emissions for all our new capital investment programs going forward, but it has also reduced the cost that we've seen for those capital projects. And we're seeing capital efficiencies as a result as supply chain have been forced, really, to think more innovatively about things like civils and concrete. And therefore, that has a beneficial impact on our customers and ultimately, helps us to drive better returns through our regulatory contracts as well. Andy, why don't you give your thoughts?

Yes. No. Thank you, John. And it's a really good question. I think I'd answer it in a couple of levels. Actually, the first is just to build on John's final point there, which is, for us, obviously ESG is the right thing to do, but it's also very much aligns with some of the policy goals and therefore, the regulatory goals of the jurisdictions we operate in. As you heard in the presentations earlier, both the U.K. and all of the states we operate in, in the U.S. have their own very stretching ambitions in this space. So to be fully aligned with that in our own trajectory is critically important as we talk to our own regulators investments, about the funding of pilot projects, all of which contribute to remuneration and their returns. But maybe just another example for me. I touched on green bonds, green financing. Again, for me, that's not necessarily about immediately getting a pricing benefit for a particular bond, but it certainly enables us to access different pools of capital and therefore, in terms of attracting more investors to our debt issuance, which we believe has certainly contributed to making sure we can continue to finance at an effective rate. So I think at a micro level as well, there's a number of ways that ESG will enable us to continue to perform against our regulatory arrangements.

Thanks, Andy.

Thanks, Andy. So turning back to the U.S. We have a question on oil again. So understanding that replacing oil heat is a very high priority, but also recognizing that electric heat pumps are ultimately where the industry is going, what are your thoughts on the rationale of investing in the gas infrastructure for these customers rather move directly from oil to heat pump?

Well, I think Badar referenced this earlier on. So I'll ask Badar just to answer that question. Badar?

Yes. I mean I think as we said before, we think that there are multiple pathways in our goal to decarbonize heat. Clearly, there is an opportunity to electrify heat through heat pumps, geothermal, which we're pursuing. And I've talked about some of the things that we're doing in our territories. But there are practical and affordability considerations that we have to take into account as well. And I think that's why we see in the long term, I think as John described, a mosaic of solutions that includes not just electrifying heat but also green gas or biogas, RNG and hydrogen that can be made from renewable electricity. And I think that's the sort of the conversation that we're having with regulators, stakeholders. Those are the projects and the pilots that we're trying to prove out. And so I think that's how we see the decarbonizing heat agenda progressing over the next several years.

Thanks, Badar.

Thanks, Badar. And maybe, in the interest of time, this may have to be the last one. So I think it's going to be an overarching one which I've had from an investor. So to what extent do you look at ESG, not only as avoiding and mitigating risks, but as a set of indicators to create measurable value both to investors and to the wider energy system?

So thank you. I think a lot of what we've been talking about today is exactly that, in a way. So we really don't think about it as just about mitigating risk at National Grid. Clearly, we do within our principal risks, we do consider if we don't adapt in the appropriate way, what will that mean for our networks, for example. But actually, increasingly, we do think it is a value proposition. First of all, it's the right thing to do as a business, and that's why we've published our Responsible Business Charter, but we do see it as an opportunity to create value. And a lot of what we've talked about today is about opportunities for National Grid as well as mitigating the risks. So the opportunity for us to be involved in helping the decarbonization of gas, the opportunity to extend the network, to be able to enable the electrification of transport, all of these things are fantastic opportunities that will create real value for National Grid. At the same time, the way that we position National Grid as a supporter of net zero as an enabler is allowing us to track talent like we've never seen before. So Nicola referenced the job that can't wait. Our focus for that campaign was very much around how ESG and being a responsible business could be something of a movement that people could be a part of. And we were amazed actually at just how overwhelming the response to that was. So I think Andy referenced, we got 7x more apprentices applying. I think we had 2 or 3 times more the number of graduates apply. And that was purely down to the fact that people see the ESG agenda and net zero and the broader proposition we have as being a purpose-led organization to be something that's really attractive. And of course, if you can have the best talent, you'll get better outcomes for our investors going forward and for our customers as well. So we do think of it very much as an opportunity and not as a risk these days. So with that, Nick, I think we're out of time in terms of questions. So I'm just going to say thank you so much joining us this afternoon. This is the end of the first session. What we have done this afternoon, and I hope you've got a sense of it, is just to give you a description of the progress that we are making as a purpose-led responsible business, in particular, around the environment and social. But we've also tried to set out the commitments that we're making and the ambition that we have as an organization. As I said, in the time available, it's all we could do was provide an overview, but we've got planned a number of sessions in the new year where we can go through each element in a lot more detail. So in the meantime, I thank you for your questions and for joining us. We're going to take a short 5-minute break and then I'm going to hand over to Peter Gershon, who is going to take you through the governance element of ESG. Thank you very much. [Break]

Welcome back. We now turn to governance. Leading this section is our Chairman, Sir Peter Gershon. And he is joined by some of our nonexecutive directors. [Operator Instructions] And so with that, I'll hand you over to Sir Peter.

Thank you, Nick. I will start the governance section by talking about my time at National Grid and how governance practices have evolved since I became the Chairman nearly 9 years ago. Following this, there will also be short presentations from Thérèse Esperdy on the role of the Finance Committee; and Jonathan Dawson to talk about remuneration policy and the upcoming review. In my time as Chairman, the company has been able to consistently deliver strong results, not only from a financial perspective, but also in terms of promoting positive social impact. When I joined National Grid, the policies and procedures that were in place provided a solid foundation for me to build on as regards embedding best practice corporate governance. However, I felt that key aspects of environmental, social, which are really important for the company, weren't getting sufficient oversight and challenge at Board level, which is why I introduced a committed focused on safety, environmental and health matters in 2012. Significant progress has been made, especially in areas such as Board composition, inclusivity and diversity, risk management and cyber. And I will talk to each of these briefly. As you all have heard, to further improve transparency and reporting to our investors, we will be publishing a responsible business report on an annual basis from next year. This will complement our Responsible Business Charter, which articulates our ambitions in the area of corporate social responsible activities. The responsible business report will be a channel for us to communicate externally our commitments and developments made against our ESG strategy. So starting with Board composition. One of my first steps was to review the size, structure and composition of the Board. This provided the opportunity to put in place formal succession plans, which refined our recruitment process for senior leadership positions, and more rigorous process for the appointment of both nonexecutive directors and executive directors was also introduced, alongside a review of the company's position against the Davies review, Women on boards agenda. I'm pleased to say that today, the Board thrives, thanks to a strong mix of age, gender, ethnicity, skills and experience and thinking styles. This has helped to make sure the Board benefits from a richer set of perspectives in its approach to dealing with complex issues before any decision is reached so as to optimize the value-add of the nonexecutives and to create the space to consider wider stakeholder interest. Because we recognize the importance of a diverse panel of leaders and as you will have seen in our Responsible Business Charter, we have committed to achieve 50% diversity in our group Executive Committee and senior leadership groups as well as aiming to meet and ultimately exceed the Hampton-Alexander and Parker diversity review standards and achieve 50% diversity in our Board. The Board has also placed increased focus on inclusivity beyond diversity. COVID-19 has reshaped our interactions with all our stakeholders, but we have continued engagement, including our employees. Part of good governance is ensuring that the nonexecutives have a good understanding of the business to be able to contribute informed opinions. This is why since 2012, we have incorporated at least 1 unescorted site visit per annum for each nonexecutive as part of their Board activities. We have also recently taken steps to allow our nonexecutives increased access to our employees, so that they can continue to facilitate the process of embedding the desired culture from the top while also understanding any areas of improvement from the employees' perspective. We are committed listening to our employees to ensure that their voices are heard at group executive and Board level and have a diverse range of long-established employee resource groups, or ERGs, that are encouraged, but not controlled by the company, in both the U.S. and U.K. Last month, some of the nonexecutives had the opportunity for a virtual informal discussion with ERG members from the U.S. where topics included succession and diversity. An equivalent physical meeting was held in the U.K. late last year. Direct employee engagement also continues through participation in town halls and leadership meetings wherever possible. These interactions help senior leadership understand and respond to the concerns and issues experienced by all sections of our employees. I'm proud of our progress over the years. The Board has played an essential role in setting the right culture, one that embeds safety, ethics, compliance, supply chain and customer management into all our work practices. I'm pleased to say that we now have regular Board sessions where our company values, beliefs and behaviors are reviewed against our objectives. The Board monitors these developments using a culture scorecard, including the Fairness, Inclusion and Respect commitment. This continues to help shape our company's purpose, vision and values. My term as Chairman of the Board has been a time where we have experienced multifaceted changes, such as Brexit, changes in the U.K. government, changes to the U.S. administration, climate change and more recently, the COVID-19 pandemic. This plethora of complex issues posed on our company has increased its exposure to risk and require that the Board remain vigilant in maintaining a holistic and integrated approach to risk management. There has also been increased scrutiny of big businesses by the public and politicians due to high-profile corporate failures, poor corporate behavior and weak governance practices. The pressure placed on such companies means that the Board is integral in maintaining public trust. The Board tests our principal risks annually to determine their impact on the group's ability to continue operating. We also have established processes to identify and monitor emerging risks, which are designed to provide sufficient warning of concerns, which may impact the business. One area of great focus for us is attracting the people we need to continue to deliver safe and reliable networks. Our STEM outreach programs in local schools and colleges as well as our collaboration with the Royal Academy of Engineering enable us to develop and attract the best engineering talent. We also have our chief engineers program, which aims for increased levels of professionally registered National Grid employees. Such initiatives help enhance our public image and the company's reputation in the communities in which we serve. Another key area of focus on the Board is cybersecurity, given the critical national infrastructure we own and operate in both the U.K. and U.S. The Board receives monthly bulletins and reviews cyber risk and threats with the Group Chief Information Security Officer on a regular basis. The Board also receives outside training from external parties, most recently, from KPMG in May. Further cyber training is planned in December 2020. Our risk assessment process has been developed in line with internationally recognized standards. And our assessment is developed with inputs from the security services, including the Department of Homeland Security in the U.S. and the National Cybersecurity Center in the U.K. This ensures that we have the latest threat information to inform our response in this highly dynamic risk area. The external regulatory environment has evolved since I joined the Board. And I've seen the transition from the 2012 UK Corporate Governance Code up to the latest 2018 version. Over this period, the Board's focus has shifted from being operational and focusing on what the company does and how it sets the values to grasping the understanding that a company does not exist in a silo, so it is important to maintain good stakeholder relationships, be it with our consumers, regulators or shareholders, to name a few. The procedural aspects of good governance are now business as usual, and more emphasis is being placed on the company's interrelations. As a result, the role and focus of the Board has been to review the strategies, policies, targets and performance of the company within its framework of being a responsible business. We monitor the effectiveness in a number of ways, be it through stakeholder-perception studies or in the results of third-party research, such as those that track our ESG performance, as you will have seen in earlier presentations today. In the present context of COVID-19, competing stakeholder interests have shed a spotlight on the need for Boards to maintain an inclusive approach to decision-making. The prominence placed on Section 172 in the current legislative environment was very timely. COVID-19 has had an undeniable impact on business strategies in the global market. As a Board of Directors, exercising independent judgment and discretion in our decision-making in order to facilitate positive outcomes for our stakeholders has never been crucial. The Board has encouraged and been supportive of management when balancing the needs of our stakeholders through COVID-19. For example, our businesses responded quickly to ease financial burdens on consumers, suspending debt collection in the U.S. and deferring some charges for U.K. suppliers. As a business, we have increased our charitable donations and outreach to our local communities, with our people contributing more time than ever in the support of local organizations and charities. We have furloughed no employees. And whilst we do see a financial impact from COVID-19, we don't expect it to be a long-term economic impact given the regulatory mechanisms we have in place. Being able to help balance the needs of all our stakeholders, shows the importance of an effective governance approach in executing the Board's stewardship role. Now let's review ESG from the Board's perspective. It has become increasingly important for companies to demonstrate a sustainability focus that goes beyond profit generation. Looking closer at the environmental element, there's been increased interest and awareness of the importance of accelerating the transition to a low-carbon economy while leaving no one behind. Climate change considerations continue to be made at the Board level to further understand threats and opportunities that may affect our company and the investments that need to be made in the coming years to accelerate energy transition and to enable our regions to get on the path to net zero. I have previously highlighted 5 key areas that we need to advance in order to address an effective transition to net zero in the U.K., which equally will fit for the U.S. as well. These are electrification at scale, decarbonization of heat, capturing of emissions, decarbonization of transport and skills for the future. As you would have heard from business presentations, our capital investment programs and business plans are structured so that they can position us to deploy new technologies that have the potential to help us decarbonize at scale in the years ahead. The Finance Committee has oversighted the Green Financing Framework and Thérèse will talk about this in a bit more detail shortly. Moving to social. This includes how -- our colleagues and communities and the economies in which we operate. Our collaboration with regulators, our business partners, suppliers and other key stakeholders provide a basis for being a value-based organization. This means that an understanding of our stakeholders' priorities is essential. So we adopt practices that amplify the stakeholder voice in all our considerations at Board level. At the same time, as you will have heard from Andy Doyle and Marcy Reed today, maintaining the safety and well-being of our people through these difficult times and being a valued member of our communities and giving back will remain top priorities. Finally, turning to governance. Our focus is on delivering long-term sustainable shareholder value while ensuring that all our stakeholder needs are considered in advancing our goals. This is why ESG matters are incorporated in our senior executive remuneration packages, and Jonathan will shortly shed more light on remuneration. The last few years have seen change across the energy industry as clean energy has grown as an area of focus, and this has emphasized National Grid's critical role in creating a cleaner, greener grid for the U.K. and U.S., and we've met this challenge. As part of this transition, the Board has overseen evolution to our company strategy in the course of my tenure, the most recent being the acquisition of Geronimo, our large-scale renewables business in the United States. National Grid's strong leadership at Board level has meant that the company has been well positioned to adjust its structure while retaining a sustainable business model. Going forward, in both the U.K. and U.S., we will prioritize implementation of our company values and vision in advancing the energy transition. And we will continue having effective dialogue with our regulators, politicians and other key stakeholders to influence future energy policy. As many of you know, the company announced earlier this year that he would be looking for a chair successor. And I am delighted to have Paula Rosput Reynolds succeeding me as the Chair of National Grid. She brings a wealth of energy industry knowledge, a significant U.K.- and U.S.-listed company Board experience. She will join the Board on the first of January 2021 as Nonexecutive Director and Chair designate and will assume the role of Chair after a transitional period and no later than the conclusion of the 2021 AGM. I'm delighted that on my departure, National Grid becomes a member of the very small subset of the FTSE 100 that has a female chair. I will now hand over to Thérèse.

Good afternoon. I'm Thérèse Esperdy, the Chair of National Grid's Finance Committee and a nonexecutive director for the past 6 years. I spent 3 decades in a variety of leadership roles in investment banking and so bring a wide range of banking and financial management expertise and deep knowledge of the global capital markets to my roles at National Grid. I'd like to spend a few minutes briefly explaining what the Finance Committee does and how it embeds ESG matters into its work as part of its routine activity. The role of the Finance Committee is to govern the financial risk management process for National Grid. Its membership includes 3 nonexecutives as well as the CEO and CFO. And the Chair of Audit and Board Chair also regularly attend. The committee sets the risk appetite and manages policies for the financial and balance sheet risks of the company across key areas such as treasury, tax, pensions and insurance. For example, over the past year, the committee approved a decision to target a lower level of balance sheet hedge for our U.S. assets to give greater stability to our credit metrics. This reduced the amount of dollar-denominated debt on the balance sheet. We also approved implementation of 2 significant buy-in transactions for our U.K. pension schemes, which together, resulted in the exchange of over GBP 4 billion of gilts for bulk annuity policies with insurers. This reduced our exposure to investment, inflation and longevity risks. The committee is also tasked with overseeing the group's financing strategy, which includes funding of the group's GBP 29 billion of net debt. With the dual uncertainties of Brexit and COVID, 2020 has been a challenging year for everyone. Given the volatile backdrop, unsurprisingly, the finance committee met more frequently than its usual quarterly cadence and played an important role in overseeing our modeling and stress-testing work on financial viability. We took a prudent approach at the onset of COVID and fortunately, have not seen the worst-case scenarios we planned for emerge. The work the committee undertook on COVID scenario planning provided a critical foundation to enable us to prudently manage through these uncertain times and continue to provide the support for our communities. While COVID will have a financial impact on the group, we expect to see limited long-term economic impact given our regulatory mechanisms. The accelerating external focus on ESG and how it's now embedded in our business is well illustrated in the recent work of the Finance Committee, with a key milestone in our ESG approach bringing the approval of our Green Financing Framework. This framework clearly facilitates the disclosure, transparency and integrity of our green financing for our stakeholders. Why does this matter? Most importantly, it shows that our businesses are on the right path to deliver an ambitious program of energy transition, bringing benefits to our people through new skills and jobs, our communities and the environment. And you've heard us talk about this today. At the same time, the green bonds that we now issue also have the added benefit of providing us with new sources of liquidity, and this improves our financing risk profile. But the Finance committee is not just about the implementation and monitoring of policies and frameworks. Since I have been Chair of the committee, we've had an objective to use every meeting as an opportunity to meet and interact closely with the wider U.K. and U.S. finance teams. These additional interactions help build relationships with those who contribute to the work of the committee and further our understanding of the important issues across the company. I'm really pleased with the role the committee has played in navigating a much more challenging year than we could have expected. This is a hugely exciting time for National Grid as we progress our agenda to deliver the infrastructure required for a cleaner energy future. My committee's rigorous oversight and challenge to the business will play a part in delivering what I'm sure will be a successful journey for all of our stakeholders. With that, I will hand it over to Jonathan to talk about his work on the Remuneration Committee. Thank you.

Good day to you. I'm Jonathan Dawson, and I chair National Grid's Remuneration Committee. National Grid takes its remuneration responsibility very seriously as befits a regulated utility group that touches almost every household in our service territories in the U.K. and the U.S.A. We seek constructive engagement and dialogue with our shareholders and the proxy agencies. And I'm glad to say this has been reflected consistently high voting outcomes for policy and implementation over the last 6 years. It's worth just underscoring at the moment what our key principles for senior executive pay are. First, a very heavy tilt to long term, which is aligned to how we see long-term value being created. Secondly, mainly pay in National Grid shares. Thirdly, aligned with a very high personal shareholding requirement, some 500% of base salary for the CEO. And these broad principles are cascaded down from the executive directors through the executive committee to other senior levels. Where does ESG therefore fit into this? ESG is not a new idea to us in terms of our approach to remuneration. Our existing arrangements take into account, for the major business segments, outcomes around, for example, motor accidents, lost time injuries, et cetera. And also, by way of example, our regulated revenue arrangements the U.K. under Ofgem also require us to perform to or beat their requirements around SF6 release, as Nicola has mentioned. And we go beyond these factors, of course. RemCo has, in recent years, acted to exercise downward discretion on bonus outcomes for senior executives, most recently over a tragic fatality. And the Chairman has also referred to U.K. Companies Act Section 172 which plays as well a role in our RemCo assessment of corporate reputation, employee engagement, relations with our regulators, et cetera, which are incorporated in the formulation and scoring of personal objectives. All of these components are ESG aspects, though I acknowledge, we have not reported on them in an aggregated way to illustrate with clarity what we have been and are doing. This will change in our next annual report accounts. So that brings me to our way forward and the next steps. We're currently in the process of reviewing, with new external advisers, our remuneration policy, ahead of a new policy vote at our 2021 AGM. This review, which I presaged in this year's Directors' Remuneration Report, will naturally bring our policy up-to-date where applicable with ongoing best-practice improvements. It will also reflect changes to our business, resulting in particular from Ofgem's fund determinations expected late December this year. This is likely to encompass both the remuneration metrics and ranges. In addition to bringing together the various ESG measures that we include currently, we'll also be considering how wider ESG factors might be incorporated, particularly around E. There may be several different ways of assessing performance in this area, and we're giving very careful thoughts to them. However, setting a remuneration structure necessarily must follow the business strategy. We have, therefore, been in dialogue with management around our ambition for a medium- to long-term path of lower emissions, scopes 1 and 2, as well as how this might dovetail with a wider scope 3 definition, the principle being that management develops the plan just like an annual budget against which targets can be set, measured and verified. For remuneration, there was an interesting question as to whether variations in emission performance can be meaningfully assessed over a 1-year basis or whether a longer-term approach is required. And similarly, they're a good basis for a discussion around whether reduction or control of emissions are, per se, worthy of a bonus themselves or whether such reductions are an effect of precondition. We are considering all of these points very carefully, and we are aiming to have a full and thoughtful debate with management as we work through our policy review. Once RemCo has reached its conclusions on this, and other important areas in our review, we will, as always, be approaching our major shareholders and the proxy agencies in our consultation, which I expect will be during the first quarter of 2021. We look forward to a good engaged discussion then, which will help inform us, as will today, about the optimal rem arrangements for the company. Thank you. And now I'll hand back to Nick for Q&A.

Thank you, Jonathan. [Operator Instructions] So then with that, we will move on to the first question. So we've got the questions coming in. So Sir Peter, I think I will start with a question from one of our investors. What is the governance mechanism to ensure internal accountability for meeting the goals within the Responsible Business Charter? And will there be a Board-level or managerial responsibility for achieving these goals and integration into executive pay?

It's worth saying that in John Pettigrew's quarterly business reviews, all the key aspects of the Responsible Business Charter commitments are reviewed with the businesses. And the Board will hold the executive accountable for meeting the goals that have been clearly set out in the Responsible Business Charter. As for integration to executive pay, I mean that -- Jonathan has just indicated that we are in the early stages of a review of the policy, and I'm sure that, that is one of the issues that he will want to discuss both with management and consult with shareholders on before we finalize our proposals to put to shareholders for voting on at next year's AGM.

Perfect. Thank you very much for that. Next one is on climate risk. Is climate risk factored into the Board risk appetite statement and in enterprise risk taxonomies. And if so, type what type, what category of driver in risk taxonomies?

So we have a number of our principal risks which are heavily influenced by climate risk. For example, security of energy suppliers, which is clearly vulnerable areas like the exposure of some of our key sites, the flooding measures that we're taking on improving the flood defenses and also the whole -- the transition to the clean energy system, which, as you've heard from Andy Doyle, requires massive amounts of new skills and talent come into the industry. So those sorts of things are included. I'm sure as the responsible -- as we work our way through the implementation of the goals of the Responsible Business Charter, that this is something that my successor will want to look at, at an early stage in her tenure as to whether the existing statements of risk appetite and principal risks that we have do need to be modified in light of what we have now published in terms of the RBC.

Thank you very much. We have actually had a few questions on cyber, and it's something that you mentioned in your presentation. And so can you talk a little bit about the changes to cyber policies that have been made in recent years and the impact that, that's having, please?

So I think if I look back at how the Board's consideration of cyber has evolved since 2012, I think when we started, I think one of the real challenges is how do you find a framework in which the Board can have an intelligent discussion with the Chief Information Security Officer, which does not immediately take you into a lot of the world of geeks and spooks. And I think through the work that was then done to adopt the NIST framework that is well-established in the U.S., we have now found a framework in which it is possible for the Board to have sensible value-adding interactions with the CISO and the IT Director and the executive and enables us to challenge why, for example, our appetites have been set at certain levels and certain aspects of cyber without getting completely -- being overwhelmed by a lot of jargon, which is a characteristic, not just of cyber, but of the IT industry as a whole. So I would describe, that's probably, I think the biggest change is about the implementation and use of the NIST Cybersecurity Framework that has enabled us to have much more constructive and value-adding discussions with the executive and the management on this critical topic.

Thank you. And this may be one for Jonathan, I guess. But we've had a few questions on rem. And so the one I'm going to ask, I guess, is do you expect the portion of ESG-linked executive compensation to increase going forward. And/or are there any other ESG metrics that you're expecting to incorporate into executive compensation? Are there plans to integrate ESG metrics for compensation of mid-level management as well? Jonathan?

Thank you. A work in progress, but I exposed the points in my short address, deliberately, to say that this is clearly here to be something we're focusing on. This is clearly something that is part of the zeitgeist and is entirely consistent with the strategy, for the longer term, of the company. So I would expect to have metrics which build on what we already do and we will be exploring additional metrics that could be appropriate to be added in. I can't make any promises at the moment because we're still some months away from concluding as to how percentages will flow, but this is more of a growing subject than a diminishing one.

Understood. Thank you, Jonathan. Bouncing around a little bit as the questions come in. So Sir Peter, one of the last decisions you may need to cover will be whether to accept the U.K.'s or GB's transmission price controls or asking for a CMA referral. What framework will you use to assess that? And are there any lines in the sand? And that's from Mark Freshney at Credit Suisse.

Well, thank you for that question. I think leading the Board through that decision in the early part of calendar '21 probably will be the last significant decision the Board will make under my chairmanship. I was fortunate to be around in 2013 when we accepted the T1 settlement and still remember sort of some aspect of the discussions we had at the time. So I think some of the critical factors we will have to take into account are, firstly, we'll have to look at the settlements in the round as to whether we think they're acceptable or not. Secondly, we will have to be very careful in distinguishing between those aspects of the settlement we may not like but actually, when you stand back in the cool light of day, actually, the logic and the rationale that the regulator has used for that particular aspect of the settlement are such that they're robust and the advice will be -- you can go to the CMA on it, but your chances of winning are not very high, in which case, I think it would be pretty pointless to waste time and money going to the CMA. So we will need to look very -- at whether there are aspects of, I think, of the proposed settlement that we do not regard us being in the best long-term interest and where we think there may be a realistic chance of succeeding at the CMA. I think it's also worth bearing in mind, of course, that under the system for appealing energy settlements, we are no longer in a situation where the whole settlement is appealed or accepted. We can choose to go to the CMA on individual aspects of a settlement without challenging the whole settlement. So those will be some of the factors that the Board will take into account, I think, in the determination of whether or not we accept the Ofgem final determinations.

Thank you. Moving on to diversity. How do you currently compare to the Hampton-Alexander and Parker diversity review Standards?

So today, we have 4 out of 12 members of the Board are female, and we have 1 Board member from an ethnic minority. When Paula Rosput joins the Board on the first of January, 5 out of 13 of the Board will then be female. So today, we are at 1/3 female. First of January, we will be, I think, 38% female and we already meet the Parker diversity review standard of at least 1 person of ethnic minority being on the Board.

And in terms of COVID. We've got quite a few questions actually coming in on COVID and how the business has dealt with it. Can you just talk a little bit about how you've seen it from the Board's perspective and how the Board has dealt with COVID and the changes to the business over the last 6 months?

So throughout the COVID thing, I think what the Board has sought to do is to be able to be helpful and supportive of management. In the early stages, we were meeting weekly with management for about an hour to be updated on what was a very fast-moving situation. It also provided a very helpful forum in which nonexecutives, who sit on other Boards, could bring to those meetings into the attention of management, what they were seeing as best practice in some of the other companies they were involved in, so that management could also add that to the range of measures that they were looking to implement. And one of the elements that we have been very keen as a Board to do is and, I think, like many other companies, we saw a degree of agility and flexibility and speed within the company that was somewhat different and, we thought, better than, if you like, what we have seen in business as usual. So one has been very keen to sort of surface with management is which aspects of our sort of current modus operandi as a result of COVID-19 do we need to ensure that we retain in the organization as hopefully, we return to some form of new business as usual so that we do retain some of those aspects of speed of decision-making and agility and flexibility.

Thank you. And just on that, we had a couple of questions around financing and thinking about the group through COVID as well. And I know that Thérèse touched on it a little bit as well. So maybe we can ask Thérèse a little bit how the Finance Committee has thought about the changes to the organization through financing through COVID.

Well, it was clearly -- what I mentioned in the prepared remarks, we spent an enormous amount of detailed time on this whole stress-testing analysis and modeling that the team did, and obviously that was quite fluid as the environment around us changed. But our focus was clearly on liquidity, cash, CapEx, the impact on capital structure, credit metrics, regulatory recovery. And we looked at it from both the sort of short-term immediate lens as well as a longer-term intermediate lens. And as the environment changed around us with respect to lockdown scenarios, et cetera, we updated things, but it was a pretty dynamic process in the beginning. And then as the markets fairly quickly returned to a pretty amazing degree of stability, the finance team has actually been quite active in terms of financing. And so it really hasn't disrupted the planned financing agenda for the year to any great extent.

I think if I just add to what Thérèse said. I mean certainly, in respect of the work the Finance Committee did in preparation for the viability statement in this year's annual report and accounts, there was a lot of work done with management, identifying a realistic worst case for COVID-19 against which to do the stress testing for the viability statement.

Thank you. If people have more questions on governance, then please do write them in. [Operator Instructions] Otherwise, we just have one final question, which would be, would you consider putting the group's net zero transition plan to the next AGM for shareholder approval.

I mean at this stage, I think the answer to that question would be no. I don't get any sense at the moment from investors that this is a matter that they would wish to be put for approval. So next year's AGM is a long way away. There's a lot of water to flow under the bridge in terms of continuing to deal with the ongoing challenges of COVID-19 and various other things that the company is dealing with at the moment. But as of today, my answer to that question would be no.

And with that, I think we have finished the session. So thank you, Sir Peter, Thérèse and Jonathan. And thank you for all your questions and interest today. I hope you found the event informative. All today's materials can be found on the Investor Relations website. If you have any further questions, please feel free to contact me or any of my team and we'll be happy to help. We look forward to seeing some of you at our half year results, which will be on the 12th of November. And of course, we hope to see many of you again for our first Grid Guide to... session on the 21st of January next year. Thanks for joining, and stay safe.