United Utilities Group PLC (UU) Earnings Call Transcript & Summary

Welcome to today's United Utilities Group PLC ESG Event. My name is Jordan, and I'll be coordinating your call today. [Operator Instructions] I'm now going to hand over to Phil Aspin, Chief Financial Officer, to begin. Phil, please go ahead.

Thank you. Good morning, everyone, and welcome to today's presentation. Unfortunately, due to a recent founder bereavement, our Chief Executive, Steve Mogford, is unable to join us. So I'll be hosting this morning's presentation and will be joined by colleagues who I'll introduce shortly. Here at United Utilities, our strategy to deliver long-term sustainable improvements in the service we provide is clear and enduring. Our approach to ESG is central to this strategy, driving us to deliver our services in an environmentally sustainable, economically beneficial and socially responsible manner. Putting ESG at the heart of our strategy ensures that we were able to enhance the resilience of our services, deliver on our purpose and underpin the robust and sustainable financial performance of the business. In today's presentation, we'll provide more detail on how this approach delivers better outcomes for customers and the environment, drive efficiency and allows us to retain and attract the best talent by delivering on issues that matter to our employees. This enables us to provide the best possible service to customers and ensures that we are well placed to continue to create long-term sustainable value for all stakeholders. Next slide, please. Our purpose is to provide great water and more to the Northwest. This is where we exist and is what drives our approach to focus on what matters to our stakeholders. We have 6 key stakeholder groups shown here on the slide. We not only influence what we do, but also benefit from the value that we create. We look after the interest of these stakeholders and create value by understanding what matters to them through strong and constructive relationships. Our work puts us at the heart of our communities, and we invest to support them in becoming stronger. We've developed a deep understanding of our customers and supporting care for them while also providing a reliable and trusted service. We recognize our employees are critical to the success of our organization, and we've created a great place for all to work. We have a deep and enduring relationship with the environment and seek to protect and enhance it. For our investors, we deliver a sustainable return and adopt an appropriate strategy with ESG very much at the heart. And we work closely in partnership with our suppliers, with our activities supporting almost 18,000 jobs in the supply chain. Next slide, please. By focusing on what matters to our stakeholders, we create a link to ESG measures, and we firmly believe there's a close relationship between ESG performance and investor value. This slide shows a framework for how our stakeholders approach these fruitful ESG measures. And many of the examples shown here are things that you've already be familiar with or which we will cover during the course of the presentation today. I won't go through all the details here, needless to say that the vast number of examples and case studies we could take you through that demonstrate our strong track record of leading on ESG matters. This is not something that's new to us, and it's something that is very much part of our DNA, it has been for many, many years. Today, we'll only be able to give you a snapshot of our achievements to date and our funds for the future that builds on a summary we published last September. The link is on the slide for the book that we published last September. I hope to be discussing this topic with many of you in the coming months. Next slide, please. So joining me today on the call is Jo Harrison, our Environmental Planning and Innovation Director. Jo will cover the environmental performance, including the long-term planning and our approach to climate change adaptation and mitigation. Also with us today is Chris Matthews, our Head of Sustainability. Chris will cover the S in ESG in terms of how we engage with communities, customers and employees, and Chris will also drive the connection to the reporting in our latest annual reporting accounts. And finally, I'll cover our approach in terms of responsible financing and our best practice governance before summarizing and concluding and taking Q&A at the end. So to begin with, I'll hand over to Jo. Next slide, please.

Thank you very much, Phil, and good morning, everybody. So my name is Jo Harrison. I'm the Director of Environment, Planning and Innovation at United Utilities. And today, I'm going to take you through the environmental aspects of the work that we're doing. We go on to the next slide, please. Today we'll be sharing an update on our latest performance and plans that demonstrate our strategic leadership in the water sector and beyond. We've got a long-standing focus on the ESG agenda, and it's embedded across the business. We're really pleased to have delivered leading environmental performance this year, and I'll take you through some of the details of that in a moment. Our results of system thinking is at the heart of our approach, and we balance the delivery of investment with technology, data, nature of partnerships to be able to deliver best value across the region. We're also increasingly focused on resource to lead on our approach to climate change through decarbonization and climate change adaptation and all of that part of being an efficient and effective business in the short term and a resilient business in the long term mitigating the impact of climate change, population growth and changing politics and environment. We move on to the next slide, please. Every year, the environment agency assesses the water companies based on their environmental performance in the year. EA compares us with a number of different measures, including pollution incidents, compliance without permit and delivery of our investment program. We're really proud that UU that we've been a leading company for the last 5 years. And last year, we secured the highest status, a 4-star status, for the third year in the last 5. We're only a handful of -- one of a handful of companies to get a green status across the board, and we're the only listed water company to get all green across all of our measures. We're particularly proud about performance against solutions and serious pollution incidents and being a leader in the industry. If we move on to the next slide, I'll explain a little bit about our strategy. We're delivering frontier performance in a number of areas, but our performance on pollution is by far the best area that we are focused on. We've achieved zero pollution incidents for the last 2 years. And overall, we've seen a 31% reduction in overall pollution incidents. We've produced a plan, which we call our pollution incident reduction plan that's signed off and reviewed by the Board on an annual basis. And our strategy has got 3 key areas that we're focused on. The third is through delivering our approach to systems linking to proliferating the use of technology within our sewage system in order to be able to understand the performance on a day-to-day basis and being able to drive and improve performance before we have an impact on the environment. The second is focusing on people and culture. We've embedded ESG at the heart as a way that we operate throughout our business and the focus on driving down solution incidents has been a key aspect of delivering the performance that we see. And finally, we have a long-term approach, which is based on planning and maintenance. So we lead what we call a place-based planning approach looking holistically at our assets and the environment in which they operate to be able to understand the best long-term investment requirements to drive pollution performance in the future. If I move on to the next slide. During AMP7, we are delivering GBP 730 million worth of investment that's directly related to improving the environment. This will see the improvement of 1,500 kilometers of rivers over that period and the removal of over 500 tonnes of phosphorus each year. And we are taking a combined approach to thinking about how we deliver that improvement. So we are balancing traditional investment and improving our asset, but also doing that along delivery -- alongside delivery systems [indiscernible] with -- and delivery of technology and national solutions to be able to balance and deliver most efficiently and effectively. There's a growing momentum externally for tighter environmental standards. We are seeing both the climate and biodiversity emergencies driving political regulation and thinking. And we think this is essential for resilience of public services and the wider benefit of reversing biodiversity loss and supporting public health and boosting the economy. Therefore, our 25-year environmental plan will be the fundamental driver for investment in the future. It's a response to our changing regulatory environment, the impact of Brexit and it strengthens our environmental ambitions. And tightening environmental regulation brings us opportunities for more investment and driving growth in the future. We move on to the next slide. As a water company, we are entirely reliant on the natural environment. The natural environment has been significantly impacted by climate change and other drivers, and we need to focus on ensuring that we have a stable environment to deliver efficient water services. We've got a long-standing history at UU in working across our catchments to be able to deliver environmental performance and ensure that we have a sustainable, resilient environment of the future. Significant projects that we've delivered across our approach to stamp includes the remodeling activities at Wild Ennerdale, where we've delivered a 20-year program of rewilding the catchment in order to secure resilience and focus on water quality. And we're rolling out that approach now across our [ zone ] and Haweswater catchment which are critical for water supplies to Greater Manchester. But it's not just about our water catchment. We're now focusing much more broadly on the wider natural environment and how we can balance the impact of all of our operations across those environments. So we developed our new approach called Catchment Systems Thinking back in 2015 and we're really trying to sort of think about the environment in a holistic way, looking at how we manage the sort of combined impact of flooding, driving water quality improvements and securing water resources for the future. So we're delivering the widest possible application of Systems Thinking. We're managing our catchment holistically, and we're delivering work with partners in order to be able to drive those environmental improvements and delivering better overall outcomes more efficiently and more sustainably for the future. Two critical examples that support our approach as the work that we're doing on the river [indiscernible] and the river Wye. In the river [indiscernible], we're working with other industries such as Nestlé, where we're delivering improvements to agriculture across the regions to remove the need for phosphate removal as that treatment work and replacing the need for energy and chemical intensive treatment processes with natural ones. In the River Wye, we're working with the insurance industry to look at how we can deliver natural flood management to reduce the need to invest in hard engineering to control flooding. And all of this has been the basis for our approach for AMP8, and we're extending our philosophy Catchment Systems Thinking to think about place-based planning for AMP8 investments. And there are 3 strategic catchments where we believe that the delivery of such a joined up and a competitive approach will really drive the need for sort of investment and efficiency moving forward. Although [indiscernible] and where we're seeing significant growth in the catchment [indiscernible] that experiences flooding and very significant environmental improvement needs in the river region. Another is a wild catchment where we have complex relationship between flooding that occurred within the catchment and the management of water resources and environmental improvement. But by most far the most complex and exciting is the work that we are undertaking in Greater Manchester. And if we move on to the next slide. We've got a significant ambition, along with the Greater Manchester Combined Authorities to improve the water environment in Greater Manchester to reduce flooding and secure our climate-resilient water sources. This is a significant opportunity for us to invest across the city, and we're proposing a large multi-AMP investment that needs to deliver a radically new approach to managing water across the city. And we've already started that approach in AMP7. So we are already investing over GBP 90 million for improving treatment processes at Bolton Wastewater Treatment Works. And through the green recovery, we've secured a further GBP 44 million to invest at Bury Wastewater Treatment Works to drive environmental improvements. But as part of our AMP7 negotiations, we negotiated with the environmental agency, one of the country's first flexible permits. And this is an opportunity for us to optimize the way that we manage our assets across North Manchester, to be able to balance the delivery of solutions and to optimize dynamically the performance of the assets to achieve the environmental outcomes that are required. This new innovative approach and the second only in the country has enabled us to save over GBP 100 million in efficiencies, it enabled us to reduce carbon emissions, chemical usage and actually to deliver more environmental improvements than ever before. But this is just the start of the work that we want to do and look into the future and into AMP8, we're proposing that we invest more than GBP 500 million on delivering combined improvements to manage [indiscernible] improve water quality and secure water resources in the region. And that will sit alongside the work that we're doing on dynamic network management, where we're investing over GBP 100 million in improving our performance on overflows and flooding whilst driving efficiency and performance. We move on to the next slide. All of those examples show the importance of natural capital to our region and to the way that we deliver our business. Natural capital and the assessment and understanding of it is a technical requirement of the government's environmental and the 25-year environment plan. And so 3 years ago, we came together with 18 partners across the region to build a combined natural capital account to the Northwest region. That enables us to have a common baseline and understanding of the environmental condition in the Northwest. It allows us to work with stakeholders, both NGOs and local authorities to deliver joined up planning to ensure that our investment opportunities align and deliver value through efficiency. We're also working in partnership with those organizations to deliver multiple benefits. The value to us and wider society of the Northwest environment is over GBP 135 billion, and we are very, very keen and very focused on working together with our partners and stakeholders to deliver joined up plan to drive that environmental improvement even further. We move on to the next slide. One of our biggest risks that we're facing is a change in climate. And we've got a very strong approach to resilience, which was recognized by [ Alpha ] and other regulators through our PR19 submission. Climate change brings a range of risk for us in the Northwest. It will bring dry summers, wetter winter, more stormy conditions and a greater risk of landslip and land and catchment fires. So we're very focused on understanding the risks that climate change brings across the business. We've completely embedded climate change in our risk-based approach across the region and we're in the final stages of finalizing our climate change adaptation plan, which will bring those plans together. We've got a huge focus on operational resilience. And over the past number of years, we've been strengthening our operational response through the ICC and through our deployment of Systems Thinking. Our use of technology of monitoring and modeling and understanding the real-time performance of our assets has been a critical aspect of our focus on operational resilience. But we're also focusing on the longer term and driving a resilience will be a key feature as a part of our PR24 and pay plan. Some examples that we're particularly wanting to focus on about secure -- securing of water resources across the region. We've already seen a huge focus on reducing demand, and this is a crystal aspect of how we'll be resilient in the future. We've already driven down on our demand as an organization from 2.5 megaliters a day to 1,750. And by 2050, we hope to secure a further saving of 200 megaliters a day. We're spending GBP 290 million over the -- next 5 years on reducing leakage to see a 25% -- a 15% reduction by 2025 and a 50% reduction by 2050. And similarly, we're focusing on customer behavior and trying to drive down per capita consumption from a current 140 liters per head today to 115 by 2050. And all of this enables us to ensure that we have resilient water for the future. We're also focused on playing our part nationally, and we lead the group called Water Resources West which is building the super regional plan for water resources across the West of England. As part of that plan, we're looking at opportunities for water trading and we're currently working with other companies to look at an opportunity to transfer water from the River Severn to the River Thames, transferring 300 to 500 megaliters a day. Investment of around GBP 800 million to GBP 1 billion that we might see in our pay. And moving on to the next slide, I want to focus a little bit on carbon. So we have very bold, clear and transparent plans on driving down our carbon use. We report openly, and we had the second year of TCFD report as part of our annual report. We've made very good progress in driving down emissions already. We've reduced emissions by over 70%, and we generate 25% of our energy needs. So we've committed to achieve the industry target of net zero by 2030, which is 40% to 42% reduction in real terms, and we've also signed up to achieving 100% reduction by 2050. We've made big commitments around renewable energy electricity purchase. And so we will -- by the end of this year, we'll have -- 100% of our electricity will be renewable energy. We've also made commitments to ensure that our fleet of electric vehicles is achieved by 100% by 2028. We're planting over 1 million trees to create 550 hectares of woodland and we're restoring over 1,000 hectares at Peak. A great opportunity for us with our considerable landholding. And finally, we're committed to setting scope 3 emissions by 2021. This is something that we've already achieved, and I'll move on to that in my next slide. So we were the first water company to have our scope 3 emission targets approved by the SBTI. We've also set ourselves a challenging target on emissions as well as engagement. It's critical that we are focused on the science-based approach as a real endorsement of the approach that we want to take. And we're already engaging with the supply chain on setting these new targets, ensuring that we're delivering in line with our targets that we've set. We're ensuring transparency and legitimacy across our agenda. And we've got more details on our annual report and our website, including our expanded TCFD section. And now I'll move on to Chris.

Many thanks, Jo. Good morning, everybody. I'm Chris Matthews, I'm Head of Sustainability, and I'm delighted to talk about the S of ESG. If we can have the next slide, please. For us, the S of the ESG, that social has 3 key elements. These are communities, customers and employees. And over the next 10 minutes or so, I'll share with you some key highlights. For communities, it's about understanding their makeup and the stakeholders that represent them, engaging proactively to yield business benefits by, for example, creating partnerships. Over the last 5 years, we have developed a deep understanding of the diversity of customers we serve, and this is now driving better business performance. A motivated workforce is key to delivering strong performance and it's clear that our focus on health, safety and well-being, digital skills and diverse inclusion is making a difference. I'm going to finish with a brief overview of our approach to reporting and the importance of openness and transparency. Next slide, please. When it comes to communities, our purpose places us at the heart of local communities where our customers and employees live and work, understanding these communities and the stakeholders that represent them and engaging proactively ensures support for and the efficient delivery of our capital projects. The approach we adopted to public consultation for our Haweswater Aqueduct Resilience Programme or HARP illustrates. COVID prevented traditional face-to-face consultation methods, so we adopted a virtual approach to understand community concerns and to address them. We received twice as many responses as normal and 69% of stakeholders supported our plans. This approach to community engagement builds social capital, while developing trusted relationships brings benefits to both parties. The proof of the pudding can actually be seen in West Cumbria, where we secured unanimous planning commission for our GBP 300 million scheme in one of the most beautiful parts of the U.K. A 2-year concerted effort to focus stakeholder engagement meant we avoided costly planning delays. Our goal is to achieve the same outcome for half. We invest in community partnerships to tackle issues more effectively to find new solutions to the challenges we face and to access new funding streams driving efficiency and a better overall outcome. This summer, we signed 2 memorandum of understandings with the RSPB and the Rivers Trust and the slide here shows Steve Mogford meeting the CEO of the RSPB at Haweswater. These are partners that held in really high esteem by local communities with a broad membership base, so enhancing the credibility of what we do. Through such partnerships, we leveraged additional funding. And last year, for every GBP 1 we invested in the partnership, we secured a further GBP 7. Sadly, there are too many people in the Northwest who struggle to make the first step on to the career ladder. And our reason is characterized by low levels of social mobility, yet there are definitely talented people out there. Last October, we hosted the sector's first Social Mobility Summit, attended by over 100 organizations to capitalize business action on this important topic. We launched our Opportunity Action Plan to encourage others to do more. We're supporting the government's Kickstart program by providing 250 placements in various roles across the Northwest. Each Kickstart has a dedicated skills coach and will receive job-related and employability skills training. Already, some young people have joined the program have been offered permanent paid employment with us. Our commitment to young people has continued throughout the pandemic. Just this month, we've welcomed 70 apprentices and graduates to the company. We've made good progress, too, in recruiting apprenticeships from more diverse backgrounds, 31% of apprentices starting with us this month are female and 18% are from ethnic minorities. Next slide, please. As many of you will know that the Northwest is one of the most economically and socially deprived parts of the country, with 41% of the most prime areas in our region. By understanding our customers and targeting health, we also help the business, too. That's why we put real focus on our affordability and mobility schemes, which include a suite of industry-leading payment assistance schemes. We've embraced innovation to drive efficiency and better outcomes for customers. Typical household bills have been reduced by 5% this year in real terms, and we've committed GBP 71 million of shareholder support over AMP7, 200,000 customers now benefit from our health schemes and over 133,000 have signed up to priority services, for which we have retained British standard certification, which is an ODI measure. We were the first company to secure regulatory approval to extend our social tariff. An additional GBP 15 million has supported over 73,000 customers, that's 62% more than originally estimated. And alongside CCW, we're playing a leading role in advocating for a national social tariff. Innovation has a crucial role to play in reducing the stress and stigma of death. We are the first company to share data with DWP and the local electricity distribution company, enhancing the efficiency of processes designed to help those most in need. We're piloting a real-time income verification tool that streamlines eligibility for social tariffs, which lowers the cost and overhead, and we're the first company to roll out an open banking solution for such applications, and the early evidence indicates this is a more efficient approach. So it's clear our efforts to embrace digital are improving service, enhancing experience and reducing costs. And it's pleasing that over 1 million customers engage with us digitally, and we're rated 4.7 out of 5 on the app store. Our own in-house app development capability with its agile approach has created the void property app, which has reduced the number of voids by 93,000 and led to an ODI reward. All of these strong foundations, I mean, we have one of the healthiest balance sheets in the sector with a very clean network and Phil can touch on this later. This approach is building social capital that customers and regulators alike, and driving high levels of customer satisfaction, as can be seen in our C-MeX and D-MeX scores, where we're unique amongst the listed companies in earning the reward for both. Next slide, please. Without motivated employees, we cannot deliver for our stakeholders. We treat our employees well, which means we can rely on them when we need the most. This also relates to how we treat our supply chain to support us through incidents. Last year, we achieved an engagement rate of 89%. That's 5% above the U.K. high-performance norm, a result delivered in part because of our focus on health and safety, where we had a 15% improvement in accident frequency rate. Such high levels of engagement are a prerequisite for sustaining business success, and we scored 4.5 out of 5 on Glassdoor, and this comes from former and current employees. Engagement is an important aspect of fulfilling our purpose to do more. For instance, we build social capital with our employees if they can see that we are investing in their safety and well-being so that they can return home safely to their loved ones every night. Becoming additional utility requires a different skill set. We're ahead of the curve on this and have evolved training to enable us to harness innovation and deploy solutions quickly. We want our people to develop their skills and knowledge and we support them with the most effective technology. And our training center is the only one in the sector currently governed by offset with a good overall rating. We've introduced artificial intelligence and robotics into areas such as leakage detection, maintenance prioritization and back-office activity where processes are becoming more efficient and service for customers has improved. For example, with 25 robots and carrying out nearly 0.5 million tasks. Embracing this technology requires a different skill set for our people. The strength of the digital economy in the Northwest presents an opportunity and advantage for us given the importance of recruiting and retaining capable employees to underpin our digital transformation. We're confident we can source employees we need as we develop our in-house capability. This is a fundamental part of our Systems Thinking approach. And as we embed this way of working ever more deeply, it provides the basis upon which we can be a sector leader. We carefully monitor all the people-related trends and issues and feedback from colleagues and act in response. That is why we are fully committed to enhancing a quality diversity and inclusion. Our 5 employee networks -- our 5 employee diversity networks, I should say, have a growing membership of 730 people and play a pivotal role in providing insight, raising awareness and giving support to colleagues, each sponsored by a member of the executive team. The early signs are promising. 17% of our apprentices are female, that's double the industry average. We feature in the top 1% of 15,000 companies across Europe and the highest wastewater company in the diversity leaders ranking survey by Statista and OFT. We've achieved the inclusion in the Bloomberg Gender-Equality Index, and our gender pay gap continues to reduce important progress given the challenge we face to bring diversity into the sector. And once we've completed all of our foundational activities, such as gathering comprehensive data throughout our workforce, we will implement the necessary actions in a targeted way and set improvement targets with confidence on our D&I agenda. Next slide, please. Phil will talk about governance more broadly. But before he does, I wanted to give an overview of what laid behind our approach to 2021 annual report. As reporting trends evolve, we see our annual report as our shop window and over the last decade has moved from a pure financial report to one that provides strategic and performance oversight. We pull our ESG approach together in this integrated annual report. This year, we decided to theme it around purpose. And as you can see from the slide, our purpose to provide great water and more for the Northwest has 3 component parts and set out to provide evidence for stakeholders to judge that we are fulfilling our purpose. I take each in turn, great water, simply about delivering service excellence. For some stakeholders, that's about an ODI reward. For us, it's about fewer supply interruptions. Behind them all, there's focus on the value add we bring to all the stakeholders we serve. We've identified 50 measures across [ 6 staples ] to catch these AMP7 to track how we generate value so stakeholders can have the confidence in our approach. And for the Northwest, this brings a clear focus on the region we serve. We are clear that water makes the Northwest, and we are committed to engagement with relevant regional stakeholders to address the water management issues here in our region. In part, our approach was guided by a broader investor feedback about the importance of having trust and confidence in our company's sale. We noted the findings of a recent survey of 4,600 individual investors across Europe and the U.S., which found many believe corporates have a responsibility to prove they are meeting ESG pledges. But the survey also found that investors have difficulty trusting ESG claims at face value and comparing them with peers. While we can set out evidence that we are fulfilling our purpose, it has more impact when others draw that conclusion. This year, we revised the performance of pages in our annual report to demonstrate value creation to key stakeholders and provide a summary across several of the independent ESG indices where we performed strongly and consistently across almost all of them. Phil will say more about this shortly. Our approach to the 2021 report built on the evolution of our approach since we first embraced integrated reporting in 2015. Each year, we seek to build on improvements made the previous year, as can be seen in the way that we presented our TCFD report for the second year. And with that, I'll hand over to Phil.

Thanks, Chris, and good morning, everyone. Next slide, please. I'm now going to talk about our responsible approach to financing and corporate governance. While much of the material I'll talk through is not new news. I think you'll find it helpful for me to frame our activity in the context of ESG. So you can see how delivering for all stakeholders supports our approach for the long-term sustainable financial performance. I'll start with an overview and then consider a couple of examples: first, where we have secured attractive funding based on our ESG potentials and then how our responsible approach to pensions and the pensions journey has put us in a strong position, which supports our ability to pay future dividends. Lastly, I'll touch on our best practice approach to corporate governance. The next slide, please. We are one of the leaders, if not the leader, in the sector in terms of financial resilience and governance. Long-term financial resilience starts with a robust balance sheet and a prudent approach to financial risk management. We have a clear and transparent approach that has served us well over a long period. We bought approved policies around capital risk at the level of debt to RCV alongside liquidity risk and market risk, i.e., interest rates and inflation. These policies mitigate risk for all stakeholders, making the business more resilient while supporting the delivery of financing outperformance for the benefit of shareholders. For many years, we've maintained a stable RCV gearing, consistent with our target range of 55% to 65%. And at March '21, we were comfortable within our range of 62%. Maintaining this position of strength ensures we are resilient to shocks and supports our stable A3 credit rating with Moody's. As a result, we retain efficient access to debt capital markets through all economic cycles. And when we do issue debt, we were able to walk in rate to compare favorably with the price of your assumptions and deliver financing outperformance. As you've heard already today, our business is intrinsically linked to the environment in which we operate. This provides us with a great opportunity to raise environmental funding and link our debt issuance to projects that detect and enhance the environment. And finally, our financial resilience. Pensions is an issue which is now receiving greater regulatory attention as pension liabilities were effectively dead. This is not an area of concern for us. As our defined benefit pension schemes are fully funded on a low dependency basis, which means that we no longer have to make deficit repair contributions. And given our well-hedged position, we expect this to remain the case in the future. On governance more broadly, we consistently adhere to the highest levels of corporate governance, accountability and transparency, and we were early adopters of best practice in this area. When we expose ourselves to public assessment to the various indices, but I know you'll be very familiar with, we are found to be one of the sector's top performers. Next slide, please. Now turning to our ability to raise environmental funding. This is not something that's new to us, having raised environmental funding for many, many years, principally from the European Investment Bank. We remain the European Investment Bank's largest borrower in the U.K. And at its peak, we had over GBP 2 billion of debt outstanding, representing around 1/3 of our net debt at that time. This funding was all raised at favorable rates, leveraging EIB's mandate to some projects with a beneficial impact on the environment. Post-Brexit, EIB funding is no longer available to us. Our environmental funding journey has therefore evolved with the publication of our Sustainable Finance Framework in November 2020, allowing credit investors with an appetite for ESG funding to invest on the basis of our strong credentials in this area. In January '21, we issued our first sustainable bond of the framework, a GBP 300 million bond with proceeds allocated to the financing of eligible green or social projects. This first bond issued from our framework attracted significant investor interest, pulling engagement with around 50 institutional investors over 2 days. The order book was more than 3x oversubscribed and attracted a significant number of new investors for credit with over 30% of the bond allocated to overseas investors. It was great to engage with some of the investors with such a keen interest in our ESG agenda. Those who would like to see how the proceeds have been allocated, we published our first allocation and impact report recently showing exactly how we're funding projects with a positive ESG impact. And further evidence of the link between ESG performance and investor value, it is significant to note that our daily sustainable bond outperforms the index used for regulatory assumptions and selling new cost of debt by around 150 basis points, securing almost GBP 40 million of financing outperformance over the life of the bond. With GBP 1.2 billion of EIB funding still to mature and significant environmental funding requirements going forward. This gives you some context of the value that we can drive from our strong ESG credentials and funding our ongoing capital requirements. Next slide, please. And now turning to pensions. A topic I will have discussed with many of you previously, but today, I want to focus on the journey. The journey that we've been on for more than 10 years now, a journey to responsibly manage our pension risk. Back in 2010, we had an IFRS pension deficit of just under GBP 300 million and our passing of PR19 settlement has drawn a line on the funding of future pension deficits beyond 50% support for the deficit that existed at that point in time. Recognizing this, we established a joint working group of the pension trustees to manage the pension risk collaboratively with an acceptable risk and affordability envelopes. We agreed an innovative approach to derisking supported by a variable scheduled deficit repair contributions and a plan that saw us progressively establish hedges to minimize volatility caused by market risk. As a result, we made our final deficit repair contribution in 2019. And now our pension schemes are fully funded on a low dependency basis, which means no further deficit of repair contributions are due. Furthermore, because the pension teams are fully funded or fully hedged for interest rates and inflation, we would expect pension scheme positions to be largely insulated from market volatility. This has been a decade-long journey of risk mitigation for us. Today, the U.K. government has just brought on to the statute books the Pension Schemes Act 2021, which will be supported by a new funding care from the pensions regulator. In short, these changes will progressively require other companies to follow a similar approach and achieve the responsible position we have already. These changes are likely to have 3 impacts on companies. Companies not fully funded on a low dependency basis will face increased deficit repair contributions. The regulator will be able to retrospectively scrutinize company decisions, especially around the appropriateness of paying dividends when pension deficits persist, recognizing the potential for criminal liability for directors who are found culpable. And for many, this will likely result in the increasing prioritization of pension deficit repair contributions to a potential detriment of future dividends. As we are fully funded on a low dependency basis, we don't have any of these concerns. So a classic example of how and doing the right thing for all stakeholders, we have delivered resilient and long-term sustainable value. Next slide, please. Now turning to corporate governance more broadly. Being open, honest and transparent about what we do and how we perform is key to building and maintaining trust and legitimacy with all our stakeholders. We have systems and processes through which our organization is managed, controlled and held accountable. We maintain the highest ethical standards of business conduct and corporate governance. This slide gives just a snapshot of the recognition we receive for our strong performance in this area. We adopt the most up-to-date standards of best practice and more often than not adopt early and lead the way for the sector. We were early adopters of the current UK Corporate Governance Code and provided a long-term viability statement ahead of it being a requirement under the code. As climate change mitigation and adaptation become ever-increasing focus, we were the only listed water company to include a full TCFD disclosure in our FY '20 reporting accounts and have included our disclosures still further and related to FY '21 annual reporting account. And earlier this year, we were awarded a Fair Tax Mark for the third consecutive year, recognizing our continued commitment to paying our fair share of tax and behaving in an open and transparent manner in relation to our tax affairs. As a public listed company, you would expect us to adhere to the high standards of corporate governance. But as the slide demonstrates, we are consistently recognized as going above and beyond the minimum. Next slide, please. This slide shows that when we test ourselves, we are assessed across a broad range of ESG indices, we are consistently one of the leading performers. We have attained world-class status with Dow Jones Sustainability Index for 14 consecutive years. And in April this year, we were ranked 9 out of 604 global utilities in the Sustainalytics ESG risk rating assessment, positioning us as the leading water utility in the sector in the index. CDP is a global disclosure system for environmental reporting. And in 2020, our CDP climate change rating improved from B to A-, demonstrating leadership level reporting and disclosure. Along with Wessex Water, we are the only 2 companies in the U.K. water sector to achieve leadership level in this very important area. In February, we received an MSCI ESG rating of AA recognizing our ability to manage industry-specific ESG risks relative to peers. And in 2020, EcoAct assessed us as 11th in FTSE100 and the highest ranking listed water company, firmly positioning us as a leader in environmental matters in our sector. From an employee perspective, we achieved a significant improvement in the workforce disclosure initiative. It's going well above the overall average and receiving special recognition in the COVID-19 transparency category at the recent workforce transparency awards. So as you can see, we actually participate in a broad range of global ESG ratings, indices and frameworks to benchmark our approach against best practice and emerging sustainability challenges and we find ourselves consistently assessed as a leader in this space. Next slide, please. We recognize that customers and other stakeholders don't differentiate between United Utilities and our suppliers and see us operating together. We believe that it's crucial, therefore, that we not only hold ourselves to a high standard of corporate governance and sustainability more generally, but we also drive these principles for our supply chain. We now see supply chain approach as our supplier engagement strategy and is fundamental to achieving this and delivering our purpose. This approach is centered around 10 responsible sourcing principles that are structured around the environment, social and governance issues that are important to us as a business and in our approach to responsible sourcing. These principles have helped us identify areas of risk within our supply chain and develop strategies to eliminate these risks. The plans are expected to become signatures to our responsible sourcing principles and we encourage those suppliers who have the capability to become leaders to work with us more closely and set positive examples for others. Our supply chain is critical to our success, and we've demonstrated that we can work collaboratively on key issues. As Jo mentioned earlier, we are the first company in the sector to have signed state carbon emission targets approved, including targets that cover our supply chain emissions. And we are working together with our suppliers on this critical issue. We're delighted to have successfully gained the CIPS corporate ethics code mark, recognizing that our people are equipped with the knowledge and understanding to ensure that we procure in an ethical manner. And we believe that operating and procuring in a responsible manner will mitigate risk, build resilience, improve compliance and ultimately, deliver better value for customers. Next slide, please. So before we open up to Q&A, I'd like to briefly summarize some of the key points you've heard this morning from Jo, Chris and myself. We have a strong track record of performance on ESG matters. On the environment, we are leading the sector in terms of pollution performance and once again achieved an industry-leading 4-star status with the EA. We're making good progress in our journey to carbon net zero by 2030 and are on track against our 6 carbon projects, including being the first company in the sector to have validated science-based carbon targets, including scope 3 emission targets. And we've already started planning for PR24. We're seeing ongoing investment is required to continue to protect and enhance the environment and with good visibility of over GBP 500 million of investment needed in the AMP in Greater Manchester area alone. On social, we're supporting more customers than ever before, and we're well placed to meet customer needs as we emerge from the effects of COVID. Our workplace is at the heart of our local communities where we understand our impact and tackle those issues that matter most. And we recognize that the success of the organization is built on having an engaged and diverse workforce. And finally, on governance, robust balance sheet, improved purchase financial risk management is delivering long-term financial resilience. We are leveraging on our ESG credentials, raising environmental funding of our Sustainable Finance Framework and our debut sustainable bond secured significant financing outperformance as further evidence of a link between ESG performance and investor value. We were early adopters of best practice corporate governance, and we performed well across a broad range of ESG indices. ESG has been very much at the heart of our overall strategy now for a long time and delivers the performance you've seen to date. We know that there's always more we can do, and the ESG will continue to be a fundamental priority in the coming years ahead. By delivering on our funds, we will ensure we continue to improve the benefit of all our stakeholders. So thank you for listening, and I'll now pass back to Jordan to take questions.

[Operator Instructions] We have a question from Mark Freshney of Crédit Suisse.

My question is on your own ethics versus your contractors because as I understand it, you have roughly 5,000 employees, but depending on the point of the year and what you've got on, you might have at least twice that of people working on your network or working on your assets, particularly the capital delivery plan. And I guess, your supply chain, there are a lot of things that happen in the supply chain, and that's a lot of consequences there. So how do you work with your contractors, particularly in the sensitive areas to ensure that they live and breathe the same kind of standards that you've presented to us today.

Okay. Thank you, Mark. So great question. I think sort of -- contractors are sort of fundamentals of our business, as you say, there's quite a lot of our contractors sort of managing, particularly in the network area, for example, where we've got a heavy reliance on contractors. Those contractors operate very much [ badged ] as you sort of work force. So that really, really is -- doubles the importance of sort of having a responsible approach. And I've touched on in the sort of session today that the United Supply Chain initiative, which is, I suppose, the umbrella under which a lot of that is actually captured and governed in terms of the responsible principles that we apply there. So it's very much fair to say that we see that the supply chain as an extension of the United Utilities business. Our customers will see them as part of United Utilities and we take it incredibly seriously. So I think those business principles in terms of the united supply chain is the sort of key focus for driving the right outcomes and behaviors. But sort of leave it to us, I think, Mark.

[Operator Instructions]

There's no current questions on the phone lines. I'll take a couple from the webcast that have come in. So we've got the first questions from [ Noel White ] of [ Industry Investment Management ]. And he says here, we spoke about the initiatives around improving river quality. Can you say something about the state -- firstly, the state of the river quality in the UU region more generally and what the key challenges are? And secondly, the Mersey area and in particular, because particularly, we didn't talk about, we focused obviously, a lot on Manchester but can you say a little about the Mersey area as well. So I'll pass it across to Jo to sort of respond to that.

[ Noel ], thanks for your question. So in sort of summary, I can give you a few sort of stats and a bit of information to give you a sort of sense of the overall quality of the rivers in the Northwest. So just 12% of the rivers are classified as core or bad. 21% other side is good. And the vast majority, 55% are classified as moderate. And the environment agency use that data to determine the investment that's required, not only in the water industry, but across lots of different sectors. So if you look at something -- and if I take the -- we identify something called reasons for failure, and so that's really identifying where the key impacts on water quality in each different region and location. And by far, the largest number of reasons for failure in the Northwest are associated with agriculture, so 44% of the reasons for failure in the Northwest are associated with agriculture. Reasons for failure associated with our operations of the water business are at around 18% of that figure. So much, much lower than agriculture and not far above the number attributed to urbanization and transportation, which is 13%. And where reason for failure are identified associated with water industry, the legislation around the water framework directive identified those of key projects that we need to deliver as part of our investment program that we're delivering a range of investment that I touched on, if you remember, the GBP 730 million worth of investment, which will deliver improvements to those reasons for failure by 2027 and beyond. With regard to the Mersey more specifically, I've not got the breakdown of figures in front of me for the reasons of failure. But the quality of the River Mersey has really sort of the underpinning of the conversation that we had earlier around Great Manchester. The Mersey begins in the Pennines in the Peak District and flows through the Greater Manchester before reaching Merseyside. We know that we've got some significant challenges around environmental water quality in Greater Manchester, and driven by those factors that we talked about. So urban transportation as well as the water industry. And historically, because of the level of panelization of those rivers that integrates Manchester, targets have been set that are less stringent than elsewhere because of the geophysical nature of those rivers. So we're working very closely with the environment agency to identify where investment will be required in AMP8 and AMP9, and we'll be building that collaborative plan, not just with the environment agency but with other stakeholders and particularly local authorities across the region.

Okay. Thank you, Jo. Very comprehensive. Another question from the webcast from [ Annie ] you could think there's 4 parts of this question. So I think I'll probably take the 4 part in turn on to each as we go. So first question probably for Jo really is how do we completely plan to reduce the emissions? How do we decarbonize your assets? And do you have any renewables to satisfy your energy needs. So perhaps I'll ask Jo to respond on that.

Yes. So we've got a robust program of work that we need to deliver over the next 20, 30 years to -- and actually focus on decarbonization. Obviously, what we're focusing on at the moment is the decarbonization of a lot of our operations. So particularly looking at fuel use and energy use as sort of priorities and looking at our fleet as these are sort of known options that we can deliver very quickly. And around half of our emissions are associated with our process that we operate from our wastewater and bioresources treatment. So we're focusing increasingly on understanding how we can change our asset base in order to reduce those emissions. So as an example, we're looking at how we can maximize advanced digestion from our bioresources business to significantly reduce the carbon emissions from our bioresources business. We generate about 25% of our own electricity through our renewables. So that's either from sludge digestion through bioresources or through other renewal activities, both through solar panels and wind and so on. So we're really focused on trying to understand how operational changes can drive our process emissions down, better understanding of science and looking at how innovative and new technology is part of our [ 8 ] submission process for PR24 to make significant improvement.

And just to add to that sort of people may have heard Steve and I talking about disposable of our renewables business at the full year results in May. But just to be clear, we -- in any disposal that goes ahead, we will be retaining the full offtake of those renewable assets. So effectively, it doesn't impact our carbon ambitions. And indeed, in sort of managing disposal process and recycling the capital, we'll be able to put that capital back into work in the business in terms of further driving the carbon ambitions, so yes. Moving on to the second question. You've mentioned about issues addressing client behavior to save water. Could you please give some more concrete examples? So I'll perhaps ask Chris just to talk a little bit about what we're doing with our customers and water efficiency initiatives.

Yes. Thanks very much. Phil. Thanks, [ Noel ], for your questions. You're actually right. It's really important we work with our customers and via the stakeholders to promote the importance of water efficiency. Jo referred to earlier, our long-term goal to reduce the amount of water consumed by individuals from over 140 liters per person today to 110 liters per person today. And we do need some specific measures to get there. So a couple of examples I could -- I can share with you for customers with the potential we do provide proactive water efficiency advice through a rolling home audit program, which includes the installation of water-saving devices and the identification of any leaks. Year-to-date, we fixed over 3,000, which is, say, between 60 and 85 liters per property per day, not to mention the savings on the customer's bill. And in parallel to measures like that in the home, of course, we need to continue to communicate to customers, and that's what we do to remove behavior change through e-mail, social media and digital channels and targeted engagements such as tax through customers. And there's been a recent launch of a new platform across the sector, we've been promoting it here, as I'll call Get Water Fit!, which I'd encourage you all to download, which enables customers to self-audit and order water-saving devices. And in the first 4 weeks, we sold 20,000 registrations. So a couple of examples of the steps that we're taking really to drive water efficiency across customers in the Northwest.

Okay. Thank you, Chris. The third part of the question was what is the base gas resource. Can you talk about your leakage ratio over the last 10 years and has it improved? I think just picking this up, we've halved our leakage position since privatization. We've met our regulatory leakage target now for 15 consecutive years. And last year, in FY '21, was our lowest ever level of leakage. Clearly, we continue to innovate in this area in terms of new techniques. And we've talked before about how we use satellites and sniffer dogs to sort of help sort of identify sort of areas of leakage. And we'll continue to invest in water pipe network. Across this AMP, our target for the leakages to continue to reduce leakages by 15% by 2025. The fourth question was then about green funding and regarding the green funding from EIB. Did we satisfy requirements and use of proceeds in the designated project? And is there any reporting documentation available? So the EIB, very much the same as the Sustainable Finance Framework. EIB had a sort of a criteria for projects they would come out and visit the company undertake environmental audits and we view the use of proceeds in a biological way. There is no sort of public documentation available because as I say, they were very much in that bilateral relationship hands on and came on to site to sort of undertake reviews of the work that we've been doing. So that's how they manage the environmental compliance side of things. Third question that we've got from the webcast is from Pavan at JPMorgan. And Pavan's asking, can we talk about the discussions with the regulator on investment and ODI is now paid, and is ESG creating more opportunities to invest and earn rewards? I guess it's sort of still very early days to sort of unpaid PR24. But we are working for our plan now as we sort of work on PR24. And it's fair to say that I think environmental drivers are fundamental to sort of unpaid and beyond. And you touched on ESG. And I think focusing on the E there and the environment, the sort of focus around climate change adaptation and mitigation activities is clearly key. And so I'll pass across to perhaps Jo, just to sort of touch on it a bit more granular detail.

Thanks, Phil. So with regard to sort of our plans for unpaid and looking at the investment opportunities, I suppose we're talking to both of our regulators, so the environment agency and of what were our conversations with the Environment Agency are now well underway to identify where investment needs are required. The government through Defra is currently publishing and consulting on a whole series of pieces of documentation that are going to drive the shape of our investment program moving forward. So the strategic policy statement, the SPS and then 2 documents called the [indiscernible], which really guide our investment. Embedded in those documentations and our documentation is a clear for the strategy from government, we're able to balance clear environmental improvement with investing for reducing carbon and climate change adaptation. So that will sort of form the basis of our plans moving forward. And in terms of Ofwat, they are obviously party to -- and the development of those plans. And we're talking to them quite considerably about the sort of shape of what ODIs might look like moving forward. I think our sort of initial indication is that they might be simplified and so there might be fewer number and more common measures across the industry. But certainly, they're very excited and interested in looking at aspects of ESG and particularly around natural transport and carbon. And so we're having ongoing discussions in those areas.

Thank you, Jo. So those are all the questions that are coming on the webcast. Jordan, is there any final questions on the telephone line?

[Operator Instructions] We have no further questions on the phone lines.

Okay. Thank you, Jordan. So just to say thank you very much, everyone, for participating in the event today. Hopefully, you find it useful and informative. And we look forward to talking to you again in the future. Thank you very much.

This concludes today's call. Thank you for joining. You may now disconnect your lines.