Severn Trent Plc

Annual Report and

Accounts 2024

DRIVING

LASTING

CHANGE

WHAT’S IN

THIS REPORT?

Strategic Report

How we bring our ‘performance driven,

sustainability led’ strategy to life

1 Group Highlights

2 Severn Trent At a Glance

4 The Water Sector

6 Our PR24 Business Plan

8 Our Business Model

10 Chair’s Statement

13 Chief Executive’s Review

16 Our Performance and Key

PerformanceIndicators

18 Delivering Outcomes our Customers

Care About

25 Caring for People in our Region

33 A Driver of Positive Change

42 Running a Business that Goes

Hand-in-Hand with Nature

43 Our Approach to Climate Change

(TCFD)

69 Our Net Zero Transition Plan

76 Our EU Taxonomy Disclosure

82 Business Services Performance Review

84 Chief Financial Officer’s Review

92 Managing Risks and Opportunities

95 Our Principal Risks

102 Emerging Risks

103 Viability Statement

108 Stakeholder Engagement

110 Engagement in Action

122 Section 172 Statement

126 Non-Financial and Sustainability

Information Statement

Governance Report

How we govern our

business responsibly

128 Chair’s Introduction to Governance

132 Our Culture

134 Board of Directors

138 Governance Framework

140 Board Activities

146 Evaluation

148 Nominations Committee Report

153 Audit and Risk Committee Report

162 Treasury Committee Report

165 Corporate Sustainability

CommitteeReport

169 Directors’ Remuneration Report

174 Remuneration at a Glance

175 Remuneration for the Year in Review

179 Summary of Remuneration Policy

and Implementation

182 Company Remuneration at SevernTrent

188 Committee Governance

190 Annual Report on Remuneration

195 Remuneration Policy

205 Directors’ Report

208 Directors’ Responsibility Statement

Financial Statements

Our financial performance

for the year ended 31 March 2024

Financial Statements

209 Independent Auditor’s Report

216 Consolidated Income Statement

217 Consolidated Statement of

ComprehensiveIncome

218 Consolidated Statement of ChangesinEquity

219 Company Statement of ChangesinEquity

220 Consolidated and Company Balance Sheet

221 Consolidated Cash Flow Statement

222 Notes to the Financial Statements

Other Information

273 Five Year Summary

274 Glossary

275 Information for Shareholders

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

Group turnover (£m)

2023/24 £2,338.2

2022/23 £2,165.1

2021/22 £1,943.3

8.0%

Shadow Regulated Gearing (%)

2023/24 59.7%

2022/23 59.8%

2021/22 58.9%

0.2%

Basic earnings/(loss) per share

(‘EPS’) (p)

2023/24 51.0p

2022/23 52.7p

2021/22(35.2)p

3.2%

Group profit before interest

and tax (‘PBIT’) (£m)

2023/24 £511.8m

2022/23 £508.8m

2021/22 £506.2m

0.6%

Dividend per share (p)

2023/24 116.84p

2022/23 106.82p

2021/22 104.14p

9.4%

Adjusted basic EPS (p)

2023/24 79.4p

2022/23 58.2p

2021/22 96.1p

36.4%

GROUP

HIGHLIGHTS

Market Review

Our PR24

Business Plan

Every five years, water companies in

England and Wales put together their

plans for the future. We talk to our

regulators, Government and, most

importantly, our customers to find

outwhat’s important tothem.

Our PR24 Business Plan covers

2025-30, but the changes we’re making

will have an impact for decadesto

come.

1 Earnings and the weighted average number of ordinary shares for the purpose of adjusted earnings per share are defined in note 14 to the

financial statements.

Find out more about our PR24

Business Plan on pages 6 to 7.

Strategic Direction

Statement

Sustainability

Report

Get River Positive

Report

Green

Recovery

Report

Community

Fund Annual

Report

Gender and

Ethnicity Pay

Gap Report

Customer

Vulnerability

Strategy

Our reporting suite

STRATEGIC REPORT

1SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

SEVERN TRENT

AT A GLANCE

Our regulated water and wastewater businesses are Severn Trent Water (‘STW’)

and Hafren Dyfrdwy (‘HD’). The primary activities we focus on are:

Having Courage

We always do the right thing

andhave courage to challenge

the norm and speak up if

thingsaren’t quite right. We

areprepared to step out of our

comfort zones and act with both

today and the future in mind.

Showing Care

We keep our promises to

customers and show care by

treating everyone fairly and

equally. We try to enhance the

environment around us and

spend every pound wisely.

Our strategy to be ‘performance driven,

sustainability led’ acknowledges our relentless

drive to deliver the operational and financial

performance that our stakeholders expect,

inasustainable way.

We are two of the 11 regulated water and wastewater

businesses in England and Wales. Our regulated

businesses provide essential services to over 4.7 million

households and businesses in a region stretching across

the heart of the UK, from the Bristol Channel to the

Humber and from North and Mid-Wales to the East-

Midlands. Our non-regulated businesses operate across

England, Scotland and Wales.

We serve a diverse range of customers with different

cultures, interests and experiences. Our region includes

some of the most affluent areas of the country as well

assome of the most deprived. There are more

conurbations than any other water company’s region,

yetwe also serve predominantly rural counties and

communities. It is a region which is characterised

by,andbenefits from, its diversity.

Providing clean water

We provide over 9 million people

across our region with fresh, clean

drinking water every day.

Treating wastewater

Over 3 billion litres of wastewater

are treated every day, cleaned and

returned to the environment.

Generating renewable energy

Severn Trent already generates the

equivalent of 56% of our own energy

use from renewable sources.

Our

values

How we are structured

Driven by our strategy

Performance driven,

sustainability led

Our purpose

Taking care of one

of life’s essentials

See page 21. See pages 21 to 22. See page 83.

Scan the QR code tofind

outmore about our

SustainabilityReport.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 20242

Business Services operates a UK-based portfolio that complements the Group’s core

competencies and is well positioned to capitalise on market opportunities in these areas:

Taking Pride

We make a difference for our

customers every day, owning problems

and working with others until they are

solved. We take pride in what we do and

champion our work in the communities

we work and live in.

Embracing Curiosity

We search out safe, better

andfaster ways of doing things

through innovation and are always

curious and willing tolearn.

Operating Services

Operating Services provides a variety of

operational water and wastewater services

to private businesses across the UK.

Green Power

Severn Trent Green Power generates

renewable energy from anaerobic

digestion, hydropower, wind turbines

andsolar technology.

Property Development

Our Property Development business

manages the sale of surplus land.

Non-Regulated Business

DELIVERING OUTCOMES

OURCUSTOMERS

CAREABOUT

CARING FOR PEOPLE

IN OUR REGION

RUNNING A BUSINESS THAT

GOES HAND-IN-HAND

WITH NATURE

A DRIVER OF

POSITIVECHANGE

Our Corporate Strategy

’

Performance

driven,

sustainability

led

See page 82. See page 83. See page 82.

Find out more about our strategy on pages 2 to 3.

Helping our own people thrive

Supporting our suppliers

Creating opportunities in

ourcommunities

A force for good for our customers

A role model for others

Collaborating widely to

supportinnovation

Creating a market that works

foreveryone

Actively improving the places we touch

Creating opportunities to enjoy nature

Valuing our most precious natural

resources

Always thinking about our impact

Investing for the long term

Resilient to our changing climate

Putting the customer first

Right first time every time

STRATEGIC REPORT

3SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

MARKET REVIEW

THE WATER SECTOR

There are 17 regional businesses supplying water services in

England and Wales. These businesses serve over 50 million

household and non-household customers. Of these, 11 also

provide wastewater services, including Severn Trent Water

Limited and Hafren Dyfrdwy Cyfyngedig.

How we plan for the long term

We recognise that the future is uncertain and

that we cannot predict with accuracy what will

happen. Therefore, we employ a strategic

planning process to understand the risks

wemay face and identify the most

appropriateresponse.

Key trends

By considering what the most influential

trends might be, we can assess the different

drivers of change and start to visualise how

the future may look and respond to any

opportunities that arise from a rapidly

shiftingsector.

Considers key trends and their implications,

together with potential market developments,

to identify and model alternative versions

of the future and the pathways to them.

Describes our future priorities based on the

challenges posed by key trends, together with

our organisational purpose, the needs of our

customers and other stakeholders, and

current performance.

Identifies the enablers which underpin our

future priorities, and the level of ambition

appropriate for each one.

Allows us to look holistically across our

business and ensure we have a coherent

plan,which balances the needs of

differentstakeholders.

Creates a plan for each priority area and

enables us to deliver on our ambitions,

reflecting current commitments and

delivery capabilities.

Plans include reference to the implications on

our people and technology systems as well as

major infrastructure assets.

Climate change

Key trends and challenges

Climate change will continue to impact global

weather patterns and create more extreme

weather events such as flooding and drought.

We anticipate further interventions around

decarbonisation and a focus on reducing

carbon emissions.

How we are responding

In response to climate change, we will

improvethe resilience of our network and

infrastructure, whilst maintaining a safe

andhigh-performing culture.

We will continue to focus on reducing our

carbon footprint and that of our supply chain.

As a Group, we have committed to being net

zero on our Scope 1 and Scope 2 operational

emissions by2030.

Linked Principal

Risks: 11 and 12.

pages 100 to 101.

Environmental change

Key trends and challenges

Change in land use as a consequence of

demographic change (such as more housing

developments) and climate change (extreme

weather) has potential to impact the

environment and ecosystems.

Awareness of environmental issues and the

value and role of our natural environment

is increasing in society.

How we are responding

We will identify, design and adopt more

sustainable practices to support the natural

environment in response to these challenges.

We have invested £1.2 billion this year, bringing

the total investment this AMP to over £3 billion,

improving our network resilience.

We will minimise waste and support the

principles of a circular economy

whereverpossible.

Linked Principal

Risks: 11 and 12.

pages 100 to 101.

Horizon scanning

Enablers

Future priorities

Delivery plans

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 20244

We also work with a range of other

regulators, including:

– Health and Safety Executive to ensure that

thehealth and safety of our employees,

customers and visitors ispreserved;

– Ofgem, the economic regulator of gas and

electricity markets, whose remit extends

torenewable energy generation; and

– Ofsted, the regulator for education,

children’s services and skills, since

our Academy became accredited.

Demographic

and social change

Key trends and challenges

The UK population is expected to grow over the

next 25 years. Our population is expected to

have a higher proportion of single occupancy

households and an increasingly ageing

population. This growing population is likely to

result in a higher demand for water, pressure

on existing housing and a greater need for

foodand subsequent demand for water

inagriculture.

How we are responding

Given the increased demand for water, we

have made significant investments to bolster

our resilience to source and deliver water

andhelp our customers to become more

water conscious.

We will continue to offer multiple channels to

allow our customers to contact us in the most

convenient way to them.

Affordability

challenges

Key trends and challenges

The impacts of future recessions and periods

of economic growth will not be sharedequally,

with impacts unevenly spread across our

household and non-household customers.

Responding to future environmental and social

change will require investment by water

companies, which will need to be balanced

against the impact on customer bills.

How we are responding

In AMP8 we are increasing our affordability

support to £550 million. We will continue to

review our systems and processes to support

our customers, and deliver a high-quality,

affordable service.

We will work with our communities to make

apositive social difference, including building

skills capability and employment opportunities

in our region.

Maturing

technologies

Key trends and challenges

The increasing use of developing technologies

is likely to result in the greater use of smart

devices, Artificial Intelligence (‘AI’) and

machine learning, automation, data and cyber

security technologies.

How we are responding

To support future resilience, we will continue

to invest in our physical assets and also utilise

new technologies to ensure we can run those

assets efficiently and safely, especially at

times of stress. Combining AI and machine

learning will enable us to combine real-time

sewer data with historical performance and

meteorological data to predict network

performance and identify problems before

they materialise.

A key year in our regulatory cycle

Every five years, Ofwat reviews the prices we charge for the forthcoming five-year period. They also review our plan setting out how we intend

to deliver for customers and the environment. In October 2023, we submitted our Severn Trent Water and Hafren Dyfrdwy Business Plans for

AMP8, which run from 2025-30. Further information about Severn Trent Water’s Business Plan is included on page 6.

Working with our regulators and stakeholders

We are subject to regulation of our price and performance by economic, quality and environmental regulators, as outlined below. You can read

more about how we engaged with our regulators and other stakeholders this year on pages 108 to 121.

Regulation and representation

The Consumer Council for Water (‘CCW’) speaks on behalf of water

consumers in England and Wales.

The Drinking Water Inspectorate (‘DWI’) independently checks that

water supplies in England and Wales are safe and that drinking water

quality is acceptable to consumers.

The Environment Agency (‘EA’) regulates and allows us tocollect water

from reservoirs, rivers, and aquifers and return it to the environment

after ithas been used by our customers and treated byus.

Natural England advises the Government onthenatural environment in

England and helps to protect nature and the landscape, especially for

plant and animal life in both freshwater and the sea.

Natural Resources Wales (‘NRW’) is the environmental regulator in

Wales. It oversees how the country’s natural resources are maintained,

improved and used, both now and in thefuture.

Ofwat is the economic regulator for the water and wastewater industry

in England and Wales. Ofwat principally exercises its duty to protect the

interests of customers through periodic reviews of charges (price

reviews) every fiveyears.

Policy

The Department for Environment,

Food & Rural Affairs (‘Defra’) in England,

and the Welsh Government, provide

strategic and policy direction for the

industry and our regulators.

Linked Principal

Risks: 10.

page 100.

Linked Principal

Risks: 4.

page 97.

Linked Principal

Risks: 6.

page 98.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 5

STRATEGIC REPORT

MARKET REVIEW

OUR PR24 BUSINESS PLAN

Planning in a changing world

Every five years, water companies in England

and Wales put together their plans for the

future. We talk to our regulators, Government

and, most importantly, our customers to find

out what is important to them. Our Severn Trent

Water PR24 Business Plan (our ‘Plan’),

submitted in October 2023, is the most

ambitious in our history. It is built on a strong

track record and developed in consideration of

over 68,000 customers’ views and feedback. It

shows we want to play a leading role in

restoring our sector’s credibility today, whilst

also making significant investment for

sustainable change for future generations.

Subject to regulatory approval, this ambitious

Plan looks to invest £12.9 billion to deliver

benefits for our customers and communities,

the environment and shareholders,

underpinned by a sector-leading £550 million

affordability package and strong shareholder

support following a successful £1 billion equity

raise in October 2023 (read more on page 164).

Investment

Our Plan proposes £12.9 billion of total

expenditure across our network, including

£5 billion of investment focused on enhancing

capacity and service beyond current levels,

almost all of which is focused on the

environment. Our Plan seeks to invest over

£1 billion of capital expenditure each year, over

five years, the scale of which means that for

every household we serve, we will invest

£2,400 back into the region, delivering a

further step change in service for more than

four million customers across the Midlands.

In line with over 68,000 customer views that we

sought as part of our Plan’s development, our

investment will deliver improvements on the

measures that our customers care about most,

including a 16% reduction in leakage and a 30%

reduction in spills from storm overflows,

putting us firmly on track to deliver the

Government’s 2050 targets at least five years

early. We will also build on our industry-leading

environmental performance, as demonstrated

by securing 4* EPA status for four consecutive

years, by driving a further 30% reduction in

pollutions. We will invest £5 billion across

11enhancement cases, asfollows:

– Transforming the natural environment

(Water Industry National Environment

Programme (‘WINEP’))

– Protecting raw water quality

– Meeting future water needs

– Our journey to net zero – reducing process

emissions

– Alternative water supplies

– Physical security

– Enhancing cyber security

– Reservoir safety

– Water resilience

– Urban catchments of the future

– Reducing lead pipes

Our Plan is expected to create up to 7,000 jobs

directly in the business and our supply chain

and will also enable thousands of new work

experience placements, apprenticeships

and internships.

Our Plan has been developed to balance the

need for scale investment and sector-leading

ambition while committing to keep bills

affordable. We recognise that while increases

to bills are spread over a long period, this is a

difficult time for some of our customers. That

is why we have included a £550 million

financial support package as a core part of our

Plan (see page 7).

But we’re not waiting for AMP8 to make a

difference. We’re making the right investments

now, with at least £450 million additional

expenditure accelerated into AMP7 to get a

head start on our targets and enhance our

current performance. We have a strong track

record on deliverability, supported by our

robust governance procedures, effective

organisational structure and strong talent

and expertise. This ensured we achieved the

required AMP8 run rate in 2023/24 and we

areon track to do so again in 2024/25,

demonstrating that we can deliver the levels

of investment required in AMP8. You can read

more about our approach to deliverability on

page 11.

Our full Plan is available on the Severn Trent

Water website at stwater.co.uk/about-us/

our-plans-2025-30.

Investment

Base total expenditure (‘totex’) and

modelled enhancement– The running costs

of our business, driven primarily through

econometric models.

Enhancement totex: Statutory AMP8

requirement – This enhancement

investment is to meet statutory targets by

2030 or earlier. This is non-discretionary

spend andrepresents 82% of the £5 billion

of enhancementcases.

Enhancement totex: Statutory Plus–

Thisenhancement investment is required in

order to meet statutory targets beyond 2030,

which we are choosing to accelerate in order

to deliver benefits to customers and the

environment earlier than required.

Enhancement totex: Customer and risk

driven – This enhancement investment goes

beyond our statutory requirements and is

driven by our assessment of customer

requirements and risk mitigation, supported

by comprehensive business cases.

Base totex Modelled

enhancement

Statutory – AMP8

requirement

Statutory

Plus

Customer and

risk driven

improvement

Total totex

25%

real RCV growth

7.0

12.9

0.9

31%

real RCV growt

4.1

0.6

0.3

£bn, 2022/23 prices

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 20246

Affordability and support

Our bills are £29 a year lower than the

industry average, and £85 a year lower than

the highest. We’ve worked hard to ensure we

aren’t passing on unnecessary costs to

customers, building on our strong track

record of delivering our totex programme

efficiently. The scale of the investment we’re

proposing means that bills will need to go up

between 2025 and 2030 by an average of

£2.32 per month, over the next five years.

With other water companies also planning

large investment programmes, we anticipate

our bills will stay amongst the lowest.

We recognise and understand that our

customers are feeling the effects of economic

uncertainty and cost of living pressures. Our

Plan challenges us to keep driving efficiency

further, to minimise the impact of our

increased level of investment on bills and we

are committed to the principle that customers

won’t pay for the same thing twice.

Our sector-leading affordability package will

build on our existing programme of support

and will help c.700,000 customers who need

help paying their bill each year by 2030, the

equivalent of one in six customers.

The number of our customers expected to

benefit from financial support exceeds those

forecast to be in water poverty by 2030. This

includes those who may be at risk of falling

behind with their bills, or experiencing

short-term challenges, by offering payment

breaks and payment plans, while offering a

range of other support options tailored to

our customers’ needs, including support in

increasing water efficiency, backed by our

extensive metering programme.

Alongside our affordability package, we have

also developed our Customer Vulnerability

Strategy during the year to ensure our

support is accessible to customers who

need it now, and in the future.

Our key areas of focus

Our Plan will deliver across the three

pillars that our customers have told

us are important to them:

High quality and reliable

A high-quality, reliable service that can be

depended on no matter what, where our

customers know they are valued.

Sustainable

Confidence we are doing the right thing for the

environment, society, and future generations.

Affordable

Water should be affordable for everyone – so

that no person or generation is left behind.

Read more about how we have engaged with

our customers on pages 110 to 111.

Keeping our bills as low as possible for our customers

now and for generations to come*

2024/25 2025/26 2026/27 2027/28 2028/29 2029/30

£379

£438

£518

£481

£508

£533

Delivering an affordable service for everyone

*Average annual combined household bills 2025-30 (before inflation)

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 7

STRATEGIC REPORT

Our purpose Our resources and relationships

At Severn Trent, we are

driven by our purpose –

taking care of one of life’s

essentials. When we are

united by our clear social

purpose, we can drive

positive change and deliver

positive outcomes for all our

stakeholders – our

customers, colleagues,

investors, regulators and

Government, the society we

live in and the environment

we depend on.

Now, more than ever, we

know that taking care of one

of life’s essentials means that

what we do really matters to

the families, businesses and

communities we serve. This

is why our values of Having

Courage, Showing Care,

Taking Pride and Embracing

Curiosity are so important to

us. Being a company that can

be trusted, taking care of the

environment, helping people

to thrive and providing the

best value service means we

all need to be focused on

living our values, by Doing

The Right Thing, every single

day – the Severn Trent way.

Physical assets

We maintain over 50,000 km of clean water

pipes, over 93,200 km of sewer pipes, and c.130

water andc.1,000 wastewater treatment works.

Principal Risks: 2 and 3

Strategic objectives:

Natural resources

We take care of some of the UK’s most impressive

natural resources and make them accessible to

support the health and wellbeing of communities.

Principal Risks: 2, 3, 11 and 12

Strategic objectives:

Financial capital

Our shadow RCV is in excess of £12 billion.

Ournetdebt represents 59.7% of our shadow RCV.

Principal Risks: 8 and 9

Strategic objectives:

Technology and innovation

As a large organisation, we rely on technology

in our business every day to communicate,

store and manage data, operate our assets and

monitor our operations. We are always exploring

innovative technology to deliver efficiencies and

continuously improve our processes.

Principal Risks: 4, 6 and 10

Strategic objectives:

Our people and culture

We look to attract, develop and retain talented

people from all backgrounds. We directly

employ over 9,000 people.

Principal Risks: 1 and 13

Strategic objectives:

Suppliers and partnerships

We work with over 1,600 direct suppliers.

100%ofcontracted suppliers have signed up

toour Sustainable Supply Chain Charter.

Principal Risks: 5

Strategic objectives:

OUR

BUSINESS MODEL

Key:

Strategic objectives

Outcomes Nature

People Change

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 20248

Taking care

of one of life’s

essentials

What we do

We provide clean water and wastewater services and develop

renewable energy solutions through our businesses. In the course of

providing these services, we create social and environmental value.

Collect raw water

We collect water from reservoirs,

riversand underground aquifers

acrossour region.

Clean raw water

Our groundwater and surface water

treatment works clean raw water to the

highest standards, making it safe to drink.

Distribute clean water

Our network of pipes and our enclosed

storage reservoirs bring a continuous

supply of clean water direct to our

customers’ taps.

Customers enjoy our services

4.7 million households and businesses use

our services, delivered by a team of over

9,000 employees, and supported by our

contact centres, always ready to help.

Collect wastewater

Our network of sewers and pumping

stations collect wastewater from homes

and businesses and take it to our

wastewater treatment works.

Clean wastewater

Wastewater is carefully screened and

treated in our wastewater treatment works

to meet stringent environmental standards.

Recycle water to

theenvironment

We safely return treated water torivers

andwatercourses.

Green energy

The green energy we generate through our

Business Services activities contributes to

meeting our net zero targets and keeping

our energy costs down.

The value we create for all stakeholders

Regulators, Government and NGOs

The policy framework for our sector is set by the UK

and Welsh Governments. Our industry is regulated by Ofwat

and others. Our non-regulated businesses drive competition

in the market, improving the quality and value in the water

sector supply chain.

Households and businesses served

4.7m

Total Group employees (average)

8,691

Average during 2023/24

See note 8 to the financial statements

Litres of drinking water supplied each day

2bn

Litres of wastewater treated each day

3.3bn

Our customers

We aim toanticipate and meet changing customer and

wider societal needs, as well as improve and protectthe

naturalenvironment.

How we measure this

ODI performance (% of targets/measures met or exceeded target)

76%2023/24

2022/23 79%

Our colleagues

Our greatest asset is our experienced, diverse, and dedicated

workforce. Our relationship with them is open and honest, and

they are appropriately supported, developed, and rewarded to

encourage them to be theirbestin all that they do.

How we measure this

Employee engagement score (out of 10)

8.62023/24

2022/23 8.4

Our shareholders and investors

We create value for equity investors through a reliable,

index-linked dividend, underpinned by strong operational

performance, and a growing RCV, which will lead to higher

returns in the future.

How we measure this

Return on Regulated Equity (‘RoRE’) (%)

5.72023/24

2022/23 12.2

Our communities

We create value for the communities we operate in by

providing direct employment to local people, engaging

withlocal businesses in our supply chain, and paying

businessrates to local government.

How we measure this

Severn Trent Community Fund (£m donated to charitable projects

inourregion)

22023/24

2022/23 2

Our suppliers and contractors

Strong supplier relationships ensure sustainable, high-quality

delivery for the benefit of all stakeholders, supporting our

business operations in line with our Code of Conduct and

Modern Slavery commitments.

How we measure this

Average time to pay suppliers (days)

332023/24

2022/23 31

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 9

STRATEGIC REPORT

CHAIR’S

STATEMENT

Serving our stakeholders, now and for the long term

Severn Trent has a long history of industry-leading operational

and environmental performance and strong financial resilience.

Thelast 12 months have re-emphasised the importance ofthese

critical pillars, whilst at the same time highlighting theneed

forus to demonstrate consistent leadership beyond

theday-to-day running of our business.

Our sector has been subject to heightened

public interest and we must, as a whole

sector, respond to this by stepping up to the

challenge that this brings to rebuild trust and

meet the expectations of our customers and

wider stakeholders, both now and for the long

term. I am proud of the role Severn Trent has

played in forging a path to meet these

expectations – by setting bold ambitions,

accelerating investment, with the support of

our shareholders, and embodying the social

purpose we so passionately believe in. At the

same time, we acknowledge that there is

more to do in the areas that matter most to

our customers and wider stakeholders.

Planning for

the future

Our Business Plan for 2025-30 (our ‘Plan’) will

support this through an investment proposal of

£12.9 billion to secure water resources for the

future, transform river health in our region and

deliver operational net zero by 2030. Our

investment will also deliver improvements in

the service we deliver for our customers, with

a planned 30% reduction in combined sewer

overflow (‘CSO’) spills and pollutions, and a

further 16% reduction in leakage over the

course of AMP8. You can read more about our

approach on pages 38 to 41 and page 20.

Performance

driven,

sustainability

led

Severn Trent is setting bold

ambitions, accelerating

investment with the support

ofour shareholders, and

embodying the social purpose

we so passionately believe in.

Christine Hodgson

Chair

Dividend per share

116.84p

2023: 106.82p

Group PBIT

£511.8m

2023: £508.8m

Group turnover

£2,338.2m

2023: £2,165.1m

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202410

Underpinning our ambitious Plan are a

number of core pillars. As a Board, we

developed the strategy that underpins our

Plan and spent time considering detailed

updates throughout its development ahead of

our Plan being submitted, with a particular

focus on:

– Ambition – through challenging our own

ambitions to drive better outcomes for our

customers, communities and the environment

both now and over the long term;

– Deliverability – ensuring we have the people

and supply chain in place to deliver our

investment. The Board scrutinised the

Company’s approach to AMP8 deliverability

to ensure that robust governance

procedures are in place, supported by an

effective organisational structure and

strong talent and expertise within the

Company and its supply chain;

– Affordability – offering a comprehensive

package of support for customers who

might struggle to pay their bill. The Board

scrutinised the Company’s affordability and

societal approach – with detailed

consideration given to potential impacts to

customer bills in view of our existing

commitment to keep absolute bills as low as

possible for all customers whilst also

delivering improved resilience,

sustainability and customer outcomes.

Alongside our affordability activity, the

Board also oversaw the development of our

Customer Vulnerability Strategy, which

seeks to outline the support and services

offered to customers in vulnerable

situations, particularly those who need extra

help accessing our services. Read more on

page 125. The Board also considered the

vital role that we play in our communities to

drive positive change and leverage our

resources to make a positive impact across

our region. This is best embodied by our

10-year Societal Strategy which you can

read more about in the pages that follow;

– Transparency – to provide all of our

stakeholders with confidence that our

strategy for data assurance and governance

processes support high-quality data across

all aspects of our Plan;

– Resilience – to ensure that our Plan will

deliver operational, financial and corporate

resilience over the next control period and

long term; and

– Financeability – securing the appropriate

funding to safeguard our financial resilience.

On this final point, on behalf of the Board

Iwould like to express my thanks for the

support of our shareholders in raising

£1 billion to fund our proposed investment. The

equity raise we conducted in October 2023 was

multiple times oversubscribed, with

overwhelmingly positive feedback from our

shareholders, reflecting their confidence and

belief in the future success of this company.

I would also like to express my thanks to the

68,000 customers we consulted with in the

development of our Plan. It was useful to meet

our customers and members of our

communities to discuss their priorities,

through attending our customer focus groups

and ‘Your water, your say’ sessions, which

provided insight on their views and the

challenges they face. I am confident that the

Plan we have developed and submitted fully

reflects customer expectations.

Read more about our Plan on

pages 6 to 7.

Climate

resilience

A key theme of our Plan is resilience and the last

two years have reinforced the need for resilience

today and for the long term, with one of the driest

years on record being followed by one of the

wettest. Increasing weather extremes such as

extended periods of hot and/or wet weather are

expected to become more commonplace as we

feel the impact of climate change. We must

therefore find innovative ways to ensure we

continue to deliver our essential services, whilst

also safeguarding the environment.

Our teams have worked determinedly to

manage the challenging conditions of the last

12 months, which have seen 10 named storms

from September to March. From the

leadership team through to the frontline, the

hard work and commitment shown to continue

to deliver strong operational, environmental

and financial performance has been evident.

To bolster our preparedness for the future,

the Board has overseen the Company’s

management of storm events, incorporating

learnings from our established Summer

Readiness and Winter Readiness

approaches. In response to Storm Babet, we

oversaw the Company’s approach for future

storm events, focusing on proactive

measures to be implemented in anticipation

of storm events, prioritisation of resources,

communications with customers and

communities and reactive actions to be

deployed to mitigate the impacts to the

greatest extent possible.

More fundamentally, we are investing in our

long-term resilience. Our 25-year Long-

Term Delivery Strategy (‘LTDS’) indicates

that, without investment, by 2050 we face a

600 million litres per day (‘Ml/d’) deficit of

clean water, and 45% more homes would be

at risk of internal flooding. Our Plan includes

scale investment to mitigate these risks,

with 99% of our proposed £5 billion

enhancement spend categorised as either no

or low regrets under all of the scenarios we

have modelled, giving the Board confidence

68,000

customers helped form our plan

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

STRATEGIC REPORT

Chair’s Statement continued

that we are investing in the right areas for

the long-term resilience of the business.

As well as adapting to climate change, we must

also play our role in mitigating it. We launched

our Net Zero Hub at Strongford wastewater

treatment works in May 2023. Our £40 million

investment, supported by the Ofwat Innovation

Fund, is enabling us to implement a range of

new, innovative technologies, that combined

will completely mitigate the site’s annual

operational emissions. The learnings from our

Net Zero Hub will enable us to meet our goal of

operational Net Zero by 2030 – one of the three

commitments in our Triple Carbon Pledge.

Read more on page 68.

Environmental

performance

Another area of significant customer and wider

stakeholder focus is environmental

performance. Our long-term investment

continues to deliver performance

improvements, and we have invested

£1.2 billion in 2023/24, a 63% increase year on

year, bringing our total investment this AMP to

over £3 billion.

It is pleasing to see this investment reflected in

our EPA performance, as we achieved EPA 4*

for the fourth consecutive year for our 2022

performance, and we have had no serious

pollutions this year. This is an area of significant

focus for the Board. We are highly confident that

we will achieve EPA 4* for a fifth consecutive

year for our 2023 performance – something no

other company has ever achieved. We have also

reduced our share of Reasons for Not Achieving

Good Status (‘RNAGS’) to 14% as our Get River

Positive programme drives long-term

improvement in river quality.

However, this year has highlighted that, despite

the performance improvements made in some

areas, we know there is more we can do to

improve. We want to deliver faster

improvements on areas such as CSOs and

pollutions, where we have set bold targets to

drive performance improvements. Our

sustained investment has driven a number of

improvements, which makes the Barlaston

pollution particularly disappointing. There was

Board-level oversight of the pollution, and you

can read more about our environmental

performance and, in particular, our response

to the Barlaston pollution and action taken to

implement lessons learned to bolster our

preparedness for similar pollutions in the

future on pages 23 to 24. You can also read

more about the significant, scale investment

we are making on CSOs on pages 38 to 41.

Delivering for all

stakeholders

The past 12 months have re-emphasised the

role that our company and our sector must play

in society, particularly for the customers and

communities we serve, and the importance of

delivering our social purpose ambitions.

As a Board we recognise the vital role that our

company plays in our communities and are

committed to driving positive change,

leveraging our resources to make a positive

impact across our region. This is best

embodied by our 10-year Societal Strategy

which aims to support 100,000 people in, or at

risk of, poverty to provide them with the

opportunity and skills to improve their life

chances through access to high-quality

employment-related experience and training.

This important work extends beyond our

extensive package of affordability support,

through tackling the long-term drivers of

poverty. We have made good progress in the

first 18 months of the programme, supporting

around 9,000 people and have generated more

than £2 million of Social Value, as measured

under the National Themes, Outcomes and

Measures (‘TOMs’) Framework. The

partnerships and projects we have

establishedprovide a firm foundation to

informour programme and expand into more

areas of ourregion where our help is needed.

To reflect the strategic importance we place

onour social purpose commitments, we have

incorporated Social Value into our proposed

Remuneration Policy. You can read more

aboutthis on page 187.

Social purpose is part of our culture at Severn

Trent. The interests of our stakeholders – our

customers, communities and employees – are

strongly aligned. The majority of our colleagues

live in our region and are also our customers,

and many are also shareholders. This strong

link with our communities means that our

people care deeply about the role we play in

their communities, and our Societal Strategy

has energised our organisation, with many

volunteering to support in a variety of ways.

Our people are more engaged than ever before,

with our most recent annual employee

engagement survey score of 8.6 out of 10

placing us in the top 3% of utilities globally.

Moreover, every single directorate in the

Company scored at least 8.5 out of 10, which

is a testament to the leadership and passion

demonstrated at every level of the organisation.

As well as reviewing the results of the annual

engagement survey, the Board seeks regular

and direct feedback from our people, with

regular attendance at the Company Forum,

visits to our operational and office-based sites,

and recently our first in-person ‘Meet Our

Board’ session which was attended by

graduates and apprentices from across the

organisation, enabling a two-way feedback

process. You can read more about how the

Board engages with our people on pages 132

to133.

Our role is to create and maintain a culture

that enables our people to bring their best

selves to work every day and contribute to our

sector-leading performance, which our people

work hard to deliver every day. It is also critical

that our people feel safe and secure to raise

any concerns and we have extensive support

inplace to ensure that they can, at all times,

dothe right thing.

Finally, on delivering for stakeholders, the

Board has considered a range of factors in

recommending our dividend this year, including

the Company’s performance delivery for

customers and the environment, both now and

over time, the broader performance of the

Company and the long-term financial resilience

of the Company. You can read more about the

process that the Board undertook to assess the

Company’s performance in the round on page

131 and, in relation to our English regulated

water company, in the Severn Trent Water

Limited Annual Performance Report that will be

published on 15 July 2024. In recommending the

proposed dividend, the Board considered the

impact of its decision on all stakeholders,

including our shareholders, many of whom are

small, retail holders and pensioners, reliant on

dividend income in return for their continued

investment in our company. In consideration of

all of these factors, the Board has proposed a

final dividend of 70.10 pence for the year ended

31 March 2024.

Leadership and

theyearahead

The next 12 months are pivotal, as we close out

the last year of AMP7, including our £566 million

(2017/18 prices) Green Recovery Programme,

and work hard to deliver our 2025

commitments, whilst readying ourselves for the

significant investment period ahead in AMP8.

The Board is well prepared for the challenges

and opportunities ahead. Following the

retirement of James Bowling, Helen Miles has

seamlessly assumed the role of Chief Financial

Officer, demonstrating the strength of our

succession planning. We also welcomed a new

member to the Board, Richard Taylor, in April

who brings a wealth of experience in strategy,

corporate finance, risk management and M&A.

I am confident that our Executive Committee

will deliver the commitments we have made

and continue to demonstrate exemplary

leadership both within our organisation and

across the broader sector.

We are at a critical and exciting point in our

history. We must step up to meet the

increasing expectations of our customers and

broader stakeholders, which will require more

investment, ambition and leadership than ever

before. We have strong foundations in place to

achieve this and I look forward to seeing the

positive change we can deliver in the next year

and beyond.

Christine Hodgson

Chair

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202412

CHIEF EXECUTIVE’S

REVIEW

2023/24 Capital investment

£1.2bn

Proposed PR24 investment plan

£12.9bn

Net ODI reward

£55m

2023: £53m

Progressing against bold ambitions

I’m pleased to share my Chief Executive’s Review for 2023/24 in

which I will highlight some important moments from the year and

provide an update on our performance over the last 12 months.

Highlights of the year

We have delivered a good set of results in

2023/24 and I’m pleased with the progress we

have made in key areas.

Accelerating our Capital Programme

This year we have invested £1.2 billion in our

capital programme – a 63% year-on-year

increase, putting us ahead of the required run

rate to enter AMP8, which is set to be the

biggest investment period in our history.

We’ve delivered all of our commitments under

the Water Industry National Environmental

Programme (‘WINEP’) in the year and have

made significant progress in our Green

Recovery Programme which is already

delivering benefits for our customers and the

environment. You can read more about our

Green Recovery progress on pages 34 to 35.

To bring to life one of our projects, in Stroud we

will shortly complete a £25 million project to

upgrade the sewer network and have already

installed a new concrete storm tank that uses

smart controls to hold up to 7.4 million litres of

wastewater back during severe weather events

before returning it to our treatment works

when rainfall has subsided and capacity to

treat it is available.

Delivering operational excellence

The long-term investments we have made over

recent years have enabled us to deliver

sustained improvements on operational

performance and I’m pleased to report that we

have met 76% of our performance

commitments for this financial year.

And crucially, we’re continuing to deliver

improvements in areas our customers tells us

they really care about:

– We’ve delivered our best ever leakage

performance, reflecting an increase in the

number of jobs completed in our network,

and a reduction in the time to complete our

most significant customer reported jobs to

an average of 3.3 days, which includes the

time to reinstate and clear site.

– Our customers were off supply for 6 minutes

and 40 seconds – whilst this is still above

our Final Determination target, it reflects a

reduction of 27% on last year and our best

ever performance.

– We have delivered our best ever low

pressure complaints performance, thanks

to targeted investment across a range of

capital schemes.

– Blockages in our network have reduced by

17% year on year, 30% ahead of our target,

benefitting from our extensive cleansing

programme and customer education on

correct sewer use.

We have made bold

progress in some

ofthe areas that

weknow our

stakeholders truly

value. We know

thereis more to do,

and we continue to

push further, faster,

as we embody our

strategy of being

‘performance driven,

sustainability led’.

Liv Garfield

Group Chief Executive

13SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

STRATEGIC REPORT

Chief Executive’s Review continued

Focused on the environment

We expect to once again achieve the highest

possible rating in the Environment Agency’s

annual Environmental Performance

Assessment (‘EPA’). This would make it the

fifth consecutive year of 4* EPA status which

is something no company has ever before

achieved. The EPA is a rigorous measure

ofour performance, consisting of seven

individual metrics which become

progressively more stretching every year.

Youcan read more about what is included

inthe EPA, and on our performance against

each ofthemeasures, on page 22.

Our performance this year includes no serious

pollutions, defined as pollutions whichcould

have a significant impact on the environment.

Preventing serious pollutions isa priority for

every single person in our organisation and

while pleasing to have achieved zero serious

pollutions this year, it is something we remain

absolutely focused on maintaining.

More broadly on river health, our overall

impact is best measured by the RNAGS

attributable to us, as recorded by the

Environment Agency. Our assessment of this

data supports that we are now responsible for

14% of all RNAGS in our region. We’re working

hard to reduce that share to 10% this year.

Engaging our people

One of my personal highlights for the year was

embarking on an all-employee roadshow to

share our PR24 Business Plan (our ‘Plan’).

Through these visits I was able see first-hand

just how engaged our people are, driven to

deliver for the communities they live and work

in, and I was delighted to see this reflected in

the results of our most recent employee

engagement survey score of 8.6 out of 10 which

places us in the top 3% of utilities globally.

We know that a key driver of engagement for

our people is their connection to our

communities. We’re proud as an organisation

to donate 1% of our profits to local charities in

our region, and this year we donated over

£2 million to over 100 organisations in our

region. Our people are already playing an

active role in our 10-year Societal Strategy,

and it has been inspiring to see the strong

connection they have with the region they live

and work in. Further detail can be found in

theChair’s Statement.

Performance

focus areas

Our achievements this year have been delivered

against a backdrop of some truly challenging

weather conditions; this year was 35% wetter

than last, with 10 named storms between

September and March and nearly 30% of river

gauging stations in our region recording their

highest ever levels.

This weather undoubtedly contributed to a

disappointing performance on some critical

waste measures. In particular, I was

disappointed by our performance in three areas:

– Total pollutions – despite having no serious

pollutions this year, a 24% increase in the

number of Category 3 pollutions meant we

missed our pollutions target for the first

time since Performance Commitments

wereintroduced in 2015.

– Sewer flooding – a significant increase in

hydraulic flooding resulted in more external

sewer floodings, meaning we missed our

stretching target again this year.

– Spills from storm overflows – greater

utilisation of overflows was not unexpected

given the higher levels of rainfall, however

we were still disappointed in the increase.

While we’ve felt its impact, weather cannot be

an excuse for us or our sector – climate change

is something we must all adapt to, and it is our

job to protect our customers and the

environment from its impact on our

operations. The unprecedented weather this

year has highlighted that we need to go further,

move quicker, and find more creative and

innovative solutions to meet the expectations

of our stakeholders, in particular on combined

sewer overflow (‘CSOs’).

In our investment plans for the next five years

we set ourselves the most ambitious targets

in the sector for minimising the use of CSOs,

with targets that go further and faster than

the Government’s Storm Overflow Discharge

ReductionProgramme (‘SODRP’).

Meeting our target of an average of 20 spills by

2025 is a priority, and we are determined to

achieve our stretch ambition to halve our

number of spills between now and 2030. Our

whole organisation is energised and focused on

this activity, and we are now finalising the

procurement of thousands of assets, utilising

the £1 billion of funding our investors

contributed last October to help us accelerate

our five-year investment plan. This investment

will have a dramatic reduction on the use of

CSOs once installed this year. Overall, we

expect these capital works to benefit 900 sites,

representing over 40% of all CSOs that spilled

last year.

To ensure we make demonstrable progress

onour investment programme, at the pace

ourstakeholders expect, we have assembled

adedicated team of hundreds of people

working across hundreds of sites. By the end

of this year we will deliver a combination of

solutions as follows:

– over 700 storage solutions at our treatment

works and network assets. These will allow

us to capture and store more flows during

periods of high rainfall and dramatically

reduce spills at those sites;

– 25 submerged aerated filter (‘SAF’)

treatment units that will enable us to expand

the treatment capacity through the

additional processes, dramatically reducing

spills into the environment;

– over 70 reed beds that will provide for

nature-based treatment of sewage at the

storm route for smaller sites, which would

eliminate untreated sewage entering rivers;

– nearly 200 enhancements at specific CSOs

on our network, which will enable us to

increase the flow of sewage to our treatment

works, reducing the potential for a spill into

the river;

– over 100 flap valves that will prevent river

ingress into our network, which would

otherwise overload the capacity of our

sewers with river water; and

– over 8,000 water butts in 10 communities to

trial at-scale surface water separation.

This activity is being supported by international

partnerships, an international solutions

scouting programme and a guaranteed

payment scheme.

This complex, scale activity will be overseen by

our dedicated CSO programme, that reports

directly into my weekly Executive Committee

meetings, to ensure we maintain absolute

focus on delivery of our investment plan as

quickly as possible. We intend for all these

solutions to be installed by the end of the year,

enabling us to rapidly reduce the use of CSOs

once in operation. Irecognise how critical it is

to be transparent about our CSO performance,

so in this year’s Annual Report we have

included a dedicated storm overflow section,

setting out our detailed plans to improve our

performance, which you can find on pages 38

to 41. Alongside this, we launched our Storm

Overflow Map in April, showing the status of all

storm overflows in our region. I look forward

to sharing with you our progress on this vitally

important measure next year.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202414

Barlaston pollution

This year also saw the Company fined £2 million

for a serious pollution that occurred in 2020,

following a pollution at our wastewater

treatment site in Barlaston. Our operational

failings meant that there was a risk of

environmental harm, and that is unacceptable

to me, my team and everyone at Severn Trent.

We took valuable lessons from this pollution

and have put in place measures to prevent

pollutions of this nature happening again.

To demonstrate how seriously we take this

pollution, we have included a dedicated section

within this report on pages 23 to 24, which sets

out our response, lessons learned and action

taken to prevent similar pollutions in the future.

Strong platform to drive

positive change

As I look forward to the year ahead, I am

excited by the opportunity it presents. We are

on track to meet our 2025 commitments and

close out AMP7 stronger than ever, with the

foundations in place to push further, faster, to

meet the needs of our stakeholders and deliver

sustainable change for future generations.

I especially look forward to seeing the impact of:

Expanded capital delivery capabilities–

Bythe end of this year, we expect to have

accelerated £450 million of investment,

delivering benefits more quickly and

smoothing our transition to the next AMP.

Building on the work undertaken over AMP7 to

diversify our supply chain and foster excellent

working relationships, we have bolstered our

in-house capabilities, expanded our digital

expertise and implemented automation to

significantly reduce the time taken to design

projects. We’ve also developed an innovative

approach to delivery using the concept of Plug

and Play, which has the potential to deliver

assets much faster than ever before.

Investing in insourcing – While we remain a

sector leader in waste, we know that we have

the ability to push the frontier further, securing

our position as operational leaders for years to

come. A key enabler of this is the insourcing of

around 400 people into our Waste Networks

teams, which was completed in the past year.

Insourcing of this scale is an organisational

challenge, requiring the investment of

substantial resources to ensure success,

soit’s pleasing to have delivered this

programme in advance of the next AMP. As our

new colleagues embed into the organisation,

weanticipate seeing benefits in our waste

performance in the next 12 months.

Innovation in customer platforms – In October

2023, we announced that we would be

migrating our customer platforms to Kraken

– an innovative, world-class system that we

expect to deliver significant benefits across

multiple business areas. Enabled by the

installation of more than 400,000 smart

meters this AMP, and a further one million

smart meters in AMP8, Kraken will support

customers to actively manage their

consumption and help us to pinpoint leaks

more quickly and accurately than ever before.

Smart technology in-built into the system will

also allow water specialists in our contact

centres to focus on delivering the best possible

customer service. We’ve already migrated

more than 20,000 customers tothe new

system and expect to have four million in

Kraken by theend of the year.

Our Net Zero blueprint – Over the past year we

have invested £40 million in transforming one of

our largest sites, Strongford, to be a Net Zero

Hub. All of the exciting new technology is

installed and operational, and we expect it to be

fully commissioned by the Summer. Our Plan

includes a proposal for £430 million to roll out

the blueprint that Strongford has provided

across our estate, toachieve our operational net

zero by 2030 commitment. We’ve also invested

in increasing our energy generation capabilities,

with the equivalent of 60% of our total

consumption self-generated in the last

12 months.

Final reflections and thanks

Reflecting on the past year, it has been one of

considerable challenge, as we felt the impact

of climate change on our operations, and

continued to face heightened scrutiny as a

sector, but it has also been one of considerable

progress. We have delivered our biggest ever

capital programme, achieved our best ever

performance on a number of critical

measures, met key milestones needed to

deliver our long-term commitments and

submitted a Plan that has the powerto

transform our business.

We know we have much more to do to ensure

we are delivering the best possible service for

our customers, and the environment. The Plan

we submitted in October 2023 (read more on

pages 6 to 7) is a key enabler of progress, and I

look forward to seeing the final outcome of our

Plan later this year.

Meeting the challenges of the future goes

beyond our regulatory plans – we must go

further than what is simply required of us to

meet the expectations of our stakeholders.

Itwill need leadership, hard work and

determination, meaning our people are

absolutely critical to our success.

And finally, I’d like to take this opportunity to

thank my c.9,000 wonderful colleagues who

inspire me every day with their tireless

commitment to taking care of one of life’s

essentials. With an average tenure of nearly a

decade, and almost three quarters also

shareholders, I am thankful for their loyalty

and for their endless enthusiasm for our

ambition to lead the field.

I’m grateful to my brilliant leadership team

fortheir relentless passion, drive and

determination, and their ability to continue

stepping up to every challenge that comes our

way. And, to Christine and the Board I am

appreciative of the continued guidance,

stewardship and challenge, which supports

our success today and for the long term.

Liv Garfield

Group Chief Executive

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 15

STRATEGIC REPORT

OUR PERFORMANCE AND KEY

PERFORMANCE INDICATORS

Leakage (three-year average)

(Ml/d)

2023/24 398

2022/23 405

2021/22

411

398 Ml/d

(ODI target: 399 Ml/d)

Definition:

The average volume of water that leaks from

our water network each day (measured as a

three-year rolling average)

Stakeholders: Remuneration:

Water supply interruptions

(average number of minutes)

2023/24 6:40

2022/23 9:10

2021/22

12:39

6min 40 sec

(ODI target: 5:23)

Definition:

The average number of minutes lost

percustomer

Stakeholders: Remuneration:

Developer Measure of Experience

(‘D-MeX’) (Rank)

2023/24 1st

2022/23 3rd

2021/22

2nd

1st

Definition:

An industry standard view of developers’

experience, measured through both

quantitative and qualitative metrics

Stakeholders: Remuneration:

Compliance Risk Index

(‘CRI’) (index)

2023/24 6.19

2022/23 5.65

2021/22

2.43

6.19

(ODI target: 0.00)

(Deadband: 2.00)

Definition:

A calculated score for each

compliancefailure

Stakeholders: Remuneration:

Water quality complaints

(number of complaints)

2023/24 7,696

2022/23 7,467

2021/22

8,123

7,696

(ODI target: 9,500)

Definition:

The number of complaints about taste,

odour and appearance that we receive

Stakeholders: Remuneration:

Customer Measure of Experience

(‘C-MeX’) (Rank)

2023/24 11th

2022/23 9th

2021/22

8th

11th

Definition:

An industry standard view of customers’

experience, measured through both

quantitative and qualitative metrics

Stakeholders: Remuneration:

Inspiring our customers to use

water wisely

(number of commitments)

2023/24 172,260

2022/23 122,159

2021/22

80,656

172,260

(ODI target: 31,050)

Definition:

Number of customers agreeing to change

one or more of the three target behaviors

after participating in an engagement session

as part of our education programme

Stakeholders: Remuneration:

Pollutions

(number of incidents)

2023/24 239

2022/23 193

2021/22

204

239

(ODI target: 209)

Definition:

The number of pollution incidents that occur

from our activities

Stakeholders: Remuneration:

Internal sewer flooding

(number of incidents)

2023/24 710

2022/23 698

2021/22

677

710

(ODI target: 615)

Definition:

The number of sewer flooding incidents

thatoccur inside customers’ properties

Stakeholders: Remuneration:

OUTCOMES

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202416

External sewer flooding

(number of incidents)

2023/24 6,721

2022/23 5,353

2021/22

4,526

6,721

(ODI target: 3,456)

Definition:

The number of sewer flooding incidents that

occur in customer gardens, driveways and

external buildings

Stakeholders: Remuneration:

Biodiversity

(number of hectares (‘ha’))

2023/24 11,554

2022/23 7,728

2021/22

4,69 6

11,554 ha

(ODI target: 831 ha)

Definition:

The number of hectares of land with

improved biodiversity since 2020

Stakeholders: Remuneration:

Public sewer flooding

(number of incidents)

2023/24 1,83 1

2022/23 1,526

2021/22

1,296

1,831

(ODI target: 1,915)

Definition:

The number of sewer flooding incidents that

occur on public open spaces

Stakeholders: Remuneration:

Help to Pay When You Need It

(% of customers)

2023/24 56

2022/23 52

2021/22

(ODI target: 42)

Definition:

Percentage of our customers who need

oursupport that are part of one of our

affordability schemes

Stakeholders: Remuneration:

Lost Time Incidents

(‘LTIs’) (per 100,000 hours worked)

2023/24 0.08

2022/23 0.11

2021/22

0.14

0.08

Definition:

The number of employees unable to work

dueto injury or illness from their job

Stakeholders: Remuneration:

Employee engagement

(score out of 10)

2023/24 8.6

2022/23 8.4

2021/22

8.2

8.6

Definition:

Top 3% of energy and utility

companiesglobally

Stakeholders:

Priority Services Register

(‘PSR’) (% of customers)

2023/24 9.2

2022/23 7.7

2021/22

5.7

9.2

(ODI target: 8.9)

Definition:

Percentage of our customers that require

bespoke support during incidents that are

signed up to our PSR

Stakeholders: Remuneration:

Value for money

(% score)

2023/24 60

2022/23 64

2021/22

(ODI target: 64)

Definition:

Our customers’ view of value for money

measured by a quarterly survey

Stakeholders: Remuneration:

PEOPLE

NATURE

Key:

Strategic objectives

Performance

against target

Outcomes Nature Outperformance

against target

People Change Missed target

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 17

STRATEGIC REPORT

DELIVERING

OUR CUSTOMERS

CARE ABOUT

OUTCOMES

Our services are an essential part of customers’ lives.

We take this responsibility seriously and strive to keep

water flowing and continuously take wastewater away,

whilst working with customers to manage demand.

What this means for what we do…

– Right first time, every time.

– Putting the customer first.

– Investing for the long term.

– Resilient to climate change.

This is also aligned with our Sustainability Framework.

Find out more in our Sustainability Report 2024.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202418

Customer experience

Everyone in Severn Trent, from the frontline to

the boardroom, is focused on ensuring the very

best experience for our customers whatever

the circumstances. Our ambition is to ensure

that every customer interaction is dealt with in

a timely manner and that we deliver an

outstanding experience for them.

Whilst we are making many improvements, it

has been a mixed year on customer

experience, and we are disappointed that our

C-MeX score ranked us 11th in the sector this

year (2022/23: ninth). We recognise there is

more to do and have set ourselves an ambition

to achieve a top three C-MeX position. To

achieve this ambition, we have made

significant investments as follows:

Customer Innovation: In October 2023, we

announced our exciting new partnership with

Kraken Technologies to implement its industry-

leading platform to drive improvements in

customer experience, particularly billing. We’re

confident that partnering with Kraken

Technologies will help to accelerate the timeline

for meeting our AMP8 customer experience

priorities and help to revolutionise how we

deliver our billing service to our customers.

Waste Insourcing: Insourcing of around 400

people into our waste networks teams to

improve our operational performance for

years to come. Insourcing of this scale is an

organisational challenge, so it is pleasing to

have delivered this programme in advance of

the next AMP. As our new colleagues embed

into the organisation, we anticipate seeing

benefits in our waste performance in the

next12 months.

Customer Inspector Programme within

Water: A dedicated programme that will focus

on providing quality advice and support to our

customers – helping them reduce their water

usage, reduce their bills and support our plan

to reduce household water consumption. We

are now the highest-ranking water company

onTrust Pilot, at 4.6 and Excellent.

County Cup: In January 2024, we launched our

Severn Trent County Cup Champions initiative

for all Severn Trent Water employees. The

County Cup is an organisation wide initiative

that allocates every one of our c 9,000

employees to a county team, with the objective

of improving customer experience by having a

regional focus and, in doing so, achieving

sustained improvements in customer service.

By focusing on measures we know are

important to our customers, all of our

employees will be able to play their part in

improving services provided to our customers

and communities. This activity is supported by

a local customer engagement approach,

including local media and social media

coverage, so we can tailor our communications

to the communities we serve.

We continue to deliver upper quartile

performance in Developer Services, having

returned to the top of the podium as the

industry leading company on D-MeX, with

ourbest ever score in 2023/24.

Frankley water treatment works

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 19

STRATEGIC REPORT

2017/18 2018/19 2019/20 2020/21 2023/242022/232021/22

449.8

397.3

416.0

380.7

453.9

434.7

401.2

Annual Performance (Ml/d)

Working hard to reduce supply

interruptions for our customers

Reducing supply interruptions remains a

priority given the direct impact any loss of

supply has on our customers, particularly our

vulnerable customers. We are pleased that our

significant investment over the past few years

has helped us deliver our best ever

performance at 6 minutes and 40 seconds.

Whilst this is above our Final Determination,

itreflects a 27% improvement from last year.

Similarly, our investment in our water network

and our culture of continuous improvement

enabled us to navigate the hot weather

conditions last summer with zero hot-

weather-related supply interruption events,

despite the hottest June since Met Office

records began. We are applying learnings to

other areas of our business, including our

approach to storm events.

Last year, we achieved a significant

improvement in the impact from outlier events

(events causing over 15 seconds of impact) and

we have sustained the reduction this year with

outlier events causing a much smaller impact

to overall performance compared to the first

two years of the AMP.

The growth of our Network Response Team and

Trunk Main Repair Team has been a key driver

of our positive performance, with more teams

out in the field, minimising the time our

customers go without supply. Our Academy

facilitates the continual training and upskilling

of our colleagues, improving our effectiveness

and helping us to learn from each event we

resolve. You can read more about our Academy

on page 26.

Lowest ever annual levels ofleakage

Alongside our supply interruptions activity,

we have also been working hard on our supply

capacity. We are delighted to have delivered a

10.8% reduction over AMP7 so far and we are

currently at our lowest ever annual levels of

leakage of 380.7 Ml/d.

We are incredibly proud of our performance in

this area, having achieved our target for 12 out

of the last 13 years, putting us on track to

achieve our commitment to reduce leakage by

15% by 2025 and 50% by 2045 (from our

three-year average baseline set in 2019/20).

We are finding and fixing more leaks than ever

before which is helping us drive down leakage

and in 2023/24 we fixed around 10,000 more

leaks than we did in 2022/23. We are now

repairing significant visible leaks faster than

ever before with an average time to complete

the full end-to-end job of 3.3 days. This

includes the time it takes to reinstate and clear

site after the leak is fixed. We continue to

deliver pressure management schemes to

improve network stability, which reduces the

number of leaks caused by high pressure by

optimising pressure-reducing valves.

Our leakage reduction activity is supported by

our smart metering programme. Smart meters

enable us to proactively identify potential leaks,

mitigating risks to customers’ properties and,

crucially, helping customers to save money

on their water bills, all whilst reducing our

overall level of leakage. We have accelerated

our activity and we’re on track to install more

than 400,000 smart meters this AMP. You can

read more about our metering work in our

Green Recovery section on pages 34 to 35.

Our ongoing engagement with customers to

reduce their demand also continues to yield

positive results. We continue to build on our

use of acoustic loggers and we are trialling

new technologies, including hydrophones.

Our Drone Team is helping detect leaks

earlier from the skies using the latest

technology to help customers and the

environment. Our flying fleet, which

photographs and maps our sites including

reservoirs and treatment works, is fitted

with thermal imaging, which can detect

drops in temperature on land below –

indicating a below-ground water leak.

Drones are regularly used in live leak

scenarios to determine what extra

resources or repairs are needed on site

tohelp ensure a rapid resolution.

In urban areas, drones are used to quickly

map bursts and relay information (such as

pictures and videos) to our Incident Team

to support decision making and

equipment prioritisation.

Drones Team spotting

leaks from the sky

Delivering Outcomes continued

AMP6 Annual Performance*

Working in partnership with our

customers to reduce demand

We maintain a positive, continual dialogue with

our customers, engaging with them directly on

demand management through our water

efficiency programme. With the help of our

customers, our aim is to achieve Per Capita

Consumption (‘PCC’) of 122 litres per day by 2038

and 110 litres per day by 2050 against our current

performance of 126.2 litres per person, per day.

Our water efficiency programme has delivered

a number of customer benefits this year,

including water efficiency advice through nearly

22,000 home water efficiency visits; delivering

water efficiency products, such as water saving

Water always there

AMP7 Annual Performance

* These are the 3 years that make up our 2019/20 3-year average baseline

Leakage performance

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202420

shower heads; and over 22,500 customers have

signed up to our water survey platform (‘Get

Water Fit’) this year alone.

Our teams engage with thousands of customers

every year to make them aware of how they can

save water and reduce their bills, educating

them on the correct use of their drains, in the

context of sewage treatment processes, and

sharing how we are reducing our carbon

footprint to help protect the environment.

Alongside this direct customer engagement,

our dedicated schools programme helps

educate children living in our region. Last year,

we continued our programme of school visits,

delivering assemblies, workshops and

classroom sessions. Using our interactive

Wonderful Water Tour vehicles, the ‘digi-bus’

and the ‘experi-bus’, we introduce children to

everything water and wastewater related

using virtual reality and hands-on water

activities, such as fixing leaks, water quality

sampling and sewer misuse exercises.

At the end of our sessions, we ask children to

pledge their commitments and, this year, we

once again collected a record number of

behavioural change commitments. Over 170,000

commitments were made, the highest ever

number of pledges we’ve had in a single year,

bringing our AMP7 total to over 400,000. As well

as our core education offer, our Education Team

led our Societal Strategy school programme,

engaging with thousands of children, and has

taken our Wonderful Water Tour around the

region, popping up at our visitor sites and at

numerous community events in our region.

Every day, we take over 3 billion litres of

wastewater away, ready to be made safe

before returning to the natural environment.

We have invested significantly in our waste

operations over the last 30 years to deliver the

services that our customers rightly expect and

reduce our impact on the environment.

The last 12 months have seen some of the

most challenging weather conditions in our

history, as reflected in the significant

increase in wastewater volumes this year.

Forexample we treated 3.3 billion litres of

wastewater per day compared with 2.8 billion

litres per day in2022/23 – driven by the

increase in rainfall in our region over the year.

Our teams have worked determinedly in

particularly challenging conditions this year to

keep our services operating efficiently and

reduce the impacts on our customers and the

environment. However, we recognise that

there is more we can do to deliver the

improvements our customers expect.

Internal and external sewer

flooding and blockages

Sewer flooding remains a key focus, and we are

disappointed not to have delivered against our

stretching targets this year. Hydraulic flooding

incidents are significantly up year on year due to

the sustained rainfall and flash floods which

occurred in our region. In particular, Storm

Babet and Storm Henk resulted in a large

number of flooding incidents – for example,

during Storm Babet there were 10 times more

floodings than in an average (non-storm) week.

Our teams worked determinedly to keep our

services operating efficiently and minimise

the impacts felt for our customers and the

environment. This year we implemented a ‘first

responder’ strategy to enhance our capacity

for handling incidents promptly; and a new

vulnerable customer process, to ensure we

are proactively identifying and prioritising our

most at-risk customers.

Following Storm Babet, we applied learnings for

future events including a documented Storm

Readiness approach, focusing on proactive

measures to be implemented in anticipation of

storm events, prioritisation of resources

(including people and tankers), communications

with customers and communities, and reactive

Strong performance on water

quality complaints

In 2023, we had a total of 7,696 drinking water

quality complaints, which was less than our

regulatory target, meaning we’ve now achieved

our target for every year of AMP7. We remain

confident that we can achieve our end of AMP

target of 9,500.

Our mains cleansing and flushing programme

continues to progress well and we have stepped

up our activity this year having flushed 1,256

district metered areas (a 25% increase on last

year). We have also developed automated

designs using network analytics, meaning we

can produce instant flushing plans during water

quality events to reduce impacts for customers,

and deliver proactive messaging to customers

when undertaking flushing in their area. We’re

also providing more guidance for customers to

self-diagnose issues on our website.

We have ambitious plans to improve our

performance and in 2024 we are undertaking

a new strategy to target aeration issues to

prevent complaints that might not otherwise be

resolved by flushing. We’ll do this by installing

newly designed air valves in problematic areas

within our region.

Looking ahead, further investment is planned

for AMP8, including installation of additional

water quality monitors to provide greater

insight on our network and, where required,

Wastewater taken away safely

actions to be deployed to mitigate potential

impacts to the greatest extent possible. These

changes were applied in preparation for Storm

Ciaran but did not need to be executed.

We have outperformed our public sewer

flooding target every year in AMP7 since the

creation of the measure and this year we’ve

outperformed our target by over 4%.

We’ve achieved our best ever performance on

blockages of 28,547, outperforming our

2023/24 target by 30%. This is a 17%

improvement from last year and a 34%

improvement from the end of AMP6. Our

performance will also be helped by the

insourcing of our waste operational teams,

benefiting from greater internal control over

the quality of work delivered. The insourcing

will also help us benefit from an improved time

to attend blockage jobs which will reduce the

likelihood of blockages causing flooding as

we’re able to take action before our customers

are affected by internal or external flooding.

We are continuing to work in partnership with

food service providers in our region to prevent

fats, oils and greases from entering the network.

We firmly believe that our performance led

culture and desire to do the right thing set us

up for success to tackle sewer floodings and

bolster our sector-leading waste performance.

implementation oftargeted interventions to

drive further performance improvements

forcustomers.

Water quality standards in the UK are some of

the highest in the world and whilst our

performance benchmarks well against global

peers, we are disappointed to have missed our

Compliance Risk Index (‘CRI’) score this year,

driven by asset failures at our largest water

treatment works, including Strensham. An

internal incident team has been established to

identify root causes and implement mitigation

activities, including the deployment of

ultraviolet (‘UV’) technology at Strensham, as

well as reviewing options to accelerate longer

term asset and process improvements.

Total sample failures are down nearly 13%

from last year (122 from 140), our lowest ever

number of sample failures in a calendar year

since the beginning of CRI in 2014 (excluding

COVID-19 years). We continue to benchmark

brilliantly globally.

Our work to understand bacteria within our

processes, using online flow cytometry, which

provides live data on water quality, has enabled

us to deliver improvements at our distribution

service reservoirs. We have recently refreshed

our dedicated improvement plan, Compliance

Risk Index Sustainability Plan (‘CRISP’), with the

objective of eradicating high-impacting events

in our water network and addressing

bacteriological risk at water treatment works.

Good to drink

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 21

STRATEGIC REPORT

Delivering Outcomes continued

EPA metrics

EPA Green Target

Our 2022

performance

Our 2023

performance*

Serious pollutions 2 1 0 

Category 1 – 3 waste pollutions 201 193 239 

Discharge permit compliance 99% 99.3 99.5% 

Self-reported pollutions 80% 87% 89% 

Water Industry National Environment Programme (‘WINEP’) delivery 100% 100% 100% 

Supply Demand Balance Index 100 100 100 

Satisfactory sludge use and disposal 98.2% 100% 100% 

* Subject to Final Determination by the EA.

Our EPA performance for AMP7 to date is summarised below:

Calendar year 2022 2021 2020

EPA rating* 4* 4* 4*

We know there is more we can do and we are

confident that our substantial investment in

our network over recent years will improve

our performance.

Our new pollutions training river opened at the

Academy in 2023, enabling frontline operatives

to get hands-on experience during their

training on how to deal with certain types of

pollution incidents in order to manage events

effectively and minimise potential

environmental impact.

We continue to use detailed data and analytics

to identify hot spots and high-risk areas

where we can target our cleansing work

tokeep the sewerage network clear of

obstructions and blockages. By using the

information provided by our network monitors

we have a greater understanding of the

real-time conditions allowing us to act

toprevent problems occurring.

Our Pollution Focus Group is in place to

optimise current ways of working, and to

implement improvements. Our approach

ensures that events are prioritised and

assessed at the right level within the

organisation, to ensure a consistent approach,

prompt action taken and that potential

learnings from events are cascaded

throughout the Group in an expedient manner.

Our impact on the environment is closely

regulated by the EA and we report our

performance against Category 1, 2 and 3

events in the Environmental Performance

Assessment (‘EPA’), Category 3 being minor or

minimal in its impact on the environment.

The EPA undertaken by the EA assesses and

compares the performance of water companies

in England against the metrics set out below.

Despite the year’s challenges, we are pleased

to have had no serious pollution incidents this

year. We are highly confident that we will

achieve the highest possible rating, 4*, in our

annual EPA for 2023, making it five consecutive

years. No other company has achieved more

than three consecutive years.

Our pollutions performance

Our pollutions management approach ensures

oversight of our business performance and

service delivery for customers, the

environment and wider stakeholders in order

that activity can be prioritised within the

organisation, action taken in response and

learnings from events used to improve our

approach moving forward.

Whilst we achieved zero serious pollutions

thisyear, the unprecedented weather has

driven an increase in Category 3 pollution

incidents: 239 this year compared with193

in2022. A serious pollution is defined as a

Category 1 or 2 incident.

Having consistently delivered on our total

pollutions targets for the last eight years,

weare disappointed not to have met our total

target on pollutions this year with our 2023

performance reflecting a year-on-year

increase of 24%.

Worksop wastewater treatment works

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202422

The site is equipped with three large screw pumps which lift wastewater

flows into the works to an elevated position to facilitate gravity flow to the

rest of the works. They operate on an industry standard ‘duty/assist/

standby’ arrangement, meaning there is one pump for normal flows,

another available for times of heavy flow and a spare third ready-installed

inthe event ofa pump failure.

Barlaston pollution

In February 2024, Severn Trent Water Limited was fined

£2 million for a pollution that occurred at our

wastewater treatment works in Barlaston in 2020. Our

operational failings meant there was a risk of

environmental harm, and this is unacceptable to

everyone at Severn Trent, from the boardroom to the

frontline. The pollution occurred during storms and

when the neighbouring river was in flood and, as a

result, the actual level of environmental harm was low.

We correctly reported the pollution to the Environment

Agency (‘EA’) and the EA agreed with the assessment at

that time. The pollution was therefore included as a

Category 3 pollution in our 2020/21 financial year

reporting.

When the pollution was later prosecuted in February

2024, the Court, applying its sentencing guidelines,

classified it as a Category 2 pollution based on the

potential harm that could have arisen from the pollution

whilst accepting there was no evidence of actual harm.

We took valuable lessons from this pollution and we

have analysed in-depth the cause, and implemented a

host of solutions, which has included additional

investment. Throughout their investigation we worked

with the EA and delivered a number of improvements to

prevent pollutions of this nature occurring in the future.

There was Board-level oversight of the pollution,

including oversight of action taken andimplementation

of lessons learned to improve our approach moving

forwards. To bring this activity to life, thiscase study

sets out the high-level sequence of the pollution, our

responseto it and action taken to implement lessons

learned to improveour preparedness for, and minimise

thelikelihood of, similar pollutions in the future.

Screw pumps at Barlaston

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 23

STRATEGIC REPORT

17 – 18 February 2020

By 17 February one of the larger over-

pumps had been received, installed and

was operational, enabling the site to receive

approximately 2,600l/s, just below full FFT.

On 18 February, an engineer attended the

site to programme the temporary pumps.

This enabled complete control of the

temporary pumping system, alongside the

single screw pump. The works were

thereafter capable of achieving FFT.

Site learnings Training Management systems

Installed condition-based

monitoring on screw

pumps to proactively

detect any potential issues

emerging, allowing

intervention before failure.

Dedicated lessons learned

stand-down for all

wastewater treatment

employees, supported by

training and ‘toolbox talks’

on flow management.

Implementation of an

updated ‘assets out’

process, which triggers

a risk assessment

and mitigation plan from

site managers in the

eventassets are out of

service, with escalation

tosenior leaders and

process scientists.

Bolstered critical spares

supplies for screw pumps

on site, including spare

motors, gearboxes,

bearings and Programmed

Logic Controllers, to

reduce repair timeframes.

Guidance, flow standards

and mandatory e-learning

cascaded to the whole

operational business.

Implementation of

dedicated proactive

maintenance management,

with a focus on reducing

asset failures and

increasing asset reliability.

Mandatory enhanced asset

care package implemented

to standardise routine

operation and

maintenancetasks.

Dedicated Continual

Professional Development

events held for team

managers and

businessleaders.

New ‘Asset Golden

Measures’ standard

introduced for all

wastewater employees,

whereby each process stage

is assessed against our

asset standard and

recorded. All issues

andfeedback are managed

as part of our established

comm cellsystem.

Bolstered contingency

plans for temporary

submersible pumping and

tested the new

arrangements.

All wastewater teams

taken through a dedicated

knowledge assessment,

facilitated by our in-house

Academy team.

Deployment of new

leadership at Barlaston,

with responsibility for

training the site team

oncontingency plans,

escalation processes

andexpectations.

Updated competency

framework for all

operators and

maintenance personnel,

cascaded to

relevant teams.

Installation of additional

flow-related alarms and

analytics, overseen by a

dedicated Flow Process

Team and Waste Network

Control Team with visibility

of performance across

ourestate.

In immediate response to the pollution, we

commenced an investigation which supported

the EA’s testing that the environmental impact

had been minimal. An independent expert

instructed for the court case provided a report

to further support this.

We take all pollutions of this nature very

seriously, at all levels of the Group, from the

frontline to the boardroom. We pleaded guilty

at the first available opportunity and accepted

responsibility for the failures. We have spent

time reflecting deeply on the prosecution,

including a review of prior investment, our

processes and training, and actions that can be

taken to ensure that pollutions of this nature

do not occur in the future.

A summary of the interventions and activities

put in place in response to the pollution are

outlined below. All actions and remedial

investment have been delivered.

22 December 2019

One of the three screw pumps at the site

failed. Our duty/assist/standby pumping

arrangement meant there was no impact

on our ability to deal with permitted

flows. Arequest for a new gearbox for

the failed pump was immediately made,

witha delivery date of 4 March 2020.

Contingency plans were subsequently

initiated in the event of a second pump

failure, although as we note below they

proved to be insufficient.

14 February 2020

A second screw pump failed. We

immediately contacted our reactive

pump supplier for assistance and

subsequently discovered that they did

not have the necessary equipment that

we required and expected. We recognise

that our contingency planning was

insufficient and this has been part of our

post-incident lessons learned. We

informed the EA and they attended the

site for inspection later that day and

undertook sampling of the river. When

the second screw pump failed, we also

identified that over the period

25 November 2019 to 14 February 2020

the weir that controls full flow treatment

(‘FFT’) was set between 3 and 5% lower

than permitted, diverting some of the

flow to the site’s storm tanks in order to

manage an on-site flood risk. Whilst this

had been done with good intentions, it

was done outside of our operating

procedures, without the knowledge of

senior management and should not have

happened. This breach of the site’s

permit meant that in wet weather the

site’s storm overflow will have

discharged to the environment

earlierthan would otherwise have

beenpermitted. We informed the EA of

this issue as soon as it was identified.

15 February 2020

Temporary diesel pumps were installed

as a mitigation measure, while we

awaited delivery of the new gearbox.

Storm Dennis then hit our region,

bringing significant, heavy rainfall and

severe flooding.

Delivering Outcomes continued

Barlaston pollution continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202424

CARING FOR

IN OUR REGION

PEOPLE

Showing care is one of our values and we want

thatto shine through whenever we meet people

inour region. We know that our sector-leading

performance is made possible thanks to our

dedicated people. This section ofour report sets

out how we are taking positive action to deliver

ourstrategic pillar to care for people in our region.

What this means for what we do…

– Helping our own people to thrive.

– A force for good, for our customers.

– Supporting our suppliers to be the best they can be.

– Creating opportunities in our region.

This is also aligned with our Sustainability Framework.

Find out more in our Sustainability Report 2024.

STRATEGIC REPORT

25SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

Caring for People in our Region continued

Our people are fundamental to taking care of one of life’s essentials and we

believe our culture is what makes us special. Our teams are passionate about

the positive role they can play in helping customers and communities thrive

and want to nurture an environment where everyone can feel comfortable to

bring their whole self to work.

You can read about how we have engaged with our employees throughout the year in our

dedicated stakeholder engagement section entitled ‘Engagement in Action – Our

Colleagues’, on pages 112 to 113.

Keeping our people safe and well

We believe passionately that no one should

behurt or made unwell by what we do, and

ourpeople have done a great job of keeping

themselves and those around them safe. For

afifth consecutive year we have achieved

ourbest ever Lost Time Incident (‘LTI’) rate

witha total of 14 LTIs this year (2022/23: 16).

Notwithstanding this excellent performance,

14of our colleagues getting hurt while working

is still too many, and we continue to focus on

improving our performance. Since we refreshed

our Goal Zero strategy in 2018/19, we have seen

consecutive year-on-year improvements (with a

63% reduction in our LTIrate to date), giving us

confidence that ourstrategy is working and will

continue to drive improvements.

Although this year’s results are promising, we

are not at all complacent and continue to strive

for improvements across all aspects of our

operations, for example we collaborate in

external Health and Safety forums, ensuring

our approach incorporates best practice from

a range of companies and sectors.

Employee support

We continue to raise awareness of the different

types of support available to employees and

have a team of dedicated Mental Health First

Aiders and Champions, who wear yellow

lanyards to be easily identifiable and are

available to provide in-the-moment support.

We recognise that in-house support may not

be the right answer for everyone, and as such

we continue to promote the support available

via our Employee Assistance Programme. This

is a confidential service available 24 hours a

day for emotional, legal or career support. It is

also available to spouses or partners, and any

dependants between the ages of 16 and 25.

We are mindful of the effect that the ongoing

cost of living challenges are having on our

employees and we continue to do everything

we can to help support our people. We were

delighted to have agreed a competitive

two-year pay deal for all of our employees in

2023, giving our people certainty on their pay

increases during a period of ongoing cost

challenges. The pay deal was recommended by

all three of our Trade Unions. All of our

employees have the opportunity to become

part-owners of the Company through our

popular Sharesave Scheme and an amazing

72% of all employees participate, with one in

four participants saving the maximum of £500

per month. We are especially delighted that so

many employees decide to retain their shares.

Listening to our people

Providing opportunities for our employees to

stay connected to the direction of the Company

and be involved in business decisions is a key

part of our culture, and we are always looking

for new and different ways for the Board to

engage with employees from across

thebusiness.

Developing our people

We remain focused on driving business

performance facilitating talent progression and

building long-term technical skills resilience.

We work to ensure that we can recruit and

retain the talent and skills needed to deliver

our performance today and have plans in

placefor the skills needed in the future.

Our Academy opened in February 2021,

supporting our ambition to be a socially

purposeful company in all that we do, giving

back to the communities we live and work in,

and providing opportunities for people to learn,

develop and retrain with us in our industry. The

Academy training syllabus continues to evolve

and now contains a suite of over 600 training

interventions across multiple disciplines,

including the launch of our first water

treatment apprenticeships on our in-house

programme. Our Academy was subject to its

first Ofsted inspection during the year, and

wewere delighted to receive an overall

Goodrating and an Outstanding rating in

thepersonal development theme, after

justover two years delivering our

operationalapprenticeships.

Throughout 2023/24 we have delivered 3,637

learning events, accounting for over 170,000

hours of instructor-led training. This training

has ranged across all five learning streams, as

well as development days for teams from

across the business, and communities and

schools’ discovery events.

Talent management and succession

Our Inspiring Great Performance and Talent

Calibration approach continues to inform our

talent management approach across the

business, providing clarity on employee

expectations, feedback on performance and

reflections on achievements and learning

opportunities. Understanding potential for

progression remains a key output of these

conversations which then drive succession

planning and individual development

interventions.

Currently half of our vacancies are filled

internally and we have a strong track record of

developing internal talent, as evidenced by

recent Executive Committee appointments

from internal talent pipelines. Supporting

internal promotions and succession forms the

foundation of our approach to building skills

and leadership resilience in our organisation.

In the last two years, 27% of employees have

progressed to a broader role or been

promoted, with nearly 400 of these colleagues

moving from frontline or advisory roles to

Team Manager or Technical Expert level, and

over 60 promotions to Business Lead or Senior

Professional level roles.

As important as the range of opportunities

provided is how our people feel about them.

We continue to ask colleagues, through our

annual employee engagement survey, several

questions relating to their perceptions of

learning, careers and growth at Severn Trent.

All of these measures have improved year-on-

year, recognising our delivery in these areas.

We continue to ask colleagues

through our annual

engagement survey, several

questions relating to their

perceptions of learning,

careers, and growth at Severn

Trent. All of these measures

have improved year on year,

recognising our delivery in

these areas.

Helping our people to thrive

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202426

Wonderfully You – Providing a diverse and

inclusive place to work

At Severn Trent, we celebrate diversity and

inclusion, and embrace individuals’ contributions,

no matter what their age, gender, race,

ethnicity, disability, sexual orientation, social

background, religion orbelief. Having a culture

that enables individuals to truly be themselves

is a vital partof our future success.

In September 2021, we

launched ‘Wonderfully

You’, our diversity

andinclusion (‘D&I’)

ambition to ensure our

organisation continues to

reflect the communities

we serve.

Success means

ourcustomers and

communities can benefit

from the talent pool in

our region, and that we

can best serve our

customers because we

understand their needs. Our plans to

achieve that include widening our outreach

programmes so that we attract more

applications from under-represented groups,

breaking down some of the historical

stereotypes that might prevent people from

considering certain career paths, and making

sure that we continue to have a level playing

field at the selection stage.

Our ambition for inclusion is to develop and

maintain a fair working environment where

everyone can succeed. We measure our

progress through our annual engagement

survey and monitor the parity or disparity

between different ethnicities and genders.

Reverse mentoring and our Employee

AdvisoryGroups have also helped to give our

employees a voice across the organisation so

that we caneducate each other about our

differences and have a say in our Company

policies and procedures.

Over the last year, we have continued to

champion the voices of colleagues from diverse

backgrounds, in part through our four Employee

Advisory Groups for LGBTQ+, Ethnicity,

Disability, and Women in

STEM and Operations. You

can read more about their

achievements throughout

the year in our

Sustainability Report.

We are proud of our

track record on gender

diversity, and we were

delighted that Severn

Trent achieved first place

as the best performing

FTSE100 company for

representation of women

on the Board in the FTSE

Women Leaders Review

2024. Following Helen Miles’ appointment as

Chief Financial Officer in July 2023, Severn

Trent became the first company in the FTSE100

to have a female Chair, CEO and CFO.

As at 31 March 2024, our Executive Committee

comprised four female and five male members

(44.4% and 55.6% respectively). 22 (42.3%) of

our senior leaders (including our Executive

Committee) were female and 30 were male

(57.7%). Female representation inthe Group

was 28.1% (2,582 women), with male

representation at 71.9% (6,610 men). Six

members of our Board were female (75%) and

two were male (25%). The table below sets out

agender breakdown of Directors, senior

managers (as defined in the 2018 UK Corporate

Governance Code and Companies Act 2006) and

employees of the Company as at31 March 2024.

We’re thrilled that in November 2023,

our Academy received a Princess

Royal Training Award from The

Princess Royal, President of the City

and Guilds ofLondon Institute,

recognising our exceptional

commitment to learning and

development through our two

Apprenticeship Standard Technical

Development programmes. City and

Guilds CEO, Kirstie Donnelly MBE,

complimented our “unwavering

dedication to training and the

remarkable positive impact it hashad

on our organisation andpeople”.

Our ambition for inclusion is

todevelop and maintain a fair

working environment where

everyone can succeed. We

measure our progress through

our annual engagement survey

and monitor the parity or

disparity between different

ethnicities and genders.

Gender representation

as at 31 March 2024

Directors Senior leaders Graduates and apprentices All employees

Number % Number % Number % Number %

Female 6 75 22 42.3 67 21.9 2,582 28.1

Male 2 25 30 57.7 239 78.1 6,610 71.9

Ethnicity representation

as at 31 March 2024

Directors Senior leaders Graduates and apprentices All employees

Number % Number % Number % Number %

Asian/Asian British 1 12.5 5 9.6 65 21.2 654 7.1

Black/African/Caribbean/

Black British – – – – 18 5.9 199 2.2

Mixed/Multiple ethnic group 1 12.5 – – 11 3.6 159 1.7

Other ethnic group – – – – 1 0.3 37 0.4

Not specified/prefer not to say – – – – 15 4.9 1,103 12

White British or other White

(Including minority-White

groups) 6 75 47 90.4 196 64.1 7,040 76.6

We were delighted to be awarded the

Race Equality Matters Bronze

Trailblazer Status during the year,

which recognises how we’re driving

change when it comes to race equality.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 27

STRATEGIC REPORT

Caring for People in our Region continued

With the launch of ‘Wonderfully You’ we publicly

set long-term gender and ethnicity targets.

Wealso committed to reviewing these when

the latest census data was released, and this

has resulted in our ethnic diversity target

increasing from 14.1% to 18.9% to better reflect

the communities we serve. Recognising the

make-up of our existing workforce and low

attrition levels, particularly in frontline and

operational teams (the largest part of our

business), our new female hires continue to

exceed our ambitions.

You can read about our approach to Board

diversity in our Nominations Committee

Report on pages 148 to 152.

We continue to engage in a series of outreach

and employability initiatives for under-

represented groups within our communities,

tobreak down perceived barriers which may

prevent people from considering a career with

us. We recognise that there is no quick fix, and

that a sustained and consistent approach is

needed over a long period of time. We continue

to focus on increasing additional diversity data

sharing beyond gender and ethnicity of which

c.88% are sharing, including data on disability,

sexual orientation, gender identity, trans and

socio-economic background, and 59% of

colleagues are now sharing some or all of this

data, up from 19% three years ago.

We measure progress on inclusion primarily

through our annual engagement survey, and

we are delighted that our scores continue to

remain strong and well ahead of benchmark.

Our equality score of 9 out of 10 for the

question ‘People from all backgrounds are

treated fairly at Severn Trent’ places us in the

top 5% for energy and utilities.

Gold Award for Employees’ Recognition

Scheme with the Armed Forces Covenant

Our commitment to the Armed Forces has

been recognised by the Armed Forces

Covenant, after receiving a Gold Award for

Employer Recognition Scheme in2023.

The prestigious award – the highest

available – recognises the important and

positive role that organisations can play in

supporting the Armed Forces community.

Severn Trent’s internal Armed Forces

Network was set up in 2021, and since

then has been a big driver in support for

ex-military colleagues and their families

with settling back into the

community, while also

providing skills and training

tohelp ex-military

membersfind work.

Building our future skills through

diverse newtalent

An inclusive environment is the foundation

ofatruly diverse organisation, with all of

therewards that brings. Having the right

people with the right skills to deliver positive

outcomes for our customers and the

environment today, and for the future, is a core

part of our approach to building future skills.

The launch of our Societal Strategy and

continuation of our outreach activities,

internships and new talent programmes are

critical to our success in attracting diverse

candidates from under-represented groups,

removing barriers to entry and creating a level

playing field, whilst still recruiting the best

person for the job.

Our graduate programmes remain the most

successful gateway into the organisation and

have a successful track record in onward

progression, with one in five being promoted to

Business Lead or above.

Our graduate programmes include tailored

placements and projects that help individuals

to develop the knowledge and skills to become

our future technical experts and leaders.

Theytypically last 27 months and are made

upof three placements across our business.

We currently have a number of graduate

programmes, including Technology, Cyber

Security, Finance, Engineering, Strategy

andRegulation and the Graduate

LeadershipProgramme.

This year we also launched our new

Operational and Environmental Leadership

Programme, with the aim to develop our

operational team managers of the future.

The 2023 cohort of those on graduate programmesand Year in Industry placements.

We continue to have a strong presence in

D&I indices, including:

Eighth

on the Social Mobility Index, placing us

inthe top 10 for the fifth year running

Level 2

Disability Confident employer

23rd

in the Stonewall Workplace Equality Index

and aGold employer for our commitment

to beinga truly inclusive LGBTQ+

employer 2023

4.5/5

Glassdoor score continues to perform well

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202428

Severn Trent scoops

top award at the

Multicultural

Apprenticeship

Awards

In October 2023, we were proud to gain

national recognition at the Multicultural

Apprenticeship Awards for our work and

investment in nurturing talent through

our apprentice scheme, which was

awarded Engineering & Manufacturing

Employer of theYear. Additionally, two

ofSevern Trent’s apprentices were

shortlisted under the Management,

Legal& Professional Apprentice of

theYear and the Judges’ Choice

Apprentice of the Year categories.

The Multicultural Apprenticeship Awards

recognise talent and diversity within

multicultural communities through the

celebration of individuals who have

overcome adversity to achieve their goals

through apprenticeships. They also

highlight the achievements of apprentices

and the contribution of employers and

learning providerswho have assisted

them along their journey.

Our vision as an apprenticeship provider is to

develop the most skilled teams in our industry

through outstanding technical development

programmes. We currently offer two

Apprenticeship Programmes for new starters

and New Talent apprentices in frontline

operational roles. These are water treatment

and wastewater. We remain one of only three

water companies that are fully accredited and

delivering apprenticeships as an employer

apprenticeship provider.

Applications opened in 2024 for our second

biggest ever intake of 110 apprentices, with

roles available right across our region, ranging

from level 2 (equivalent to GCSEs) to level 7

(equivalent to a degree) apprenticeships

across Operations, Commercial, HR, Customer

Service, Business Administration and

Engineering. We have two colleagues on our

‘Apprentice Sales Executive’ scheme who

started in August and September 2023. We are

also in the early stages of obtaining centre

recognition for functional skills delivery. This

will enable us to take a more flexible approach

to the delivery of Maths and English tuition and

testing, which will be better suited to our

learners’ and operational business needs.

According to the Institute of Student

Employers, on average employers retain 71%

of school leavers and 72% of graduates after

three years. At Severn Trent, we are

significantly over-achieving this: since 2014

wehave had 581 apprentice joiners and 81%

are still with us today.

We are delighted to have welcomed four

newinterns from Derwen and Hereward

Colleges this year to gain first-hand work

experience. Byhaving partnerships with the

colleges, itmeans we can support students

with special educational needs and

disabilities(‘SEND’) and make a huge

difference to their futures.

Around 23% of the working age population

have a disability and the proportion of adults

with a learning disability in paid employment

has decreased over time. Due to this, the

Employability Working Group was established

to foster acollaborative approach with

colleges, aimed atenhancing the prospects of

securing employment for students once they

complete their college education and

internship with Severn Trent.

All of our employees have theopportunity

tobecome part-owners of the Company

through our popular Sharesave Scheme and

an amazing 72% participate across

allschemes, with one in fourparticipants

saving the maximum of £500 per month

across all schemes.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 29

STRATEGIC REPORT

A force for good for customers

To be truly impactful in our communities, we need to help more of our

customers who need support today.

Our average combined bill for the year remains one of the lowest in the

country, and we will continue to offer one of the lowest bills for the remainder

of the AMP. Even though our bills are low, some customers have difficulty

paying and we make it clear to our customers that we don’t want anyone to

struggle to pay.

In May 2022, we announced a £30 million

affordability package allowing us to help

afurther 100,000 people to reduce their water

bill by up to 90% through our social tariff.

By2025, our financial support schemes will

besupporting about 315,000, or 6% of our

customers, in line with the number of

customers assessed as living in water poverty

in our region. Approximately 260,000 of our

customers are benefiting from support on

their bills already.

We recognise the importance in building

more partnerships to ensure we are finding

customers who really need our support. We are

working closely with local authorities, securing

c.£500,000 of arrears support through the

Government’s Household Support Fund and the

introduction of our care leaver’s support

package. We have signed 12 partnership

agreements to either signpost or passport

customers to our Big Difference Scheme.

We have also reviewed our Trust Fund, which

has historically supported customers through

an annual grant of £3.5 million, to maximise

the support this can provide to our customers.

Over 80% of successful Trust Fund applicants

were also receiving support though our Big

Difference Scheme. As such, we saw an

opportunity to amalgamate the Trust Fund and

Big Difference Scheme processes, reducing

barriers to customers receiving support and

reducing the costs associated with supporting

customers. We subsequently announced our

Big Difference Scheme Plus offering, which

has been received positively by customers.

Supporting our

vulnerablecustomers

We aim to reach out to as many customers

aspossible to find those who might need

additional support from us and we now have

over 9% of our customers signed up to our

Priority Services Register (‘PSR’), an increase

of around 20% on the prior year. Our PSR

ensures those who need additional support

areprioritised during an incident so we can

provide them with bespoke communication

anda personalised service.

We know that winter can be hard forlots of

our customers, so we launched our winter

campaign – ‘Weather the winter together’

– ajoint campaign across water, waste and

affordability which ran until the end of

March 2024. Our customers received an

email, with messages also shared through

our social channels, outlining information

and tips for the colder months, such as

supporting those who are worried

about paying their water bill, protecting

customer pipes from freezing and

savingmoney around the home.

A hassle-free winter

Fairly rewarding

ourpeople

We have been working hard to create a

consistent framework which includes

transparent pay ranges to support us in

measuring our fair pay processes and we were

pleased that in June 2023, the Company’s pay

offer was accepted by members following the

recommendation by the Joint Trade Unions.

You can read more about this on page 112.

All of our people share in our success by

participating in our all-employee bonus plan,

ensuring all employees are aligned with the

same measures and rewarded for achieving our

key objectives. Additionally, we offer a market-

leading defined contribution pension scheme

and double any contributions that employees

make (up to a maximum of 15% of salary).

In March 2024, we published our second

combined Gender and Ethnicity Pay Gap Report,

highlighting a decrease in both the median and

mean gender pay gaps between women and

men, with both now at the lowest level seen in

the seven years that we have been reporting.

The Report shows a median pay gap of 7.8%,

down from 9.4% in 2022, and a mean gender pay

gap of 2.0%, down from 2.9% in 2022.

We know that to improve our gender balance,

we need to place focus on recruitment and

retention and provide everyone with the best

possible opportunities to learn and grow their

careers with us.

Our median ethnicity pay gap is 6.3%

(2022/23: 4.1%) and our mean gap is 7.2%

(2022/23: 5.7%). This year there has been a

slight increase in both compared to last year,

despite an increase in the hourly rate for

employees. Although we have seen an overall

increase in representation of colleagues from

minority ethnic backgrounds, up to 12% from

10% last year, we are now placing more focus

on our senior roles, to better represent our

communities at all levels of our organisation.

The full Gender and Ethnicity Pay Gap Report

can be found on the Severn Trent Plc website

and further information regarding employee

pay can be found in our Directors’

Remuneration Report on pages 169 to 194.

Remuneration

The Company Remuneration section, in

the Directors’ Remuneration Report, sets

out the steps we take to make sure that

our pay and reward framework, below

Executive andsenior management, is

transparent, meaningful and useful for

stakeholders. You can read more on

pages 182 to 188.

Caring for People in our Region continued

Our Priority Services

need additional support are

prioritised during an

incident so we can provide

them with bespoke

communication and a

personalisedservice.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202430

CREATING OPPORTUNITIES IN OUR REGION

Over 10 years, we want to give

100,000 people in, or at risk of,

poverty the tools to improve their

life chances, through access to

high-quality employment-related

training and career opportunities.

On 22 November 2022, welaunched our Societal Strategy, withthe objective of

helping up to 100,000 people in our region, giving them improved chances

inlife andtackling the underlying causes ofwater poverty. Our 10-year plan

isa huge undertaking, and we are passionate about helping householdsacross

our region and will achieve this by working closely withcommunities and

partner organisations.

This section showcases some of the progress wehave made over the pastyear.

Our Societal Strategy Ambition One Year On

Our Commitment Progress

Education and Skills

We increased the number of placements to 300 and

developed new work experience opportunities. Young

people can choose between a traditional work experience

week or to join a Discovery Day.

Run at our Academy or Head Office, Discovery Days allow

school groups to come and meet a range of departments

and take part in workshops and group projects. Working

with new partner schools in East Birmingham, Derby and

Coventry, meaningful work experience consolidates and

brings to life the employability skills training that pupils

receive in schools as part of our new schools offer.

– 5,413 students engaged with inschools

– 94 students onshort-term work

experience (1 – 2 weeks)

– 79 students on long-term work

experience (1 – 3 months)

Student, Discovery Day

“Thank you so much for the

opportunity to attend and be a part

ofthe Discovery Days. I found it very

informative and definitely enjoyed it

– everything was so well organised.

All the staff were very welcoming

andgave me a positive insight on

whatit’s like to work for you and the

different roles in which I could do that.

I look forward to applying for an

apprenticeship role after completing

my A-Levels.”

Employability

We are working with community groups in East

Birmingham, Derby and Coventry providing free

employability skills sessions including CV and interview

advice workshops.

We run training sessions for people out of work orseeking

a career change; supporting people togrow their

confidence and explore career opportunities. We link the

training sessions with access to advice on available

affordability support and, in Derby, current open roles at

Severn Trent.

– 1,629 people attending BigBoost

careers fairs

– 1,455 people attending

employabilityevents

Riordan Knott, careers

fairattendee

“The Severn Trent Team quickly made

me feel welcome and comfortable. I

had an engaging talk with Surinder

and her team discussing job and

development possibilities at Severn

Trent. This lifted my spirits and made

me feel included and welcome and in

turn was the catalyst for me applying

then and there. I look forward to the

career I can build at Severn Trent.”

Mentoring Young People

In parallel with our place-based approach in

EastBirmingham, Derby and Coventry, we are working

with aspecific group of young people not in education,

employment or training (‘NEET’). In partnership with

charity Trailblazers, Severn Trent staff mentor young

people weekly for their last six months in prison and up to

12 months post release in the community. This work

complements our existing work with NEETs, such as our

apprentice and internship offer. As part of our mentoring

sessions, we provide employability workshops to

encourage and support prison leavers into work post

release and reduce the risk of re-offending.

– 16 people mentored through the

Trailblazers programme

Nathan Worton, Trailblazer

“For the first mentoring visit I was

accompanied by a member of the

Trailblazer’s team and subsequently

Iattended HMP Brinsford weekly.

Thiswas an incredibly rewarding

experience, offering real personal

growth, and I am pleased that since

release my mentee has applied for an

apprenticeship with Severn Trent and

I wish them every success during the

assessment process.”

Volunteering

At Severn Trent, we’re big believers in volunteering, which

is why we encourage and empower our employees to get

out and about in local communities with two days paid

volunteering leave per year. Our volunteering scheme is

really popular with an average of 30% of our employees

volunteering each year.

We encourage volunteering that supports the environment,

biodiversity, tree planting and water efficiency, and work in

partnership with a number of key partners across our

region to deliver this.

– 464 students on Discovery Days

– 7,895 hours of volunteering

Sonia Pengelly, Warwickshire

Wildlife Trust

“They all did an incredible job,

working very hard to achieve excellent

results. Many hands do make lighter

work and their efforts have made a

huge contribution to the area. The

people Iworked with on the day were

a really friendly group, easy to work

alongside and a pleasure to chat to,

and I hope they can all join us again

inthe future.”

STRATEGIC REPORT

31SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

Caring for People in our Region continued

Social Mobility Index

We’ve officially been named one of the

country’s top performing companies for

improving social mobility. For the fifth year

running, we’ve landed in the top 10 on the

Social Mobility Index, coming in at eighth

placeout of 75.

The Social Mobility Index, which is in its

seventh year, ranks UK employers on the

actions they’re taking to ensure they’re open

toaccessing and progressing talent from

allbackgrounds.

Lumumba, a Chemical Engineering student

atthe University of Birmingham, was awarded

with a bursary to support with his studies

through the Andy Duff Bursary programme.

Lumumba said:

The support from Severn Trent has

been very helpful because Ididn’t

have to think about going to work to

pay for university, Icould focus

solely on my degree and the

bursary helped cover some of the

expenses. The placement and

mentor at Severn Trent also helped

me grow as aperson and develop

some skills, and really helped build

my confidence, so I’m really

thankful for the support

and opportunities.

Helping our communities to achieve

their goals

During the year, we launched our new and

improved online community learning platform,

created by our Academy Team. The platform is

available for everyone in our communities to

use. We want everyone to have the best chance

of success and our Academy Team is there to

support our communities every step of the

way. There is a huge variety of free online

learning resources available, from videos and

articles to a range ofonline training courses.

Access the resources here.

Community Fund

In our PR19 Business Plan, we pledged to

create a new Severn Trent Community Fund

that donates 1% of Severn Trent Water’s annual

profits after tax (more than £10 million over

five years) to good causes in our region.

In 2023/24, the Fund awarded over £2 million,

to over 100 organisations. Since the Fund’s

inception, we have awarded nearly £10 million

to organisations across our region.

£10m

donated to organisations

across our region since 2020

You can read more about our Community

Fund here: stwater.co.uk/about-us/

severn-trent-community-fund/

Fair pay and working conditions

We are proud to be an accredited Living Wage

Employer. We also contractually require

suppliers to sign up to the real Living Wage.

Weare signatories of the Prompt Payment

Code and are committed to paying suppliers

ontime and giving clear guidance on payment

terms. We aim to pay 95% of our small

suppliers within 30 days, in line with the

Prompt Payment Code. For the payment

practices reporting period ended 31 March

2024, the average time to pay for Severn Trent

Water was 33 days.

Living Hours is a newer concept designed to

ensure that workers are on contracts where

they can earn enough to support a decent

standard of living. In April 2024 we became

an accredited Living Hours Employer. The

standards to which it holds employers

includes: a right to acontract which reflects

the hours worked; offering a minimum of

16hours per week (employees can request

less); and providing atleast four weeks’

notice of a change to working patterns. It

currently applies to all our employees, and

we are working to implement it across our

supply chain.

Read more about how we have engaged

withour suppliers in our ‘Engagement in

Action – Suppliers’ disclosure on pages

118 to 119.

In November 2023, in partnership

with Aston University, we proudly

hosted agroup of engineering

Masters students during Industry

Week – the students took part in a

transformative one-week

Innovation Challenge as part of the

Asset Intelligence and Innovation

Wavemakers programme.

The initiative harnessed the creative

potential within our communities and

wasused to address critical challenges

linked to our innovation hubs: Zero Spills;

Water Resilience; Net Zero; and

CircularEconomy.

The students collaborated with innovation

experts and SMEs from various areas of

the business. They also received

invaluable training from our Academy and

Aston Business School. This collaborative

effort delivered arange of ideas and

perspectives, creating a space where they

could be creative and solve problems.

Throughout the week, students immersed

themselves in the challenges presented

by the innovation hubs, demonstrating

exceptional creativity andingenuity.

Under our guidance, theyexplored and

proposed solutions that have the potential

to drive positive change across the

business, showcasingthe amazing talent

within Aston University.

The week-long event ended with

presentations judged by industry

experts, with the winning entry exploring

how we can use innovation toreduce the

amount of water we use inthe

agricultural community.

Keep making waves

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202432

CHANGE

A DRIVER OF POSITIVE

The world we operate in and the needs of our customers

and society change continually. We seek to embrace the

challenges and opportunities this presents, not only

driving change in what we do, but also acting as a catalyst

in our sector, our region and for the people we serve. This

section sets out how we are taking action to deliver our

strategic pillar to be adriver of positive change, setting out

our progress against our Green Recovery Programme,

GetRiver Positive river pledges and our Storm

OverflowAction Plan (‘SOAP’).

What this means for what we do…

– Collaborating widely to support innovation.

– Creating a market that works for everyone.

– Putting our regions on the map.

– Providing a role model for others.

This is also aligned with our

Sustainability Framework. Find out

more in our Sustainability Report 2024.

33SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

STRATEGIC REPORT

A Driver of Positive Change continued

In July 2021, Ofwat approved an additional

investment of £566 million (2017/18 prices) for

our ambitious Green Recovery Programme.

Nearly three years on, our projects are

makingexcellent progress – already yielding

substantial benefits for our customers,

communities and the environment, and the

learnings from the programme are

informingour future strategic plans.

Bathing Rivers Protecting customer

supply pipes

Water resources Flood-resilient

community

Improving our

region’srivers

Smart water meters

Our goal

Improve River Leam and River Teme water

quality by upgrading three sewage treatment

works, treating and reducing spills from

stormoverflows and installing river

qualitymonitoring.

Our progress

We have made good progress with the

programme and are on track to deliver

againstour goal by March 2025. Detailed

design of our sewage treatment works ozone

disinfection upgrades is complete and we

areprogressing with off-site assembly of the

plantwhich is quicker, more cost effective

andsupports equipment testing and

commissioning. This programme has now

been aligned to our Drainage and Wastewater

Management Plan (‘DWMP’), capturing recent

statutory changes, and facilitating a further

15.9% reduction in spill volume from our

original plan (over 230,000 m

per year). These

changes also increase the length of river we

will improve, to deliver even greater benefits

for customers, communities and the

environment, and we are working through the

impacts of this with Ofwat. This programme

has seen us collaborating with the Rivers Trust

to better understand how our communities are

using rivers, inform local communities of our

plans and share how we can collectively take

care of rivers.

Our goal

Replace up to 26,000 lead or leaking customer-

owned supply pipes in Coventry and Bomere

Heath, removing lead and reducing leaks by

around 1 million litres a day from customer-

owned pipes. InBomere Heath, removing all

the lead pipes alsomeans that we can reduce

our treatment process that mitigates the

impact of lead, thereby reducing the carbon

impact of our water treatment processes.

Our progress

We have delivered over 7,300 supply pipe

replacements in Coventry, and have ramped up

our delivery pace. We have completed more

than 1,000 replacements for social housing

properties, bringing benefit to customers who

may be more financially vulnerable. Supply

pipe replacements in Bomere Heath have also

continued, with 35 out of an estimated 600

completed and we have begun asampling

programme to help identify any remaining lead

pipes. This process will alsoconfirm lead

removal and support simplification of our

treatment process. We have shared our

learnings from this project across the industry,

including hosting a ‘lead pipes event’ in

November 2023. We have continued to

providebespoke updates on our trials to other

water companies.

Our goal

Increase water supplies by up to 93 Ml/d –

enough to serve a city the size of Derby –

using low-carbon-impact treatment

processes, and share our knowledge with

other water companies, supporting the

sector’s aim to achieve net zero operational

emissions by 2030. In addition, our work to

achieve this will increase the biodiversity of

46hectares of habitat at our Witches Oak

water treatment works.

Our progress

Our 31 floating wetlands were completed

ahead of schedule. The floating wetlands

biologically pre-treat the raw water before we

abstract it, reducing the amount of traditional

treatment required. Our Raw Water

Abstraction and Transfer Project construction

is on track to be completed ahead of schedule

in October 2024, despite exceptional weather

and flooding events during the last quarter of

the year. We completed our innovative Ceramic

Membrane Pilot Plant in December 2022 and it

has been in operation over the last year,

collecting critical data to support real-time

optimisation of the new treatment works.

Construction of our Witches Oak water

treatment works is also progressing well, with

the main structures complete andthe

mechanical and electrical

installationunderway.

Our goal

Create the UK’s first catchment-scale

flood-resilient community in Mansfield, using

an innovative ‘nature-based’ approach to

reduce surface flooding risk.

Our progress

We are installing Sustainable urban Drainage

Systems (‘SuDS’) across Mansfield to absorb

rainwater, providing additional storage

capacity. We have facilitated more than

4,900 m

of surface water storage through our

interventions, provided 48 rain gardens and

bioretention tree pits with acapacity of almost

600 m

and delivered more than 4,870 m

permeable paving with an estimated 1,243 m

of storage.

We have had great success with eight bioswales

and detention basins, which have provided a

storage capacity of 3,076 m

. Additionally, the

bioswales and detention basins deliver

significant environmental benefits and reduce

the pressure on the wastewater network.

We have learned a huge amount about the

actual costs of these types of retro-fitting SuDS

and how to roll them out at scale. We have

learned how, when and where retro-fitting

SuDS is viable or not – something which had not

been explored at scale before this programme.

We believe this will help us, and others, in

deploying SuDS in the right places in the future.

Our goal

Support environmental improvements to 500

km of rivers, accelerating our planned Water

Industry National Environment Programme

(‘WINEP’) investment by three years. This

includes delivering 47 Water Framework

Directive (‘WFD’) statutory obligations faster

by carrying out schemes to reduce storm

overflows and remove phosphorus. We will

also undertake Storm Overflow Assessment

Framework (‘SOAF’) investigations to inform

and prioritise futureinvestment.

Our progress

We are ahead of schedule to deliver our WFD

obligations, resulting in earlier improvements

to our rivers. We are installing more chemical

dosing systems, reedbeds and mechanical

filters to reduce the amount of phosphorus in

the rivers resulting from our wastewater

operations. Our first 21 projects, reflecting

over 47% of the programme, are in contract,

and work has commenced on site at nine

projects. This will deliver the majority of our

2025 obligations and result ina significant

benefit to the related watercourses. We

continue with our storm overflow assessment

in line with the guidance laid down in the

published SOAF.

You can read more about our plan to reduce

storm overflows on pages 38 to 41.

Our goal

Help customers save water by installing

over157,000 smart water meters to individual

household properties, giving customers

instant access to their usage information.

Our progress

We are working towards our goal to deliver the

full programme ahead of March 2025, and have

installed over 111,000 smart meters to date

and have more than 60% of meters online

transmitting data every day. The programme

has provided valuable learnings in relation to

meter connectivity and, in view of these

learnings, wehave improved our coverage to

77% through a number of activities including

raising antennas. Over 76,000 customers have

been welcomed and have access tothe Smart

Tracker platform, which displays the smart

meter readings as well as lots of other helpful

tools and water saving tips, and more than

27,900 customers have engaged with

thisfunctionality.

The success of this programme to date is

reflected in our leakage and Per Capita

Consumption (‘PCC’) performance, and we

arecontinuing to build on our positive progress

by providing additional support for vulnerable

customers, such as streamlining leak

resolution activity.

storm overflows planned for improvement to

support our Bathing Rivers project

7,331

supply pipe replacements in Coventry since

the project inception

floating wetlands were completed

aheadofschedule

4,909 m

of surface water storage delivered through

ourinterventions to date

500 km

of rivers will be supported with

environmentalimprovements

111,853

smart meters installed since the project began

GREEN RECOVERY

PROGRAMME

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202434

Bathing Rivers Protecting customer

supply pipes

Water resources Flood-resilient

community

Improving our

region’srivers

Smart water meters

Our goal

Improve River Leam and River Teme water

quality by upgrading three sewage treatment

works, treating and reducing spills from

stormoverflows and installing river

qualitymonitoring.

Our progress

We have made good progress with the

programme and are on track to deliver

againstour goal by March 2025. Detailed

design of our sewage treatment works ozone

disinfection upgrades is complete and we

areprogressing with off-site assembly of the

plantwhich is quicker, more cost effective

andsupports equipment testing and

commissioning. This programme has now

been aligned to our Drainage and Wastewater

Management Plan (‘DWMP’), capturing recent

statutory changes, and facilitating a further

15.9% reduction in spill volume from our

original plan (over 230,000 m

per year). These

changes also increase the length of river we

will improve, to deliver even greater benefits

for customers, communities and the

environment, and we are working through the

impacts of this with Ofwat. This programme

has seen us collaborating with the Rivers Trust

to better understand how our communities are

using rivers, inform local communities of our

plans and share how we can collectively take

care of rivers.

Our goal

Replace up to 26,000 lead or leaking customer-

owned supply pipes in Coventry and Bomere

Heath, removing lead and reducing leaks by

around 1 million litres a day from customer-

owned pipes. InBomere Heath, removing all

the lead pipes alsomeans that we can reduce

our treatment process that mitigates the

impact of lead, thereby reducing the carbon

impact of our water treatment processes.

Our progress

We have delivered over 7,300 supply pipe

replacements in Coventry, and have ramped up

our delivery pace. We have completed more

than 1,000 replacements for social housing

properties, bringing benefit to customers who

may be more financially vulnerable. Supply

pipe replacements in Bomere Heath have also

continued, with 35 out of an estimated 600

completed and we have begun asampling

programme to help identify any remaining lead

pipes. This process will alsoconfirm lead

removal and support simplification of our

treatment process. We have shared our

learnings from this project across the industry,

including hosting a ‘lead pipes event’ in

November 2023. We have continued to

providebespoke updates on our trials to other

water companies.

Our goal

Increase water supplies by up to 93 Ml/d –

enough to serve a city the size of Derby –

using low-carbon-impact treatment

processes, and share our knowledge with

other water companies, supporting the

sector’s aim to achieve net zero operational

emissions by 2030. In addition, our work to

achieve this will increase the biodiversity of

46hectares of habitat at our Witches Oak

water treatment works.

Our progress

Our 31 floating wetlands were completed

ahead of schedule. The floating wetlands

biologically pre-treat the raw water before we

abstract it, reducing the amount of traditional

treatment required. Our Raw Water

Abstraction and Transfer Project construction

is on track to be completed ahead of schedule

in October 2024, despite exceptional weather

and flooding events during the last quarter of

the year. We completed our innovative Ceramic

Membrane Pilot Plant in December 2022 and it

has been in operation over the last year,

collecting critical data to support real-time

optimisation of the new treatment works.

Construction of our Witches Oak water

treatment works is also progressing well, with

the main structures complete andthe

mechanical and electrical

installationunderway.

Our goal

Create the UK’s first catchment-scale

flood-resilient community in Mansfield, using

an innovative ‘nature-based’ approach to

reduce surface flooding risk.

Our progress

We are installing Sustainable urban Drainage

Systems (‘SuDS’) across Mansfield to absorb

rainwater, providing additional storage

capacity. We have facilitated more than

4,900 m

of surface water storage through our

interventions, provided 48 rain gardens and

bioretention tree pits with acapacity of almost

600 m

and delivered more than 4,870 m

permeable paving with an estimated 1,243 m

of storage.

We have had great success with eight bioswales

and detention basins, which have provided a

storage capacity of 3,076 m

. Additionally, the

bioswales and detention basins deliver

significant environmental benefits and reduce

the pressure on the wastewater network.

We have learned a huge amount about the

actual costs of these types of retro-fitting SuDS

and how to roll them out at scale. We have

learned how, when and where retro-fitting

SuDS is viable or not – something which had not

been explored at scale before this programme.

We believe this will help us, and others, in

deploying SuDS in the right places in the future.

Our goal

Support environmental improvements to 500

km of rivers, accelerating our planned Water

Industry National Environment Programme

(‘WINEP’) investment by three years. This

includes delivering 47 Water Framework

Directive (‘WFD’) statutory obligations faster

by carrying out schemes to reduce storm

overflows and remove phosphorus. We will

also undertake Storm Overflow Assessment

Framework (‘SOAF’) investigations to inform

and prioritise futureinvestment.

Our progress

We are ahead of schedule to deliver our WFD

obligations, resulting in earlier improvements

to our rivers. We are installing more chemical

dosing systems, reedbeds and mechanical

filters to reduce the amount of phosphorus in

the rivers resulting from our wastewater

operations. Our first 21 projects, reflecting

over 47% of the programme, are in contract,

and work has commenced on site at nine

projects. This will deliver the majority of our

2025 obligations and result ina significant

benefit to the related watercourses. We

continue with our storm overflow assessment

in line with the guidance laid down in the

published SOAF.

You can read more about our plan to reduce

storm overflows on pages 38 to 41.

Our goal

Help customers save water by installing

over157,000 smart water meters to individual

household properties, giving customers

instant access to their usage information.

Our progress

We are working towards our goal to deliver the

full programme ahead of March 2025, and have

installed over 111,000 smart meters to date

and have more than 60% of meters online

transmitting data every day. The programme

has provided valuable learnings in relation to

meter connectivity and, in view of these

learnings, wehave improved our coverage to

77% through a number of activities including

raising antennas. Over 76,000 customers have

been welcomed and have access tothe Smart

Tracker platform, which displays the smart

meter readings as well as lots of other helpful

tools and water saving tips, and more than

27,900 customers have engaged with

thisfunctionality.

The success of this programme to date is

reflected in our leakage and Per Capita

Consumption (‘PCC’) performance, and we

arecontinuing to build on our positive progress

by providing additional support for vulnerable

customers, such as streamlining leak

resolution activity.

storm overflows planned for improvement to

support our Bathing Rivers project

7,331

supply pipe replacements in Coventry since

the project inception

floating wetlands were completed

aheadofschedule

4,909 m

of surface water storage delivered through

ourinterventions to date

500 km

of rivers will be supported with

environmentalimprovements

111,853

smart meters installed since the project began

Green Recovery Report

Our dedicated Green Recovery

Report will be available in our

Regulatory Library on the

Severn Trent Water website

from 15 July 2024.

Scan or click to read more.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 35

STRATEGIC REPORT

In March 2022, alongside Anglian Water and Hafren Dyfrdwy,

Severn Trent Water launched Get River Positive pledges, our five

pledges to improve the health of rivers in our region. Since then we

have delivered a number of important benefits.

More people now see the value in their local

rivers when it comes to health and wellbeing

activities. We remain on track to deliver

river quality improvements as part of our

£78 million Bathing Rivers programme. We

have begun installing innovative ozone

treatment at three of our wastewater

treatment sites – one in Shropshire and two

in Warwickshire.

This is a pioneering process which aims to

enhance the effluent quality of the normal

sewage treatment process. We are the first

UK water company to trial this technology

and are excited to understand its

effectiveness in removing micropollutants

and pharmaceuticals.

We know that creating opportunities for

everyone to enjoy our region’s rivers isn’t

just about improving water quality. That’s

why we want to support water-based leisure

activities, including exploring what we can

offer at our reservoirs. This includes the

recent launch of paddleboarding at our

beautiful Ladybower Reservoir in the Upper

Derwent valley for the first time.

Over the last year we have continued to

engage with communities, schools and

organisations across our region to support

them in helping to improve river health.

We are delighted to be working with the

Shropshire Wildlife Trust to help restore and

re-naturalise a section of the River Corve. In

1992, the channel was declared ecologically

dead as a consequence of historical dredging;

our funding will restore the channel, making it

a vital habitat for trout, and provide an

opportunity to reintroduce white clawed

crayfish to support the downstream population

at Stanton Lacy, in addition to broader

biodiversity gains.

Our Community Fund has awarded over

£256,000 over the last year to projects that

help protect river health. The biggest award

went to the Severn Rivers Trust’s Black

County River Schools project, which received

nearly £200,000 for an education and physical

infrastructure programme.

Our unique collaboration with the agricultural

community has seen us support over 5,000

farmers in the last decade to help protect

water quality through a range of schemes.

Since launching our new package to promote

regenerative farming practices in May 2022,

we have awarded over 400 Severn Trent

Environmental Protection Scheme (‘STEPS’)

grants for on-farm improvements that help

protect water quality and biodiversity – worth

almost £5 million.

At Severn Trent we all take responsibility for

the health of our rivers. We have made good

progress and continued to reduce our impact

on rivers. We believe we have reduced our

contribution to Reasons for Not Achieving

Good Ecological Status (‘RNAGS’) in our

region’s rivers to 14%, and it is our ambition

to reduce RNAGS in our operational area to

10% by 2025.

By 2030, our goal is that our storm overflows

will cause no harm to rivers. We plan to

ensure our assets are responsible for less

than 2% of RNAGS by 2030.

We are working on dramatically reducing our

CSO spills. More details about our storm

overflow reduction programme can be found

on pages 38 to 41.

Pledge Two: Pledge Three:Pledge One:

Create more

opportunities for

everyone to enjoy

our region’s rivers

Support others

to improve and

care for rivers

Ensure storm

overflows and sewage

treatment works

do not harm rivers

This is a pioneering process

whichaims to enhance the effluent

quality of the normal sewage

treatment process.

14%

Severn Trent Water is responsible for

14% of RNAGS in our region

A Driver of Positive Change continued

GET RIVER

POSITIVE

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202436

Our River Rangers have completed over 7,000 inspections of rivers

and we have funded the improvement of over 600 hectares of river

through partnership with the Nottinghamshire Wildlife Trust.

Our River Rangers are at the heart of the work

we do to protect and enhance our rivers and to

improve river health. Since January 2022, our

River Rangers have been working closely with

local stakeholders and communities,

attending more than 280 meetings with

partners and environmental groups to discuss

river health. They have also completed over

7,000 river inspections to help inform our

activity and deliver further improvements.

Since 2020, we have funded a wide range of

projects with Nottinghamshire Wildlife Trust,

improving over 600 hectares of river through

this partnership. These projects focus on

improving natural wetlands and wet meadows

to provide diverse habitats and prevent

flooding, as well as species-specific work such

as the reintroduction of beavers and water

voles to watercourses.

Every employee can spend two working days

ayear doing voluntary work and further

support our Get River Positive pledges. Over

the last year, more than 400 of our people, in

partnership with local environmental groups,

spent around 2,500 hours cleaning rivers, litter

picking, removing non-native species and

finding/removing a collection of larger items

that don’t belong in our waterways.

We are continuing to explore ways in which

we can be more open and transparent about

our performance. We published our Storm

Overflow Action Plan in March 2024, which

details our investment plans to improve

storm overflows. Our Storm Overflow Map

went live on 30 April 2024, providing near

real-time storm overflow data, enabling our

customers to see the current status of each

storm overflow across our region.

We sought feedback from our independent

GetRiver Positive Advisory Panel (the ‘Panel’),

alongside other interested stakeholders, to

develop the map, to ensure it is meaningful

forinterested stakeholders and is easy

tonavigate.

After a successful year, all members have

agreed to remain on the Panel to help focus

our AMP8 programme of investment running

up to 2030. We have enhanced the Panel’s

membership to include more representation

from river users, alongside land use and

habitat experts.

Pledge Four: Pledge Five:

Enhance our rivers

and create new habitats

so wildlife can thrive

Be open and transparent

about our performance

and our plans

7,000

river inspections to help inform our

activity and deliver further improvements

Get River Positive Annual Report

Read more details about our Get

River Positive journey in our Get

River Positive Annual Report on our

website, where you can also find our

Storm Overflow Action Plan.

Scan or click to read more.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 37

STRATEGIC REPORT

A Driver of Positive Change continued

OUR COMMITMENT TO IMPROVING

STORM OVERFLOWS

Storm overflow spills are one of the biggest issues facing our sector today and we are firmly

committed to reducing their usage as quickly as possible to meet the expectations of our

customers and wider stakeholders. Over the next 25 years we will invest £4.4 billion to meet

government requirements at least five years early and we are accelerating our investment to

deliver benefits for our customers and the environment as quickly as possible.

What are storm overflows?

On an average rainy day in England, about two

million litres of rainwater will fall on every

square kilometre. And all that water needs to

go somewhere. Every day, we take away

3.3 billion litres of wastewater from toilets,

bathrooms and kitchens in homes and

businesses. But wastewater also flows into our

network because of drainage from roads,

highways and public spaces, and flows through

our 93,200 km network of pipes to one of our

1,000 wastewater treatment works to be

treated and safely returned to the

environment. During periods of sustained

rainfall the volume of wastewater entering our

network increases significantly and, as we

have seen this year, weather patterns are

changing and recently we saw some of the

wettest months on record.

Like many other countries, the UK’s sewerage

system was designed as a combined system,

with a single piped network which collects

wastewater from homes and businesses and

also collects rainwater from roofs, roads and

other hardstanding areas. To mitigate the risk of

flooding properties when there is too much

water in the system, for example in periods of

sustained rainfall, the combined sewerage

system was designed with overflows which act

as relief points during heavy rainfall allowing

diluted flows to discharge into rivers and

watercourses to protect customers’ homes

from flooding. We have 2,472 overflows within

our wastewater system and these are made up

of a mix of overflows on our network (commonly

referred to as combined sewer overflows

(‘CSO’)) and those located on our wastewater

treatment sites (commonly referred to as

settled storm overflows (‘SSO’)).

Each overflow is designed in accordance with a

permit condition as outlined by the

Environment Agency (‘EA’). The permits

specify the conditions under which a spill is

permitted ensuring no detrimental impact to

the receiving watercourse.

Whilst these overflows operate within permit

conditions and serve an important purpose,

our stakeholders care deeply about reducing

their usage – and so do we. Our entire

organisation is energised and focused on

reducing our number of spills and we are

determined to achieve our stretch ambition to

halve our number of spills by 2030. We’re

investing and working hard to deliver the

reductions we have committed to, while at the

same time protecting customers’ homes and

businesses from flooding as we implement

our solutions.

Overflow to watercourse

Wastewater

from

businesses

Wastewater

from

homes

Drainage

from roads,

highways and

public spaces

To wastewater treatment works

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202438

How do we monitor storm overflows?

How we monitor and report overflow

performance is strictly defined by the EA, and

every year all water and sewerage companies

in England are required to formally submit

performance data to the regulator.

All of our storm overflows have Event Duration

Monitors (‘EDMs’) installed which report the

number of times they activate, when they are

activating, and the length of time each overflow

discharged. We were the first water company in

England to install EDMs on 100% of our

overflows. Pulsing every 2-15 minutes and

providing over 300 million data points per year,

this insight is helping to inform our knowledge

and prioritise what action and investment is

needed. In addition to our EDMs, we also have

thousands of early warning monitors fitted

across our network which continually analyse

changes in depth and/or flow so we can

proactively identify any potential problems

before they occur.

We take the delivery of our commitments

incredibly seriously and we believe

transparency is vital to demonstrate our

progress to customer and broader

stakeholders. Our EDM data is subjected to

several levels of internal and external

assurance before it is reported to the

regulators. To ensure we are being

transparent with our customers and

stakeholders we publish our annual EDM data

on our website each year, which contains all

the monitoring information from storm

overflows across our region, and have

developed a storm overflow map in an

accessible format.

Our performance of 24.9 spills on average in

2023 (against 24.7 in 2021 and 18.4 in 2022) is

not in line with the pace of progress that we

want. An increase in utilisation of overflows

was not unexpected given the higher levels of

rainfall observed this year – being 35% more

than in 2022 – however we were still

disappointed in the increase. While we’ve felt

its impact, weather cannot be an excuse for us

or our sector – climate change is something we

must all adapt to, and it is our job to protect our

customers and the environment from its

impact on our operations. The unprecedented

weather this year has highlighted that we need

to go further, move quicker, and find more

creative and innovative solutions to meet the

expectations of our stakeholders, in particular

on storm overflow spills.

Ambitious investment plans

In August 2022, the Government published its

Storm Overflow Discharge Reduction Plan

(‘SODRP’) which sets stringent new targets to

protect the environment. The SODRP sets out

specific deadlines to ensure no storm overflow

is causing harm by 2045, with an interim target

that 75% of overflows are improved by 2035. In

addition, no storm overflow will be permitted

to discharge above an average of 10 times per

year by 2050, measured using EDMs

Aligned with the requirements of the SODRP,

we have developed our Storm Overflow Action

Plan (‘SOAP’), to ensure every storm overflow

we are responsible for meets the targets set

out in the SODRP – ahead of required

timescales. In our investment plans for the

next five years we set ourselves the most

ambitious targets in the sector for minimising

the use of CSOs, with targets that go further

and faster than the SODRP.

Meeting our target of an average of 20 spills by

2025 is a priority, and we are determined to

achieve our stretch ambition to halve our

number of spills between now and 2030. Our

whole organisation is energised and focused

on this activity, and we are now finalising the

procurement of thousands of assets, utilising

some of the £1 billion of funding our investors

contributed last October to help us accelerate

our 5-year investment plan. This investment

will have a dramatic reduction on the use of

CSOs once the new assets are installed this

year. Overall, we expect these capital works to

benefit 900 sites, representing over 40% of all

CSOs that spilled last year.

We are investing

£1.1billion between

2025 and 2030, and

£4.4 billion up to 2050,

to meet targets at

least five years earlier

thanthe date set by

our regulators.

Modular storage capacity:

Sudbury additional storage

We are installing modular additional storage

at our wastewater treatment works and

network assets to allow us to capture and

store more flows during periods of high

rainfall to dramatically reduce CSO spills.

Data and site reviews have helped us identify

suitable sites.

At Sudbury wastewater treatment works

wehave increased our storage by 60 m³

through installation of modular storage.

Thisadditional storage has helped us better

manage storm flows and in April 2024 we

noted zero spills.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 39

STRATEGIC REPORT

A Driver of Positive Change continued

Focus on innovation: our Zero Spills Hub

CSO spills are a challenge shared by other wastewater companies internationally. As

such, we have been learning how others have approached spill reduction, including

Aarhus Vand in Denmark. While traditional solutions including separating combined

sewers have an important role to play, it is also clear that emerging smart interventions,

when used in the right combination, can help to drive down spills and have the potential

for faster deployment than larger capital schemes.

Using learning from Artificial

Intelligence (‘AI’) to optimise

flows and capacity in our

existing infrastructure.

Creating new treatment options

within river catchments as well

as at works. Engaging

communities in solution

development.

Reconfiguring networks, slowing

storm water flows andtrialling

new commercial rainwater

harvesting and re-use schemes

with learnings from Singapore

andAustralia.

Managing storm water using AI

enabled temporary and permanent

storage and nature based solutions.

Our Zero Spills Hub in Nottingham

incorporates this learning and is a testing

ground for innovative solutions for spill

reduction of the type we are planning to

deploy in 2024/25. It is designed to act as

acatalyst for progress in four areas:

Accelerating progress in 2024/25

To ensure we make demonstrable progress on

our investment programme, at the pace our

stakeholders expect, we have assembled a

dedicated team of hundreds of people working

across hundreds of sites to focus on spills.

Bythe end of this year we will deliver a

combination of solutions as follows:

– over 700 storage solutions at our treatment

works and network assets. These assets

will allow us to capture and store more

flows during periods of high rainfall and

dramatically reduce spills at those sites;

– c.25 submerged aerated filter (‘SAF’)

treatment units that will enable us to expand

the treatment capacity through the

additional processes, dramatically reducing

spills into the environment;

– c.70 reed beds that will provide for nature-

based treatment of sewage at the storm

route for smaller sites, and prevent

untreated sewage entering rivers;

– nearly 200 enhancements at specific CSOs

on our network, which will enable us to

increase the flow of sewage to our treatment

works, reducing the potential for a spill into

the river;

– over 100 flap valves that will prevent river

ingress into our network, which would

otherwise overload the capacity of our

sewers with river water; and

– c.8,000 water butts will be supplied to

10communities to trial at scale surface

water separation.

This activity is being supported by international

partnerships, an international solutions

scouting programme and a guaranteed

payment scheme.

Examples of how these solutions work is

explained in the table on page 41. To bring to life

the scale and complexity of these schemes,

page 41 provides case studies of schemes

delivered during the year. To deliver these

improvements we are growing our business.

This year we redesigned sections of

wastewater operations, insourced some of our

customer waste teams, and as part of our new

accelerated programme, we will be using our

supply chain to deliver spill reductions as they

work on our wider environmental programme.

This complex, large-scale activity will be

overseen by our dedicated CSO programme,

which reports directly into our Executive

Committee on a weekly basis, to deliver our

investment plan as quickly as possible. We

intend for all these solutions to be installed by

the end of the year, enabling us to rapidly

reduce the use of CSOs once in operation.

This important activity will be supported by

data and innovation, including our Zero Spills

Hub in Nottingham to trial innovative

technologies at pace to work towards zero

spills. More detail on our Zero Spills Hub is

provided in the schematic below.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202440

To bring to life the complexity and scale of each of the investment types, the case studies below

illustrate three storm overflow investments we have delivered during the year.

Additional storage

capacity: storm tank

solution atStroud

We have invested in Stroud to install a new

concrete storm tank with smart controls

that can hold up to 7.4 million litres of

wastewater back during severe weather

events. This scheme will improve the

resilience of our network, holding back

wastewater before returning it to our

treatment works when rainfall has

subsided and capacity to treat is available.

Reed bed treatment:

refurbishment at

Fenny Compton

We have completed the refurbishment of

our reed bed treatment at Fenny Compton

wastewater treatment works using

innovative technology to restore the reed

bed and re-lay pipework. The £169,000

scheme is one of seven trials to combine

reed bed effluent with final treated

effluent before returning it safely to the

river, minimising CSO spills and providing

essential data to inform future investment.

Investment Number Solution – how it works

New storage capacity, including

large-scale storm tanks and smaller

modular solutions, including SAFs,

that can be deployed at scale.

Water butts supplied to customers’

homes across 10 communities to

reduce surface water.

c.700

c.8,000

Pump to empty tank

Wastewater

Storm tanks hold wastewater

back during severe weather

events before returning it to our

treatment works when rainfall

has subsided and capacity to

treat is available.

Nature-based treatment, such

asreed beds.

c.70 Reed bed systems help treat

increased wastewater flows

during severe weather events,

reducing the treatment

required when rainfall has

subsided and capacity to treat

is available.

Installation of solutions to optimise

assets, such as flap valves and

enhancement at specificCSOs.

c.300

Combined sewer overflow

Watercourse

Flap valve

Flap valves work as a safety

mechanism during periods

ofsevere weather, by stopping

river inundation into our

treatment works when river

levels are high.

Optimising assets:

flap valve installation

in Shropshire

In Shropshire, we have installed two flap

valves to protect against inundation from

the River Severn. These valves protect our

wastewater treatment works from

flooding, and improve our resilience to

severe weather, meaning that we can

continue to treat our customers’

wastewater even when river levels are

high, which is becoming increasingly

frequent inthis area.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 41

STRATEGIC REPORT

RUNNING A BUSINESS THAT

GOESHANDINHAND WITH

NATURE

What this means for what we do…

– Valuing our most precious natural resources.

– Always thinking about our impact.

– Actively improving the places we touch.

– Creating opportunities for everyone to enjoy nature.

This is also aligned with our Sustainability Framework.

Find out more in our Sustainability Report 2024.

Our natural environment catches, holds, carries

and helps purify our water. And the climate

drives many of our critical functions, from the

filling of our reservoirs to the ways in which our

customers use water.

Our environment cannot be taken for granted and, as such, our strategy

to be ‘performance driven, sustainability led’ pushes us to deliver

strong performance in balance with the long-term needs of our

environment – not only because it’s the right thing to do, but because

we see it as a fundamental opportunity to innovate, grow and create

long-term value for our stakeholders.

This section of our report sets out our Task Force on Climate-related

Financial Disclosures (‘TCFD’), our initial Task Force on Nature-related

Financial Disclosure (‘TNFD’) and Net Zero Transition Plan – clearly

labelled to aid readers of this report.

Great Big Nature Boost (‘GBNB’)

In 2020 we announced our GBNB, one of the biggest programmes

to support nature recovery across our region by 2027 and to plant

1.3 million trees. We said we would work to boost nature across

5,000 hectares of land by 2027 and, having exceeded our target

ahead of schedule, in May 2023 we announced that we would be

accelerating our target to 10,000 hectares by 2025.

Since 2020, we have planted over 800,000 trees, delivered 72 Tiny

Forests and have planted 600 acres of new woodland as part of the

Commonwealth Legacy Forests. This takes us over halfway

towards our 1.3 million target for tree planting by 2027.

We do need to manage our trees to counter the fragmentation of

ecosystems and promote landscape resilience, as well as to keep

people and our infrastructure safe. At many of our sites we carry

out planned maintenance to coppice woodland to ensure it can

continue to thrive and is safe. In some circumstances this

unfortunately means that we have to remove or cause harm to

trees in order to carry out our work – both on and beyond our own

land. The reasons for this could be that the operation of our

assets is compromised, trees are obstructing construction of

essential infrastructure or the tree is a danger to people. We will

only consider removing a tree if it is for one of these reasons, and

we do not remove trees for cosmetic reasons, such as shading or

leaf fall. When we do remove trees, we will comply with all

relevant legislation.

Clywedog reservoir

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202442

OUR APPROACH TO CLIMATE CHANGE

We are committed to the recommendations of the TCFD,

providing our stakeholders with transparent information on

climate-related risks and opportunities that are relevant to our

business. This is our sixth TCFD disclosure and provides an

update on what we have published previously.

This section of the report sets out our climate-

related financial disclosures, consistent with all

of the TCFD recommendations in compliance

with the requirement of Listing Rule 9.8.6R. Our

TCFD disclosure has been prepared in line with

the four TCFD recommendations and the 11

recommended disclosures set out in the report

entitled ‘Recommendations of the Task Force on

Climate-related Financial Disclosures’,

published in June 2017 by the TCFD and the

supplementary guidance entitled ‘Implementing

the Recommendations of the TCFD’ published in

October 2021. In preparing our disclosure, we

also take into account the wider guidance

issued by the TCFD, and the work of the

International Sustainability Standards

Board(‘ISSB’).

This disclosure also complies with the

requirements of the Companies Act 2006 as

amended by the Companies (Strategic Report)

(Climate-related Financial Disclosure)

Regulations 2022 (‘CFD’).

Each year our disclosure continues to evolve,

providing greater granularity where possible,

supported by financial information to give

additional insight into how we identify, assess

and manage our climate-related risks and

opportunities, and embed them into our

strategy. This section of the report also sets

out the metrics and targets we have set

ourselves and this year we have begun to

evolve our disclosure to incorporate the

recommendations of the Task Force on

Nature-related Financial Disclosures (‘TNFD’).

Throughout this report we have incorporated

summary boxes on the TNFD requirements, to

outline the work we have done to date, and to

outline our proposed approach, to seek

feedback from our stakeholders. Like the

TCFD, we think the TNFD recommendations

provide a useful framework for businesses to

embrace the benefits of nature, to understand

the impact their operations have on the

environment and to identify where to invest for

improvement. Whilst not all aspects of the

TNFD framework are relevant to our business,

this report seeks to highlight some of the

positive contributions we make to nature and

help us to identify ways to improve and focus

our investment in the right way. A more

detailed TNFD disclosure will be included

alongside our 2024/25 TCFD disclosure,

outlining more detail on the benefits we are

identifying through this work. A summary of

our progress against the TNFD requirements,

and relevant information presented elsewhere

in this Annual Report andAccounts, is cross

referenced within eachsection, and we

welcome feedback on ourapproach.

Our TCFD disclosure is supported by our

separate Sustainability Report, which includes

additional detail on the progress we are

making on our sustainability ambitions. Our

Corporate Strategy is to be ‘performance

driven, sustainability led’, and draws together

our Environmental, Social and Governance

(‘ESG’) ambitions which are delivered as part

of our Business Plan andoperations.

Our ambitions Our priorities

Climate-related

risks and

opportunities

Nature-related

risks, opportunities,

dependencies and

impacts

Where to find more

on our progress

Our investment

todate

Carbon and

climate change

Triple Carbon Pledge

Science-Based Targets

Climate adaptation

Page 68 in this AnnualReport

and Accounts

Our Sustainability Report

£220m

Enhancing nature

Biodiversity

Pollutions reductions

River water improvements

Catchment management

Pages 36 to 41 in this

AnnualReport and Accounts

Our Sustainability Report

£549m

Water resources

for the future

Leakage reduction

Per Capita Consumption

(‘PCC’) reduction

Meter installations

Strategic resource option

investment

Pages 18 to 24 in this

AnnualReport and Accounts

Our Sustainability Report

£634m

Affordability and

accessibility

Reducing water poverty

Building our Academy

Creating a Community Fund

Increasing conservation

Pages 25 to 32 in this

AnnualReport and Accounts

Our Sustainability Report

£153m

In March 2020, wecommitted to invest £1.2 billion insustainability and report on our progress

inatransparent and genuine way. The table below provides detail on where we have invested

against our plans to2025 and how our objectives align to external climate and nature objectives.

We have already exceeded our original target, investing over £1.5 billion to date. More detail on

our key metrics and targets is included on pages 63 to 67.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 43

STRATEGIC REPORT

Running a Business that Goes Hand-in-Hand with Nature continued

CLIMATE CHANGE GOVERNANCE

Governance

Robust governance underpins everything we

do. Climate change and its associated risks,

opportunities and organisational implications

are overseen by the Severn Trent Plc, Severn

Trent Water Limited and Hafren Dyfrdwy

Cyfyngedig Boards, Board Committees,

Executive Committee, Senior Management

Team and Group Subsidiary company boards.

Our Governance Framework

Our governance processes are aligned with the

Group’s Corporate Strategy – ensuring that the

Board is effective in its oversight of the Group’s

objective to be sustainability led, consideration

of climate-related risks and opportunities, and

scrutiny of management’s assessment and

management of climate-related risks

andopportunities.

Our Board, led by Chair Christine Hodgson,

hasultimate responsibility for sustainability

and oversight of the Group’s Corporate

Strategy is a matter reserved for the Board.

The Board delegates certain sustainability and

climate-related risk oversight activity to its

Committees to support the continued delivery

of the Group’s Corporate Strategy.

To facilitate effective delegation, the Group

Authorisation Arrangements (‘GAAs’) are the

mechanism by which the Severn Trent Plc

Board delegates its financial authority. This

authorises our people to be involved in the

decision-making processes that commit the

Company to financial obligations, rather than

every decision having to be approved by the

Board. The GAA is reviewed annually to ensure

that delegation limits remain appropriate.

The Governance Framework that underpins

our Corporate Strategy is also subject to

periodic review to ensure that it remains

appropriate. The Chief Executive and the

Severn Trent Executive Committee (‘STEC’)

have day-to-day responsibility for climate

change and environmental matters and are

responsible for the development of the Group’s

strategy, including in relation to sustainability-

related matters, as demonstrated in the

Governance Framework opposite.

Severn Trent has reported against the Governance TCFD recommendations and CFD requirements below

TCFD

recommendation Progress this year Read more

CFD requirement

a) Describe the

company’s

governance

arrangements in

relation to

assessing and

managing

climate-related

risks and

opportunities

Board oversight

Responding to the challenge of climate change is central to Severn Trent’s Corporate Strategy.

Throughout 2023/24, climate-related issues were assessed in dedicated strategy sessions and during Board

meetings. Board sessions considered both transitional and physical climate-related opportunities and risks and

took these into account in the decisions it made. The Board is supported by a series of Board-level and Executive-

level governance committees in carrying out its role to oversee climate-related opportunities and risks. This is set

out in the Governance Framework opposite.

In October 2023, the Board held its annual Board Strategy Day, with time spent exploring opportunities relating to

ESG matters and the future resilience of the business in this regard. Our Business Plan for 2025-30 published in

2023, sets out the priorities of the Company supporting the long-term sustainability of our business for customers

and stakeholders alike.

Board climate expertise and evaluation

The operation of our Board is supported by the collective experience of the Directors and the diverse skills and

experience they possess. Our Board skills matrix on page 136 details the individual Non-Executive Directors who

support these attributes. Our succession planning complements the composition of the Board, with an emphasis on

sustainability and climate-related topics to ensure that we continue to build upon the excellent progress we have

made to date.

Our annual Board Effectiveness evaluation provides the Board and its Committees with an opportunity to consider

and reflect on the quality and effectiveness of its decision making, the range and level of discussions, and for each

member to consider their own contribution and performance. As part of this evaluation, knowledge and experience

with regard to sustainability and climate-related matters are considered and in 2023 the evaluation process was

revised to include sustainability-specific elements for discussion, which were also considered in the externally

facilitated process this year.

Remuneration

Our transparent remuneration framework aligns reward and incentive structures throughout our business from our

frontline operatives through to our Executive Committee, ensuring that every employee is incentivised and

rewarded to deliver the same objectives. These incentives are reviewed and signed off by our Remuneration

Committee. This is in addition to ESG measures which already form part of the Annual Bonus Schememetrics.

As part of the 2024 Remuneration Policy Review, the Remuneration Committee approved changes to the structure of

our short and long-term incentive plans to reflect broader stakeholder priorities. Within the annual bonus, the

weighting of our storm overflow spill reduction target will increase, as will the weighting on our Environmental

Performance Assessment (‘EPA’) for 2024. This element of the bonus will only pay out if there are no serious

pollutions in year, and 4* EPA status is achieved, with a nil payout for any lesser status. These changes mean that the

weighting placed on environment performance increases from 30% to 35% for the 2024/25 bonus. The full

Remuneration Policy is presented from page 195.

Within the Long-Term Incentive Plan (‘LTIP’), the Remuneration Committee has recommended for shareholder

approval an increased weighting of non-financial measures from 20% to 50% of the LTIP, and the inclusion of three

new LTIP measures; a long-term River Health measure, a customer measure, and a communities measure. Please

see the Directors’ Remuneration Report from page 169 for more detail.

Board meetings and effective reporting from management

Specific roles and responsibilities for the oversight of climate change have been delegated to management. These are

defined within the Governance Framework opposite.

The Board has oversight of all ESG responsibilities and performance as well as approval of ESG strategies and

investment decisions relating to climate change. Sustainability matters are included as a standing agenda item at

every Board meeting and the Board holds dedicated sessions to consider, identify and assess climate-related risks

and opportunities, monitoring of progress against goals and targets and sustainability-related topics. Identification

and assessment of climate-related risks is delegated to Board Committees as outlined on page 45. The Board

receives detailed management reports on ESG matters at each Board meeting, and senior leaders within the Group

and external guest speakers are invited at regular intervals to offer independent expertise and insight at Board and

Committee meetings.

Read more on pages

140 to 141 – Board

activities.

Our plans 2025-2030

| About Us | Severn

Trent Water

(stwater.co.uk)

TCFD

recommendations

– Governance

(a) Describe the

Board’s oversight

ofclimate-related

issues

Board biographies

and skills matrix

– pages 134 to 136.

Board and Senior

Management Team

succession planning

– page 149.

Board effectiveness

and Board evaluation

– pages 146 to 147.

Performance

targets/milestones

for the 2024 award in

the Directors’

Remuneration Policy

– page 180.

Remuneration Report

– pages 169 to 194.

(b) Describe

management’s role

in assessing and

managing

climate-related

risks and

opportunities

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202444

The Board delegates certain sustainability oversight matters to its principal Committees. All Committees meet at least four times per year.

Audit and Risk

Committee

Corporate Sustainability

Committee

Nominations

Committee

Remuneration

Committee

Treasury

Committee

Ensures that risks and

opportunities, including

sustainability and climate-

related risks and

opportunities, are effectively

managed across the Group.

The Committee is also

responsible for overseeing the

production of the Group’s

financial statements, including

the TCFD disclosure.

Scrutinises and provides

guidance and direction on the

Corporate Strategy. Reviews

sustainability and climate-

related risks and

opportunities. Four Directors

of the Board sit on the

Committee, including the

Chair, and the CEO has a

standing invitation to

attendmeetings.

Monitors the Board’s overall

size, composition and balance

of skills, and ensures

sustainability expertise is

given sufficient prominence

inBoard and Executive

succession and

recruitmentactivity.

Ensures alignment of the

Group’s remuneration policies

and procedures to

achievement of sustainability

aims by incorporating ESG

measures into bonus scheme

requirements and carbon

reduction measures within

theLTIP.

Ensures incorporation of

sustainability into the Group’s

financing strategy, with a key

area of focus on introduction

and monitoring of the

Sustainable Finance

Framework under which

theGroup can raise debt

tosupport the financing

orrefinancing of

sustainableprojects.

Further detail of the work of

the Committee can be found

from page 153.

Further detail of the work of

the Committee can be found

from page 165.

Further detail of the work of

the Committee can be found

from page 148.

Further detail of the work of

the Committee can be found

from page 169.

Further detail of the work of

the Committee can be found

from page 162.

STEC delegates certain climate-related oversight matters to its management committees

Carbon and Energy

Steering Committee

Strategic

Risk Forum

Disclosure

Committee

TCFD and TNFD

Working Groups

Sets the Group’s overall carbon and

energy strategy and targets, ensuring

that robust plans are in place to deliver

them. Monitors progress and

performance against plans.

A cross business group which takes a

holistic view of ERM risks and focuses

on horizon scanning to identify new and

emerging risks, including climate-

related risks.

An Executive Committee responsible

for overseeing the Group’s compliance

with its disclosure obligations,

considering the materiality, accuracy,

reliability and timeliness of information

disclosed and assessment of

assurance received. TheCommittee is

also responsible for overseeing the

Group’s financial statements and

non-financial disclosures, including

climate-related financial disclosures.

The TCFD Working Group was

established in 2020 to provide

oversight and drive implementation of

the TCFD recommendations and the

Group’s wider climate change strategy.

The Group reports tothe Disclosure

Committee and the Corporate

Sustainability Committee. Itincludes

representatives from business areas

including strategy, risk, finance,

treasury and compliance. ATNFD

Working Group was established in

2023 to oversee the Group’s future

TNFD reporting requirements,

including how we will disclose our

progress to stakeholders in a

meaningful way.

The Chief Executive and the Severn Trent Executive Committee

The Chief Executive has overall responsibility for the delivery of the Group’s strategy, including climate change and environmental matters, and is accountable

to the Board for delivery of this strategy. Responsibility for the development and implementation of the Group’s strategy, including in relation to sustainability,

rests with the Chief Executive, who is supported by STEC, which meets weekly.

STEC members – pages 136 to 137

THE BOARD

The Board’s role is to ensure the long-term sustainable success of

Severn Trent by setting our strategy through which value can be created

and preserved for the mutual benefit of our shareholders, customers,

employees and the communities we serve.

Our Board, led by Chair Christine Hodgson, has ultimate responsibility for

sustainability and oversight of the Group’s Corporate Strategy is a matter

reserved for the Board. The Chief Financial Officer is responsible for how

market risks connect to our investments, including how climate-related

risks are identified, considered and managed.

The Board’s responsibilities include:

– overseeing the Group’s Sustainability Strategy;

– providing rigorous challenge to management on progress against goals and targets;

– ensuring the maintenance of an effective risk management and internal control

systems, review of six-monthly Enterprise Risk Management (‘ERM’) updates and

annual approval of the Principal Risks;

– approval of the Board’s risk appetite and policy;

– facilitation of sustainability-related discussion at each Board meeting through a

standing agenda item as tabled by the Chair of the Corporate Sustainability

Committee, and a range of sustainability-focused topics throughout the year; and

– maintaining a high level of sustainability expertise on the Board as a whole (see

Board skills matrix on page 136).

Our Governance Framework

Strong governance of sustainability issues, including climate-related risks and opportunities specifically, is led by

the Board. Key activities are delegated to a number of Board Committees, as outlined below.

Informing

Reporting

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 45

STRATEGIC REPORT

Task Force on Nature-related

Financial Disclosures

In line with the approach for TCFD, the

TNFDframework is expected to become a

mandatory disclosure requirement for

companies in the next few years, increasing

transparency and helping businesses to

understand their impact on nature, with a

view to ensuring investment drives nature

and biodiversity improvement. Our impact

on nature and the environment is central to

ourbusiness, and as such we are committed

to developing meaningful TNFD reporting

for our stakeholders. As outlined in the

introduction, throughout this report we have

included summary boxes on the TNFD

requirements, to outline the work we have

done to date and our proposed approach

moving forward. We welcome feedback on

this approach ahead of more detailed

disclosures in our 2024/25 Annual Report

and Accounts.

TNFD maturity –

Governanceprocesses

We assess ourselves as having mature

governance processes that already

incorporate many of the requirements of

TNFD, and so we will be able to report

against the TNFD Governance requirements

in full next year.

Governance –

TNFD requirements

– Describe the Board’s oversight of nature-

related dependencies, impacts, risks

andopportunities.

– Describe management’s role in assessing

and managing nature-related dependencies,

impacts, risks and opportunities.

– Describe the organisation’s human rights

policies and engagement activities, and

oversight by the Board and management,

with respect to Indigenous peoples, local

communities, affected and other

stakeholders, in the organisation’s

assessment of, and response to, nature-

related dependencies, impacts, risks

andopportunities.

Our nature governance

As outlined in the Governance section of this

TCFD disclosure, the Board has responsibility

for overseeing the Group’s Corporate Strategy,

within which nature-related risks and

opportunities form a key component. Our impact

on natureis an important element of our core

plans and strategies and our core operations,

and many of our regulatory requirements are

directly related to our crucial relationship with

nature, such as water abstraction and

preventing pollution into water courses.

Stakeholder engagement is essential to the

long-term success of our business. Our

in-depth customer surveys as part of our

business planning process, which saw us

engage with over 68,000 customers,

revealed that climate change and nature are

high on the list of priorities for our

customers and, as such, we plan to invest

more into these areas. In 2023/24 we

awarded over £2 million from our

Community Fund to support projects in our

region, with 20% focusing on connecting

with nature and just over £250,000 awarded

to projects to protect river health.

As well as regular engagement activities

with customers and community groups, we

launched our Societal Strategy in November

2022 to support people in our local

communities in a range of ways. More

information can be found in our

Sustainability Report, andon page 31 of this

report. Our Section 172 Statement outlines

how the Board takes the needs of our

stakeholders and customers into account

inits decision making.

We will expand on the detail of how nature

plays a major part in our governance,

strategy, risk management and metrics

processes in future annual reports as

weseek to report fully against the

requirements of the TNFD.

OUR NATURE GOVERNANCE – PROGRESS TO DATE

Running a Business that Goes Hand-in-Hand with Nature continued

Tittesworth reservoir

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202446

Severn Trent has reported against the Strategy TCFD recommendations and CFD requirements below

Disclosure requirements Progress this year

CFD requirement

d) Describe the principal

climate-related risks and

opportunities arising in

connection with the company’s

operations, and the time

periods by reference to which

risks and opportunities

areassessed.

e) Describe the actual and

potential impacts of the

principal climate-related risks

and opportunities on the

company’s business model

and strategy.

f) Analyse the resilience of the

company’s business model

and strategy, taking into

consideration different

climate-related scenarios.

In October 2023, we submitted our Plans to Ofwat for the period 2025-30 (Asset Management

Period 8 (‘AMP8’)), and our proposals to Ofwat include a large investment package to tackle

climate change. The submissions included for the first time a Long-Term Delivery Strategy

(‘LTDS’). The LTDS seeks to link our proposed five-year investment programme to 2030 with

longer-term objectives to 2050 and in doing so has considered all recommended warming

scenarios, from 1.5°C to 4°C. It provides insight into how our investment plans would differ

under a diverse range of assumptions across climate change, demand, water abstraction

conditions and technology. This informed our core and adaptive pathways, supported by

monitoring a range of triggers to evaluate if, in future business cycles, we should make

different investment choices to respond to changing circumstances, including key climate

change metrics. A total of 6% of our enhancement investment proposals in our PR24 Plan is for

low-regrets investment to mitigate externally driven risks such as climate change. We outline

how we have assessed our resilience in different climate-related scenarios on pages 49 to 50

within this TCFD disclosure.

Our AMP8 plans include installing one million smart meters, leakage reductions of 16%, and

more than doubling the rate of mains renewals, to secure sufficient water supplies for the

Midlands over the next 25 years. Our proposed demand measures will save around 110 Ml/d,

and with new and replacement supply capacity we plan to create more environmentally

sustainable sources and close the gap in our forecast 2030 supply/demand deficit.

On the waste side, our focus is on reducing the ecological harm from storm overflows,

improving water quality by reducing phosphate, ammonia and hazardous chemicals in

wastewater. This year has highlighted the exceptional impact that climate change can have on

the sector, as experienced through 10 named storms from September 2023 to February 2024

and close to 30% of rivers in our region recording their highest ever levels. These exceptional

conditions are reflected in significant increases in wastewater volumes, and consequently in

flooding.

Our approach to risk management, and the risks and opportunities we have identified over the

short, medium and long term, is set out in the Risk Management section of this TCFD

disclosure on pages 52 to 62. We continue to expand our work across our risk management

system to incorporate climate change drivers. We internally report all risks above a materiality

threshold of £10 million, and anything over £75 million is reported at Board level. These values

were established according to materiality to our business and are reviewed regularly. The last

review signed off by the Board was in November 2022.

Our work to prepare voluntary EU Taxonomy disclosures has supported us in going further

with climate adaptation plans by highlighting areas of focus and engaging teams. As a result of

embedding more detailed climate adaptation risk procedures, we are reporting increased

alignment in this year’s disclosure, which is included in this report from pages 76 to 81.

We published a revised draft of our WRMP in September 2023 and the final version of our

DWMP in March 2023. The impacts of climate change are a key part of the underlying analysis

behind these documents, which are used to set and evidence our five-year regulatory business

plans. Our Plan includes £170 million to take our learnings from our innovative surface water

management approach at our Mansfield Green Recovery project, and replicate this across a

further four higher-prioritycatchments.

We are strengthening our climate risk assessments across the business, using principles set

out in ISO 14090 and ISO 14091: Adaptation to climate change. For example, we are currently

undertaking site-specific risk assessments of our biosolids facilities and a treatment

process-level assessment of our sewage treatment operations. We have increased

engagement on the implications of climate change across the business, including working with

our senior manager population to incorporate climate thinking into business decisions.

We have increased our involvement with key sector and cross sector Working Groups including

acting as Co-Chair of the Water UK Carbon Group and participating in several technical groups

related to net zero including the reporting of chemicals and capital carbon. We work with the

Forum for Circular Infrastructure and chair the Water UK Adaptation Network and the West

Midlands Adaptation Working Group.

Our CEO is a member of the Net Zero Council, a high-level forum for government, business and

finance leaders co-chaired by the Minister for Energy Security and Net Zero and Co-op Group

Chief Executive Shirine Khoury-Haq to support industry to cut emissions.

We will continue the momentum we’ve built through our investment in innovation and global

collaboration including our international Net Zero Partnership with Melbourne Water and

Aarhus Vand. This work has been supported by Ofwat’s Innovation Fund, Horizon Europe and

our own £28 millioninvestment.

Construction is complete at our Net Zero Hub at our Strongford wastewater treatment works,

delivering the technologies to reduce and remove process emissions from the site, as well

asincreasing the production of biomethane. We have hosted several visits to showcase the

technologies that will be deployed, including with the Energy Minister. Our learnings formed

part of our enhancement proposal to Ofwat for net zero investment, and the results of the

project will be shared across the industry. Visits have been made by several of our innovation

partners to experience first-hand the technologies and trials. A shared roadmap has

beencreated with our international partners.

TCFD recommendations –

Strategy

a) Describe the climate-

related risks and

opportunities the organisation

has identified over the short,

medium and long term.

b) Describe the impact of

climate-related risks and

opportunities on the

organisation’s businesses,

strategy and financial

planning.

c) Describe the resilience of

the organisation’s strategy,

taking into consideration

different climate-related

scenarios, including a 2°C

orlower scenario.

See the following reports on

our websites: stwater.co.uk,

www.hdcymru.co.uk or

severntrent.com:

Strategic Direction Statement

(‘SDS’)

Draft Water Resources

Management Plan (‘WRMP’)

Drainage and Wastewater

Management Plan (‘DWMP’)

Drought Plan

Climate Change Adaptation

Report

See page 49 for our assessment

of resilience against the

scenarios outlined

TCFD – additional

recommendations

Describe the potential impact

of different scenarios, such as

1.5°C, 2°C and 4°C scenarios,

on the organisation’s

businesses, strategy and

financial planning.

Demonstrate vocal advocacy

for action onclimate change

and collaboration with peers

andother stakeholders to

achieve change.

See our Sustainability Report

on our website for more detail

on our climate resilience plans.

CLIMATE CHANGE STRATEGY

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 47

STRATEGIC REPORT

OUR CLIMATE CHANGE STRATEGY

Mitigating and adapting to climate change remains a critical

priority for us and, as such, forms a common thread through all

of our strategic documents and plans, ensuring that every part

ofour organisation is focused on reducing our environmental

impact and improving the sustainability and underlying resilience

of our business.

A changing environmental landscape

We believe that our net zero strategy and

ambition remain appropriate and are fully

aligned with the latest climate change science

and our strategy to be sustainability led.

Weare working hard to deliver our pledge to

have net zero

operational emissions

by 2030, to remain

aligned to our own

Group-level Science

Based Targets (‘SBTs’),

our Triple Carbon

Pledge and government

targets.

That said, we do not

operate in isolation and

seek to collaborate with

stakeholders to the

greatest extent possible.

To that end, we work

closely with the

Government, our regulators, customers and

shareholders, and other companies across the

sector, to improve understanding and

application of climate change science, to share

learnings and to explain our plans. Through

this approach we seek to leverage our

experiences to benefit the whole sector.

We remain committed to our climate change

ambitions and the targets we have set.

However, looking forward, there is a risk that

the industry as a whole fails to meet the water

sector’s route map to operational net zero,

originally set out in November 2020. Within the

next price review period running from

2025-30, the overall rate of investment for the

sector will not be sufficient to keep wastewater

emissions on the right trajectory to hit the

government interim target of 78% emissions

reduction by 2035, as the sector seeks to

balance intergenerational fairness and

prioritise investment in line with stakeholder

priorities and expectations. Furthermore, data

shows that at a company and a national level,

process emissions from wastewater are much

higher than previously thought, meaning that

industry-level emissions are at least twice

those previously calculated using the Carbon

Accounting Workbook (‘CAW’) v17.

We remain resolute in our determination to

deliver on our commitments to our customers,

as clearly demonstrated by the fact that over a

third of the sector’s PR24 funding submissions

relating to climate were from Severn Trent.

Price review 2024

As a predominantly regulated business we are

required to submit plans to our regulator,

Ofwat, every five years. In October 2023 we

submitted our latest Business Plans for both

Severn Trent Water and Hafren Dyfrdwy for

AMP8. Our Plans include

the investments we deem

necessary in the short

term to keep us on track

with our climate

commitments and to

mitigate and adapt to the

predicted impacts of

climate change. We

believe they represent the

most ambitious plans in

the sector to transform

the carbon impact of

ouroperations.

In plotting our course to

net zero operational

emissions, our plans consider a range of

factors, including statutory and self-imposed

targets, the priorities of our regulators and

customers, the technological solutions

available and deliverability. We also consider

available funding sources and the impact on

costs and ultimately customer bills. This

approach supports a steady, balanced

investment profile focusing initially on areas

where viable, proven and cost-effective

technologies already exist. Where they do not

yet exist or are unproved in our sector, we have

established our Net Zero Hub, which brings

together novel digital, data, physical and

biological technologies for the first time to

lower emissions from sewage treatment. This

will help create the blueprint for future

investment phases.

Our Plan includes crucial investments to

reduce pollution incidents and storm

overflows, help reduce water wastage (through

tackling both leakage and household

consumption) and improve the environment,

especially the condition of our rivers and

waterways.

We are working hard to deliver

our pledge to have net zero

operational emissions

by2030to remain aligned to

Government targets and our

own Group-level Science

Based Targets (‘SBT’) and

Triple Carbon Pledge.

We anticipate that across AMP8 we can reduce

our greenhouse gas emissions by 338 ktCO

(see pages 69 to 73 for our Net Zero Transition

Plan), all whilst keeping bills affordable for our

customers. This includes a dedicated

enhancement investment of £430 million to

deliver a package of interventions focused on

reducing emissions from our operational

processes, including heat and fuel and those

we create through normal operations of our

business, such as water or wastewater

treatment.

£430m

of our proposed investment focuses

onreducing our process emissions

338 ktCO

reduction in our greenhouse

gas emissions across AMP8

For Hafren Dyfrdwy (‘HD’), our Welsh

regulated business, our plans reflect both the

smaller scale of resources needed and the

local priorities of stakeholders in areas they

have told us are important to them. Our Plan

for HD for comparison is £250 million of total

investment, with £5 million allocated directly

to net zero operational activities, including

more than 500 hectares of peatland

restoration around Lake Vyrnwy.

While the size and nature of our investment

schemes and the outcomes they deliver are

important, there is a paradox in that many

investments will increase our total greenhouse

gas emissions given the need for more

infrastructure and reliance on traditional

construction methods and chemicals. This

clearly demonstrates the challenges the

sector faces: increasing resilience and

adapting to the impacts from climate change,

reducing leakage through mains renewal,

improving customer service levels and

outcomes, both now and in the future, and

protecting the environment; allwhilst reducing

carbon emissions.

Our Plans build on previously published

strategic documents such as our draft WRMP,

DWMP, Climate Change Adaptation Report and

Net Zero Transition Plan, which is set out on

pages 69 to 73.

Ultimately which investments are progressed

will be decided by our regulator, Ofwat. Our

PR24 Final Determination is expected before

the end of 2024.

An overview of our Severn Trent Water

Plan is presented on pages 6 to 7.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202448

CLIMATERELATED SCENARIO ANALYSIS

The impacts of climate change are critical to the way Severn Trent operates. We have anadvanced

and established approach to how we integrate climate into our business processes and risk

management. As a business we look at a wide range of temperature scenarios, from a 1.5°C Paris-

aligned scenario to a 4°C ‘business as usual’ scenario, to inform our strategy for investment in

future resilience. The specific assumptions, parameters and scenarios applicable areset out

below, and more information can be found in the corresponding reports, where indicated.

Our approach to scenario analysis and our key documents that utilise the modelling work

Scenario analysis is a key component of assessing both the likelihood and consequence of our major climate-related risks. Stress testing our

ability to deliver customer outcomes against a range of variables highlights our resilience and informs our long-term strategy and investment

plans. These are outlined in several key documents as referenced below:

WRMP, Drought Plan and DWMP

Our WRMP and DWMP focus on the

Environment Agency’s (‘EA’) preferred

scenario, which includes changes to rainfall

patterns (drought and flood), demand

forecasts arising from population growth,

changes to building regulations and water

device labelling, requirements to reduce

abstraction licences, and changes to

assumptions made around technology.

Draft Water Resources

Management Plan

Our draft WRMP – published for consultation

in September 2023 – sets out how we intend to

provide supplies of water to our customers for

the next 25 years and also looks ahead to

2085to help us understand and prepare for

thefuture.

It considers both demand – how much

watercustomers will need in the future,

considering factors such as climate change

and population; and supply – how much water

is available for use now and how this may

change in the future due to the impact of

climate change, as well as potential

reductions in the volume of water we are

allowed to take from rivers and groundwater.

Drought Plan

It is a statutory requirement under the Water

Act (2003) for water companies to produce

and maintain a Drought Plan every five years.

Our Drought Plan 2022-27 sets out how we

will manage our resources and supply

system during dry and drought years, whilst

balancing the interests of customers, the

environment and the wider economy.

Drainage and Wastewater

Management Plan

Our final DWMP, published in March 2023,

sets out the 25-year (2025-50) challenges

faced by our wastewater system in light of

future pressures such as climate change,

population growth and urbanisation. It also

informs strategic investment choices to

determine thebest value plan on how to

extend, improve and maintain robust and

resilient drainage and wastewater systems.

Long-Term Delivery Strategy

As part of our PR24 Business PLan

submission to Ofwat, we developed our

Long-Term Delivery Strategy (‘LTDS’), which

brings together for the first time every aspect of

our planning for the next 25years – strategic

planning frameworks, statutory environment

programmes and planned enhancement

activities – into asingle adaptive strategy that

covers both water supplyand wastewater

services (including bioresources). Both our

draft WRMP and final DWMP fed into our LTDS

andwider AMP8 plans.

As part of our LTDS, we explored multiple

strategies to achieve our long-term outcomes

under a range of potential futures including

the eight Ofwat common reference scenarios

(‘CRS’)

and the EA preferred scenario. This

allowed us to understand how our investment

plans would differ under a diverse range of

assumptions across climate change, demand,

water abstraction conditions and technology.

Using this insight, we created our core pathway

which includes four types of investment,

aligned with Ofwat definitions:

– ‘No-regrets’ investment: Required to meet

statutory obligations by 2030.

– ‘No-regrets’ investment: Required in all

plausible futures by 2050.

– ‘Low-regrets’ investment: Required in

most plausible futures.

– Investment required to keep future

optionsopen.

This is supported by three adaptive pathways,

as outlined in our case study on page 50.

PR24 Business Plan investment

Our PR24 Plans include those investments

which support our core pathway between

2025 and 2030.

In the short term these are based on:

– population growth assumptions in line with

Office for National Statistics and local

planning authority projections;

– medium climate change scenarios in line

with guidance from the EA and based on

UK Climate Projections 2018 (‘UKCP18’);

– an environmental destination based on our

legal obligations but with studies to better

understand how we could do more; and

– an optimistic view of the level of technology

and innovation that can be deployed to

support delivery of our outcomes, to

support our customers.

These pathways are derived from our analysis

of the expenditure required to use less water.

Where we have a choice on the pace of

improvement by 2050, we have sought to

ensure a broadly even bill impact in line with

feedback from our customers.

82% of our AMP8 enhancement investment is

needed to deliver 2030 statutory obligations,

12% to make a proportionate step towards

astatutory deadline required after 2030 and

the remaining 6% for low-regrets investment

needed to deliver customer request

improvements or to mitigate externally

driven risks to ensure we are keeping pace

with pressures such as climate change.

1 As part of Ofwat’s guidance for PR24 they specified eight common reference scenarios that all water companies should use in their planning. They represent simple, plausible approximations

ofthe future, and cover the most material areas of uncertainty around future water company activities and costs within: climate change, technology, demand and environmental ambition.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 49

STRATEGIC REPORT

These pathways are derived from our analysis of the expenditure and

intervention forecasts for each of Ofwat’s eight common reference

scenarios which include assumptions about a range of factors

including climate change, population growth and technology (see

pages 48 to 56 of our LTDS for more details), which in turn were

based on over a thousand ‘What If’ simulations. These simulations

allowed us to understand exactly how the optimal investment choices

differ under a wide range of assumptions and to identify the most

material issues, i.e. those that would change the extent or pace of

need or the efficiency of solutions.

For example, the impacts of climate change felt locally might trigger

increased concern for the environment and therefore greater

investment needed to mitigate potential impacts, but would also

stimulate a market and customer response to help solve these issues.

By considering how such issues might change over time and interact,

our adaptive pathways compromised: adverse climate-triggered

change, societal shifts and government-led legislative future, as

illustrated below with examples of specific triggers that are

considered in each category.

These adaptive pathways are all plausible, but we do not think it is

possible to calculate the likelihood of any particular route or future.

Therefore, our investment programme was optimised to take into

account all three adaptive pathways and ensure it included all the

no-regrets investments in 2025-30 needed to cover off all three,

aswell as any low-regrets investments to cover the most plausible

futures (if a project appeared 70% (or higher) of the time in all

scenarios or higher by 2050, it was included in the low-regrets

scenario). We also looked for areas where investment should be

prioritised to keep future options open, though these were

predominantly in relation to gathering more information to reduce

uncertainty and inform future AMPs.

This optimisation exercise resulted in one change to our core

pathway. Inour original core pathway optimisation, we selected two

water resource schemes to resolve the current AMP8 deficit.

However, in allthree of the adaptive pathways, that solution had

potential to fail in more adverse circumstances. We reviewed a wide

range of options and found that the lowest-cost solution would be to

construct a larger solutionin the short term, i.e. to increase

reservoir capacity, toavoid potential future cost.

To help understand when it may be appropriate to transition to an

alternative pathway, we have identified and will monitor potential

triggers, which includes a range of climate change metrics. For

example, if UKCP28 shows that the Representative Concentration

Pathway (‘RCP’) is on course for 2°C or higher and the impacts are

greater than currently assumed, then we will consider moving to an

adaptive pathway aligned to that forecast, which will drivedifferent

investment choices more relevant to those conditions. We have

included £2.5 million forclimate impact modelling to validate our risk

models and to assess the impact of any AMP8 mitigation measures to

improve theresilience of our assets to the impacts of climate change

in recognition of the scale of potential impact that could arise from

adverse climate impacts.

Climate triggered change

Societal shifts

overnment-led legislation

Core pathway

Decision point

Trigger point

2025 2030 2035 2040 2045

2050

AMP8 AMP9 AMP10 AMP11 AMP12

Total AMP Totex (£bn)

Trigger: Accelerated

environmental act

Change: Pivot to high

environment scenario

2035

Customer-driven

environmental investments

2027

UK Climate

Projections published

2044

Census data released

2035

Innovative technologies

come to market

2033

National Infrastructure

Assessment recommends

accelerated flooding

investment

Trigger: Wider policy updates

Change: Accelerated

environmental investment

Trigger: Customers expect faster

progress on long-term targets

Change: Pivot to customer-led

environmental investments

Trigger: Market and supply chain

respond with innovation

Change: Pivot to benign technology

Trigger: Market and supply chain

respond with innovation

Change: Pivot to benign

technology

Trigger: Climate change triggers

inland migration

Change: Pivot to adverse growth

Trigger: Customers value

wider benefits

Change: Pivot to nature-based

solutions over traditional methods

Trigger: Market responds with

mechanisms to reduce pressure

on customer bills

Trigger: Customer behaviour

changes to avoid climate change

Change: Pivot to benign demand

Trigger: Climate change worsens

Change: Pivot to adverse

environment scenario

Trigger: Exceeding PCC targets

Change: Pivot to benign

demand scenario

Trigger: Innovation meets

public sentiment

Change: Pivot to benign

technology scenario

There are many factors that can lead to future uncertainty, of which climate

change is a significant element. Consequently, in addition to our core pathway,

we have created three adaptive pathways which cater for a broader set of

futures and the uncertainty associated with planning over several decades.

KEEPING FUTURE

OPTIONS OPEN

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202450

OUR NATURE STRATEGY – PROGRESS TO DATE

Task Force on Nature-related Financial Disclosures

Strategy – TNFD requirements

– Describe nature-related dependencies,

impacts, risks and opportunities the

organisation has identified over the short,

medium and long term.

– Describe the effect nature-related

dependencies, impacts, risks and

opportunities have had on the

organisation’s business model, value

chain, strategy and financial planning,

aswell as any transition plans or analysis

in place.

– Describe the resilience of the

organisation’s strategy to nature-related

risks and opportunities, taking into

consideration different scenarios.

– Disclose the locations of assets and/or

activities in the organisation’s direct

operations and, where possible, upstream

and downstream value chain(s) that meet

the criteria for priority locations.

TNFD maturity – Our strategy

We are confident that our existing strategies

consider both our impact and dependencies

on nature, and have used our initial internal

Locate, Evaluate, Assess, Prepare (‘LEAP’)

assessment to assess our upstream and

downstream value chains. However, we

acknowledge we have more work to do to

effectively report against the TNFD

requirements by disclosing more detail and

improving our understanding. We look

forward to expanding on our work to date

toreport against the TNFD requirements

inour 2024/25 Annual Report.

Our nature strategy

As a provider of water services we are

heavily reliant on nature and the environment

around us. The provision of good quality

drinking water and the treatment of

wastewater to 4.7 million households and

businesses in our region goes hand-in-hand

with nature. Its importance to the lives of our

customers and communities is fundamental

to how we do business, which is why our

strategy, to be performance driven and

sustainability led, guides us to being

abusiness that ensures nature is at the

forefront of our strategic direction.

Our environment is vital to the success of our

reservoirs, treatment works and pipelines;

capturing, holding, cleaning and carrying our

water. Without nature, we could not do our

job, and a flourishing environment plays an

important role in delivering our core

activities more effectively and efficiently. The

most significant impacts in relation to our

operations are water quality, water supply,

flood risk, and biodiversity and habitats.

Society is currently facing into a range of

headwinds which have the potential to make

this more challenging – nature loss, climate

change and demographic change are all

putting pressure on the environment and

ecosystems around us. As such, we are

already embarking on a range of activities to

enhance our natural environment, whilst

also supporting the ongoing, sustainable

delivery of our core services.

– Biodiversity: We have increased our

commitment to improve biodiversity in our

region by doubling our commitment to

improve 10,000 hectares by 2025.

Inaddition, on our own capital schemes

weare going above and beyond national

targets, to deliver 15% biodiversity net gain

and help combat regional biodiversity loss.

– Catchments: We are committed to

improving the health of our region’s rivers

through working with farmers to reduce

harmful runoff within our catchments. This

includes the extension of our STEPS

programme, helping farmers across our

region protect their local environment and

river health.

– Nature-based solutions: Increasing

urbanisation can lead to increased surface

run-off, driving an increased risk of

flooding and poor water quality. Nature-

based solutions, such as our schemes in

Mansfield, can help prevent these impacts,

whilst enhancing biodiversity and

community engagement.

– Net zero: Our operational processes are

naturally energy intensive and produce

emissions thatcontribute to climate

change. We have committed to achieve net

zero operational emissions by 2030, and

created our Net Zero Hub at Strongford to

support this.

– River pledges: We are committed to five

Get River Positive pledges to improve the

health of our rivers by 2030. We believe

that we are currently responsible for 14%

of the RNAGS for rivers in our region and

we are committed to reducing this to 10%

next year. Read more on pages 33 to 34.

As a large landholder, our operations and

land holdings cover various habitats across

our region, including Sites of Special

Scientific Interest (‘SSSIs’). In our Caring

forthe Environment report, we set out how

we manage our diverse estate and the

environment around it, including our region’s

6,800 km of rivers. We also have anumber of

visitor sites, including nature reserves,

which provide opportunities for our

customers and communities to get closer to

our region’s rich natural environment.

Nature is a fundamental consideration in the

development ofour longer-term strategies.

Within our draft WRMP, we set out how we

will manage our natural water resources and

ensure the water cycle remains sustainable

for generations to come – in doing so,

ensuring the impacts on nature (such as

those presented by sustainable abstraction)

are central to our considerations. Our DWMP

considers how our activities will impact the

natural environment and river water quality

and sets out how we will continue to protect

our rivers, waterways andthe wider

environment in the face of achanging climate

and population. Our Business Plan, including

its accompanying LTDS, sets out our

ambitious plans over the next five years and

beyond. In developing these plans, we have

set out a range of programmes to enhance

the natural environment around us, while

helping us respond to some of the challenges

we face. To ensure we are resilient to the

range of nature-related risks and

opportunities, we use modelling to estimate

and assess the impacts our activities have on

nature, which allows us to make informed

decisions on how best to look after and

workwith the environment. As set out in the

Risk Management section of our TCFD

disclosure, we take an active approach to

managing the range of nature-related risks

we face as abusiness.

This year we have set out our initial approach

to TNFD reporting. Our work to date focuses

on our direct value chain. Disclosures in

future years will be expanded to include

upstream and downstream value chain

activity and its impact on nature, and we will

continue to refine and enhance our TNFD

disclosures infuture Annual Reports.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 51

STRATEGIC REPORT

Severn Trent has reported against the Risk Management TCFD recommendations and CFD requirements below

Requirements Update 2023/24

CFD requirements

b) Describe how the business identifies,

assessesand manages climate-related risks

andopportunities.

c) Describe how processes for identifying, assessing

and managing climate-related risks are integrated

into the business’ overall risk management process.

Our focus this year has been to integrate climate change into our risk management processes.

Wecompleted a programme of work to link all ERM risks to climate change modelling and scenario

planning, using the DWMP and draft WRMP as key references. ERM risks have been linked to existing and

emerging regulatory requirements and risk mitigation strategies have been reviewed. We updated our

corporate risk reporting system in 2023, enabling us to make these changes and demonstrate where the

likelihood could be exacerbated by climate change. We want to take this work further to incorporate nature

drivers and reflect biodiversity loss and other nature impacts that exacerbate existing risks to our

business. Robust relationships across our internal teams ensure alignment and knowledge sharing of

climate-related risks, incorporating them into our existing ERM system, and assessing them against our

existing framework. We continue to use the ‘Risk Bow Tie’ management tool to assess risk causes,

controls (proactive and reactive) and consequences for different scenarios, and link causes to relevant

climate drivers to determine the effect on likelihood, impact and target risk position. Core teams across

the business continue to own and assess climate risks as part of ongoing operations.

Looking ahead, we continue to incorporate climate risk in our annual horizon scanning and to monitor

existing and emerging risks to determine if our mitigation strategies remain appropriate. The Central ERM

Team will continue to work with stakeholders to ensure early warning processes operate effectively, and

we will perform maturity assessments to provide greater insight and identify opportunities to quantify

climate risk. Our work to analyse alignment to the EU Taxonomy has supported embedding new and more

detailed climate adaptation risk procedures across our business activities, engaging risk owners and

managers and increasing awareness and documentation.

TCFD recommendations – Risk Management

a) Describe the organisation’s processes for

identifying and assessing climate-related risks.

b) Describe the organisation’s processes for

managing climate-related risks.

c) Describe how processes for identifying, assessing

and managing climate-related risks are integrated

into the organisation’s overall risk management.

OUR RISK APPROACH TO CLIMATE CHANGE

Our approach to managing climate-related

risks is outlined in the table on the following

page. This highlights how we consider

climate-related risks over different time

horizons (i.e. the short, medium and long term),

which we determine by reference to our

planning cycles for Ofwat and other regulators.

We use 0-2 years as a short-term timeframe for

tactical response, a medium-term horizon of

five years to reflect the price view cycle

determined by Ofwat, and up to 25 years as a

long-term horizon as determined by our DWMP,

draft WRMP and LTDS. Climate change will

impact existing risks to our business, rather

than present as new risks: for example, an

increase in storm frequency and severity has

the potential to challenge our ability to deliver

water and wastewater services to our

customers.

Climate risks are assessed utilising key

documents including the DWMP, WRMP and

Drought Plan, as outlined in the Strategy

section of this TCFD disclosure. This means

that our plans and our investment are based on

the climate we expect to be operating in over

the next 25 years. These investment plans are

broken down into five-year periods to align

with Ofwat’s regulatory cycle. We have a

dedicated ERM-level risk to monitor our

Business Plan through to the Final

Determination, which recognises the

importance of the decisions on our climate-

related risk mitigation strategies. Each ERM

risk has anexecutive-level owner, who also

has acritical role in developing the right

investment plan to balance operational risk

and long-term strategy.

Running a Business that Goes Hand-in-Hand with Nature continued

River Leam

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202452

Time horizons

0-2 years

(Short-term)

Up to 5 years

(Medium-term)

Up to 25 years

(Long-term)

Summary – In the face of acute physical

risks, we implement tactical

response plans to ensure

delivery ofour annual

performance targets.

– We assess and make

recommendations for

improvement.

– Our Business Plan describes the

improvements that we will

commit to delivering in the next

AMP cycle.

– We use long-term plans to explore and

account for future potential risks we may

face, including climate change uncertainty.

– We consider how to meet future

challenges, and the steps that could

betaken.

Critical documents – ERM Framework and

supporting processes – a

consistent approach is taken

across the Severn Trent Group

to embed climate and

nature-related risks.

– Incident management plans

and process-driven response

plans.

– Root cause analysis outputs.

– Drought Plan.

– Localised response

strategies.

– ERM Framework – the

framework incorporates

medium-term risks to ensure

there is aproactive approach,

with appropriate risk mitigation

strategies.

– Regulator-approved AMP

investment plan.

– Rolling internal five-year

Business Plan.

– Our ERM Framework, including our

strategic Principal Risks.

– Our WRMP, which is produced every five

years. Our revised draft version was

published in September 2023.

– Our first full DWMP, produced in

March2023.

– Our Strategic Direction Statement (‘SDS’)

2050, published in May 2022.

– Our Business Plan and LTDS, submitted

inOctober 2023 for the regulatory period

beginning 1 April 2025 and ending

31March 2030.

How we shape

ourapproach

toclimate- and

nature-related risks

– Our Drought Plan 2022-2027

sets out how we will manage

our resources and supply

system during dryand drought

years. It sets out the demand

and supply actions we will

take, triggeredby drought

conditions of two to

threemonths.

– Our Climate Change Adaptation

Report provides an overview of

climate risks.

– Our draft WRMP sets out our

strategy to address risks

relating to water availability and

security of supply, takinginto

account achangingclimate and

population demands.

– Our DWMP sets out our

approach to ensuring an

effective wastewater process.

– Our SDS outlines the key trends and

challenges that we believe will be key to

shaping the future to 2050. This is used to

inform and guide our future strategy and

long-term investment plans.

– Our draft WRMP sets out our long-term

strategy for the next 25 years and also looks

ahead to 2085. This considers potential risks

to our value chain due to drought, climate

change, population and economic changes.

– The DWMP outlines our long-term strategy

for wastewater. The impact of severe

weather is modelled over the next 25 years

to help prepare future investment plans

and our LTDS.

– Our LTDS includes long-term risks,

ambitions and investments beyond

ourBusiness Plan. This uses

adaptiveplanning.

– Our Climate Change Adaptation Report

provides an overview of long-term

climaterisks.

– Our Biodiversity Strategy and Action Plan

sets out how we protect habitats and

species and drive nature recovery.

– Our Protecting and Enhancing SSSls

document sets out our approach for SSSls

that we own or which might otherwise be

impacted by our work.

Key elements – We undertake a granular and

dynamic appraisal of the

health of our assets, including

operational tasks and

operation and maintenance

ofassets, using an Asset

Health Dashboard.

– We use data collection for a

longer-term approach.

– We have a localised

approachto delivery of

improvement plans.

– Outputs drive small-scale

operational and

capitalspending.

– We engage key external

stakeholders to agree response

plans, including the EA, Ofwat

and DWI.

– We model scenarios to

determine response strategies.

– Outputs drive capital investment

and delivery of large-scale

capitalupgrades.

– We consider the potential long-term

impacts of climate change on our essential

services. We identify and assess the most

significant and influential trends and the

biggest challenges that we will face.

– We analyse longer-term trends utilising

UKCP18 datasets combined with

internalmodelling.

– We perform data-focused reviews through

technical assessments and modelling.

– We adapt and document our

riskstrategies.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 53

STRATEGIC REPORT

Our processes for identifying and

assessing climate-related risks

Importance of climate change to

ourbusiness

As a company that depends on supporting

andinteracting with the natural capital within

our region, we have an important role to

understand, prepare for and respond to

achanging environment. We know that climate

change, along with other factors such

aspopulation growth and urbanisation, will

increase the pressure on delivering our

essential services. We link our risks to the

water cycle, which means we assess risks for

the end-to-end process and the impact of

climate change (e.g. frequent storms,

prolonged dry weather) in differentscenarios.

Embedding climate change into our

existing ERM Framework

Our well-established ERM Framework is

underpinned by standardised tools, practices

and risk management methodologies to

ensure consistency across the Severn Trent

Group. The ERM cycle is divided into four main

stages: identify; assess and evaluate; mitigate

and monitor; report and assure. We use

financial thresholds to measure the materiality

of each risk and the level to which risks are

reported within the business. Risks valued at

over £10 million are reported through internal

risk management processes, and captured in

our ERM system. Four further levels exist

above this with the highest valued at over

£75 million. The risks in this bracket are

required to be reported at Board level. Risks

below £10 million are managed by the

business. Risk identification and assessments

are supported through horizon scanning;

emerging risk assessments; regular cycle of

risk updates; biannual risk reporting; deep

dives; reviews by our Strategic Risk Forum,

Audit and Risk Committee and Executive

Committee. Our ERM-level risks are managed

through our operational approach to risk (see

pages 92 to 94 for more information).

Our processes for managing

climate-related risks

Climate change is embedded in

day-to-day management and

strategicdecisionmaking

Adopting a risk-based approach to managing

climate change is embedded throughout our

business, from operational activities through

to our strategy. Severn Trent has 13 Principal

Risks (set out on page 95 to 101), which are the

overarching risks and opportunities that are

critical to the delivery ofour strategy. To

reflect the importance of climate change, we

identify a specific risk in relation to our climate

change strategy and a separate risk for natural

capital. Climate change impacts a number of

our other Principal Risks, resulting in it being

at the forefront of our strategic decisions, and

more detail is outlined on the following pages.

Key investment decisions are made based on

climate change modelling. Thisenables us to

stress test our risk mitigation plans and ability

to deliver under different climate scenarios.

The outputs of the scenario testing and

associated strategies can be found in our key

published documents (i.e. DWMP, draft WRMP

and Drought Plan) and are accessible to all our

colleagues and stakeholders. Climate change

risks are also considered individually and

collectively to ensure they are effectively

managed across the business.

Our overall risk management

Holistic risk approach to climate change

There are embedded processes for the

business and the central ERM Team to manage

risks, with a clear strategy to connect everyone

in the business under an overarching goal for

risk management. The Board has overall

responsibility for ensuring that risk is managed

effectively across the Group and there is an

effective risk management framework in place.

The Executive Committee has specific

responsibilities and accountabilities for topics

connected to climate considerations, including

our strategy and operations, and regulatory

requirements. See the Internal Controls and

Risk Management disclosure in our Audit and

Risk Committee Report on pages 153 to 161 for

more information. The risks we have already

recognised inform and help mitigate against

the predicted impacts caused by 2°C

ofwarming.

Experienced risk community

We have a dedicated risk network which

comprises of a network of risk co-ordinators

and Risk Champions. They are the principal

point of contact for the central ERM Team to

understand the risk landscape and any

changes, including climate-related risk.

Ourrisk community are trained and supported

by our central ERM Team to perform risk

assessments throughout the year and

proactively manage risk. They also have a key

role in embedding an appropriate risk culture

and behaviours across the organisation.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202454

Embedding climate-related risks

We dynamically assess potential changes in the risk environment through our investment plans, which means we plan for and invest based on the

climate we expect Severn Trent to be operating in over thenext 25 years. These plans form the key basis for our five-year investment plans that

wesubmit to Ofwat. Our three-tiered system shown below helps ensure appropriate actions are taken given the relative risk to our operations.

The tiered approach enables us to identify and categorise climate-related risks and determine where focus is needed.

TCFD TYPOLOGY

WHAT THIS MEANS

Risks caused by physical shocks

and stressors to infrastructure

and natural systems, e.g.

extreme weather.

– Acute physical

– Chronic physical

Monitored

Focused

Modelled

For our core operations, our risk management processes will

fall into the modelled category. We complete holistic system

modelling to test different climate trajectories, including the

Met Office’s UKCP19 and IPCC’s RCP climate scenarios.

This enables us to determine the impact on the water cycle

(e.g. our ability to collect raw water if we have hotter and

drier summers).

Our DWMP and draft WRMP publications demonstrate how

climate change has been integrated into our plans.

This broadly aligns with our 5-year investment plans, the

latest being our PR24 Business Plan. These investment plans

are based on the long-term outlook detailed in DWMP type

plans and prioritises the investment decisions we’ll need to

take over the next five years to continue providing a reliable

service to all customers and keep pace.

Our risks are actively monitored to identify changes in the risk

profile and determine whether monitored risks need to

transition into modelled or focused risks, and vice versa.

Both our framework and our risk community ensure any

changes are captured on a timely basis and climate-related

risks are clearly identifiable.

Risks that arise as a result of

economic and regulatory

transition toward a low-carbon

future, e.g. changing consumer

behaviour and preferences.

– Policy/legal

– Technology

– Market

– Reputational

Physical Transition

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 55

STRATEGIC REPORT

Linking modelled risks to TCFD

Modelling

In assessing climate change, we have used the

following models. For water we used UKCP18

RCP2.6, RCP6.0 and RCP8.5 in our scenario

analysis. 12 Regional Climate Model (‘RCM’)

scenarios and 20 probabilistic datasets are

included in our water resource systems

climate change analysis.

RCMs provide comparable outputs across

regions due to their representation of spatial

coherence of climate change. Current

modelling is to the 2070s, and then

extrapolated to 2085 to cover the WRMP24

planning period. For waste we used RCP2.6,

RCP6.0 and RCP8.5, including industry derived

rainfall uplifts for 2050. Within our DWMP

wemodelled present day flood risk during

a1in 50-year rainfall event. We then use

rainfalluplifts derived from climate change

projections to determine how climate is likely

to affect rainfall intensities. Current

modellingis to 2050.

Modelled risks (short-, medium- and long-term)



Safe and secure supply of drinking water

Key risk: We do not supply a safe and secure supply of drinking water to our customers.

Demand for water will increase due to population growth and changing weather conditions.

Overview: We provide 4.7 million homes and businesses with drinking water and supply about 2 billion litres each day.

We divide our water supply areas into 15 water resources zones and these vary in scale and water resources challenges.

Examples of integration into the

widerriskenvironment:

Failure to provide water treatment capacity to meet requirements in future AMPs.

Failure to ensure our network is resilient to meet supply requirements in future AMPs.

Drivers: Impact: Opportunity:

– Hotter, drier summers and changes

in precipitation will reduce water

resources availability, restricting the

amount we can abstract and supply.

Deployable output drives the supply/

demand deficiency challenge.

– Acute physical risks (e.g. floods) may

impact our infrastructure and

increase the risk of water

contamination.

– Regulatory changes and

waterresources planning

requirements also impact the water

available to supply our customers.

– Demand is a critical factor and

comprises water efficiency and

household and non-household

consumption. This is influenced by

population growth and

macroeconomic changes.

– The risk composition has been assessed for each

ofour water resources zones. Each water

resources zone’s response tovarying drought,

severity and patterns has been reviewed and a

wider system assessment performed onour

waterresources network.

– Climate-change scenarios show how the frequency,

intensity and duration of hot weather periods are

likely toincrease, with significant changes in monthly

rainfall and temperatures. This will add more stress

on ournetwork.

– Modelling indicates a reduction in the amount of

water available for distribution - deployable output.

In 2050 the expected reduction of deployable output

is 4% in an RCP6.0 climate scenario and 9% in an

RCP8.5 climate scenario.

– Key financial impacts include increased remediation

and investment needs, as outlined in our draft WRMP.

– We have not restricted our customers’ use of water

since the 1995/96 drought. However, recent

experience has shown us that overall demand for

water increases by 24% in temperatures above 26ºC.

– Our 25-year LTDS indicates that, without

investment, by 2050 we face a 600 Ml/d deficit of

clean water.

– We will deliver a range of schemes to ensure water

supplies can cope with a 1 in 500-year drought by

2039, whilst keeping pace with EA requirements.

– Our draft WRMP outlines our recommended

strategy for delivering a service to our customers

and our plan over the next 25 years to balance

supply and demand.

– Our goal is to increase water supplies by up to

93 Ml/d, creating additional resilience to hotter,

drier summers and securing water resources for

future generations.

– Our drinking water protection strategy is to use

proactive catchment management techniques to

improve resilience in the face of climate change and

population growth.

– Our ongoing programme of capital maintenance

continues to improve asset integrity and supports

investment in early leak detection technologies,

increasing headroom to meet increased demand.

– Mitigation strategies will reduce leakage by

50%by2045.

– Longer term, our plans will increase the water

available for distribution, reducing the amount of

investment required.

– We have made a commitment to reduce non-

household demand by 15% by 2050 and have a number

of customer engagement programmes to help reduce

usage, including rolling out smart meters.

Running a Business that Goes Hand-in-Hand with Nature continued

Outlined in the tables on pages 56 to 60 are the transition and

physical climate-related risks associated with our business.

Transition Risk Physical Risk

TNFD reporting approach Principal Risk

Each modelled risk is integrated into a wider risk

framework which includes Principal Risks, ERM-level

and operational-level risks.

This enables a systematic approach to managing climate-related risks.

Our modelled risks are shown in the table below, alongside the drivers,

impact, mitigations and opportunities. To signal our intended approach

to TNFD reporting, we have highlighted the risk reporting requirements

that are intertwined within our existing approach. These requirements,

including references to our Principal Risks, are highlighted throughout

this section using the enclosed key.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202456



Transport and treatment of wastewater

Key risk: We do not transport and treat wastewater effectively,

impacting our ability to return clean water to the environment.

Overview: Our wastewater networks serve more than 9.5 million people and our 93,200 km of pipes collect 3.3 billion litres

ofwastewater per day. This is treated by c.1,000 wastewater treatment works before being safety returned to

theenvironment.

Examples of integration into the

widerriskenvironment:

Failure to safeguard future wastewater treatment capacity to meet future demand or increased environmental obligations.

Failure to ensure waste capacity network is resilient to meet future demand.

Drivers: Impact: Opportunity:

– Water UK, in collaboration with

regulators and stakeholders, has

published astrategic framework for

all water companies to follow that

standardises the process for

evaluating risks and plans to ensure

the sustainability of drainage

infrastructure and services.

– We have run around 11,000 separate

hydraulic model scenarios to reflect

the drivers of climate change,

population growth and urbanisation

in our PR24 plan.

– Extended dry periods and extreme

rainfall events impact the capacity of

our sewers, the risk of rivers

bursting their banks, ground water

levels and flashflooding.

– Increased population and land cover

could also increase run-off.

– By 2050 there will be more heavy rainfall (frequency

and intensity) and we expect an increase in

population of 1.1 million in our region alongside

increased urban creep that will pave over existing

green permeable areas. The cumulative impact is an

increased demand on our wastewater network.

– Flooding will impact more customers, more

frequently, with greater severity. Modelling indicates

that by 2050, if we do nothing, we can expect 61%

more flood water to escape from the sewer network

and 44,000 more properties to be affected by internal

sewer flooding in a severe 1 in 50-year rainfall event.

– Storm overflow spills are expected to increase by

2050 if no intervention is made.

– Increased rainfall could reduce the effectiveness of

our biosolids storage and disposal operations.

– Customers are increasingly concerned about how

changes in the weather and increasing extremes will

affect their wastewater service. They recognise there is

an increased risk of flooding and environmental impact,

and strongly support investment to reduce the risk of

disruption to services and to meet future challenges.

– Key financial impacts include increased remediation

and investment needs, which are outlined in our DWMP.

– There is an inherent relationship between base

maintenance activities (asset health) and

enhancements to provide resilience and meet

futuredemand.

– To plan for uncertainty, we have taken an adaptive

pathway approach to inform our strategy and

investment planning, as outlined in our LTDS.

– Our DWMP looks at how our system works now, and

the investment we need to meet the challenges we’ll

experience over the next few decades. This is our

first published DWMP and we will regularly review it

to ensure we are focusing on the right areas in years

to come.

– We have identified high-risk storm overflows and

will target actions accordingly. We will also improve

surface water drainage in our highest risk areas to

alleviate a 1 in 50-year flood risk to around 24,000

properties.

– Our DWMP includes two core investment options to

address network capacity constraints: nature-

based, sustainable surface water separation

solutions and traditional sewer capacity upsizing

and storage. We plan to harness the value of our

waste to support a more circular economy.



Affordability

Key risk: The investment required to improve resilience and meet long-term

targets will impact customer bills and affect affordability for some.

Overview: Spreading the costs and benefits fairly across generations is at the heart of our strategy. We cannot allow future

generations to carry an unfair share of the total cost of improvement.

Examples of integration into the

widerriskenvironment:

Failure to successfully deliver the benefits of our change programme.

The investment required will impact customer bills and affect affordability for some.

Drivers: Impact: Opportunity:

– Investment will be required tomeet

more stringent environmental

standards, improve resilience, adapt

to climate change and meet

long-term targets.

– Our regulatory model means that our

investments are ultimately funded

through customer bills.

– Customers have an expectation that

their water bills will need to increase.

– Our net zero plans may not be funded

if regulators decide to keep bills low

in the short term.

– We will be delivering an increase in our investment

programme in the next AMP (2025-30) which includes

our statutory environmental programme (WINEP).

– Reflecting this investment, our water bills are going

up by just over £2 per month (£28 per year) during

2025-30. We recognise this increase will affect

affordability for some customers who struggle to pay,

and we have developed our affordability approach in

view of potential impacts.

– Cost of living and other factors are placing pressure

on greater numbers of people, making our support

vital, and approximately 6% of customers in our

region are estimated to be in water poverty. This

could increase ifthere is no sustained economic

growth to support incomes or additional support to

pay water bills.

– Customers want reassurance that existing funds

have been spent wisely and details about where the

money is going and what improvements it will deliver.

– Most customers prefer a gradual bill increase, which

will be consistently applied between now and 2050.

– The scale of the investment we are proposing will

mean that the average combined household bill will

increase. We know we need to ensure this

investment is affordable and earn our customers’

confidence that their money will be wellspent.

– Our bills are currently 1.2% of the median household’s

disposable income and by 2030 this will increase to 1.3%.

– We share our customers’ view that, as an essential

public service, water should be affordable for all.

This means not only providing meaningful support to

those facing financial struggles, but also keeping

bills as low as they can be.

– The Board has fully engaged with the LTDS and

hastaken steps to secure long-term affordability

andfairness, including oversight of the Company’s

affordability approach.

– We have a strategy that considers trends in

affordability and ensures that we update our

support offerings to reflect economic

circumstances. No one need struggle to pay their

bill as our financial support package will go further

than ever before. Almost 700,000 customers will

receive help with their bills by 2030.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 57

STRATEGIC REPORT

Linking focused risks to TCFD

Focused risks are linked to our

widerrisk environment to ensure

ourclimate-related risks are

fullyintegrated.

This ensures we are effectively prioritising

climate-related risks andhave appropriate

plans in place. The tables in this section

provide a summary of our key climate-related

focused risks and also indicate where they

relate to the TNFD.

Focused risks (short-, medium- and long-term)



Regulation/Policy

Key risk: Changing societal expectations, resulting in stricter legal and environmental obligations,

commitments and/or enforcement, increase the risk of non-compliance.

Overview: Increasing societal expectations are driving further climate-related obligations and commitments which impact water

companies. Customers, stakeholders and regulators all play a critical role in shaping the future of the water industry.

Proactivity is critical to ensure we set the right internal performance targets and make the right investment decisions

toenableus to be ahead of the change curve.

Examples of integration into the

widerriskenvironment:

Failure to comply with combined sewer overflow (‘CSO’) permits or stakeholder expectations.

Failure to build trust with the Severn Trent brand with our key stakeholders.

Drivers: Impact: Opportunity:

– Media coverage around climate

change and the level of

environmental pollution can raise

public awareness and increase calls

for policy makers (Ofwat, DWI, EA,

NRW) to strengthen regulation.

– Increased focus on environmental

protection and delivering climate

change strategy could also change

government policy and our

regulators’ approach to setting

performance targets.

– A key Ofwat theme is ‘Delivering

everyday excellence. Water is an

essential service and customers’

growing demands should be met’,

which illustrates the commitment to

listening to public opinion.

– Increased regulatory scrutiny and

accelerated regulatory change will

drive behaviour toprotect the

environment.

– We will need to ensure resilience

around changes tocarbon taxes and

readiness toact with nature-based

solutions and explore

newopportunities.

– Expectations of water companies will increase: to be

sustainable in their operations; to pay for any damage

they cause; and face greater scrutiny over

environmental performance.

– Our ODI penalty/reward position could change,

depending on Ofwat performance targets.

– Operational costs associated with taxes on carbon

emissions could increase.

– Regular engagement with the UK Government,

Welsh Government, regulators and other

stakeholders helps us to work together in order

to address the impacts of climate change.

– Our established Governance Framework,

policies andtraining ensure our ongoing

compliance with allapplicable laws and

regulations.

– We use external legal advisers to complete

detailed reviews in respect of upcoming

legislation that may affect the Group.

– We recognise that, as a provider of essential

public services, we have an obligation to

consider stakeholder concerns at a company

and a sector level. We have considered our

performance on matters such as operational

resilience in the face of climate change, river

health and storm overflow spills, and

performance against our statutory and

regulatory obligations, when determining the

appropriate level ofdividend.

– We engaged with over 68,000 customers in

development of our PR24 Business Plan to

ensure that their priorities were considered in

the plan’s development.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202458



Sustainability strategy

Key risk: Severn Trent’s sustainability strategy does not enable us to respond

to the shifting natural climatic environment and maintain our essential services.

Overview: Mitigating and adapting to climate change remains a critical priority for us and forms a common theme through all our

strategic documents and plans, from our Corporate Strategy downwards. This ensures that every part of our

organisation is focused on reducing our environmental impact, improving sustainability and the underlying resilience

of our business.

Examples of integration into the

widerriskenvironment:

Failure to deliver an effective, high-quality and ambitious price review for 2024 (PR24) strategic plan.

Failure to deliver our accelerated Green Recovery Programme to time cost or quality.

Drivers: Impact: Opportunity:

– We are aiming to reach zero

operational carbon emissions by 2030,

20 years ahead of the UK’s national

target of 2050.

– Potential government policy

interventions are likely to be focused on

speeding up decarbonisation. More

stringent standards may beenforced

alongside increased reporting.

– Our core principle is to protect

essential services and the environment

from climate-related risks.

– As the water sector contributes at least 1% of

UK emissions, we will be required to reduce

emissions in line with the Government’s interim

targets of a 78% reduction (since 1990) by 2035.

– The need for greater understanding, visibility

and transparency increases the need for more

granular data collection and reporting.

– We use a range of decision-making tools and

optimisation models to identify solutions that represent

both least cost and best value under all plausible

futures. This analysis has been used to facilitate

informed conversations with customers, stakeholders

and ultimately our Board before determining our final

investment choices.

– We have also refreshed the net zero metrics in our

Long-Term Incentive Plan (‘LTIP’) for senior

management to reflect our low-carbon priorities.

– Our strategy has been tested using all eight of Ofwat’s

common reference scenarios (‘CRS’). For example, we

have considered how investment plans would change

under high and low assumptions about climate change,

technology and demand impacts.

– The Board places particular emphasis on ensuring that

we have resilient long-term plans that consider the

impacts of population growth, drought, our

environmental obligations and climate change

uncertainty. This will enable us to continue to deliver our

essential services for customers now and in the long

term, whilst transitioning to a net zero world.



Natural capital

Key risk: We fail to positively influence natural capital in our region.

Overview: Habitat preservation, restoration and biodiversity will become increasingly important as the value and role of nature are

more widely recognised, and the loss of the globally significant habitats inspires action. As a landowner with an estate of

10,500 hectares, we need to show we are making the best use of our land and improving its natural capital.

Examples of integration into the

widerriskenvironment:

Failure to deliver our accelerated Green Recovery Programme to time cost or quality.

Failure to abstract sufficient raw material for our customers or over-abstract, damaging the natural environment.

Drivers: Impact: Opportunity:

– We are heavily dependent on nature

for providing good water quality (e.g.

healthy soils, woodlands, and

peatlands for filtering) and a

sustainable supply, in order to provide

water security in the future.

– Hotter, drier summers cause changes

to habitat composition and

distribution, along with biodiversity

loss on land and inrivers.

– Increased urbanisation, which

extends hard impermeable surfaces,

against the backdrop of more rainfall,

increases the risk and speed of

run-off, with potential to impact

sewer overflows. Agriculture is also

a critical driver, which can impact

operations and our value chain.

– A growing population and increased

water consumption can place

additional pressure on natural

resources, negatively impacting

biodiversity and our ability to

effectively manage natural resources.

– Resilience to climate change and extreme

weather events could decrease and there is a

risk our raw water quality deteriorates.

– Changes to the valuation of natural capital may

have financial impacts in the future. Delaying

the investment for climate-resilient or

adaptation solutions may increase future costs.

– Failure to manage pollutions could create

environmental harm and erode trust with our

customers and other stakeholders, and impact

our financial penalty/reward position.

– We have made public commitments to protect our local

environment (e.g. targeting 15% Biodiversity Net Gain for

our capital projects).

– We are investing in habitat restoration, which reduces

pressure on assets and lowers asset failure rates.

– Adopting a catchment management approach in

partnership with landowners in our region will mitigate

the effect of pesticides, fertilisers and organic nutrients,

and reduce additional investment.

– Management plans and controls mitigate damage to

SSSIs and enhance them through our operations.

– Our Green Recovery Programme consists of six

schemes that will deliver benefits for our customers,

communities and the environment, both now and

overtime.

– We have made a significant difference to our natural

habitat through our Commonwealth Games legacy

(72Tiny Forests and Legacy Forest), our Great Big

Nature Boost for Biodiversity (enhancing it on 5,000

hectares of land) and by restoring 2,000 acres of

peatland in England and Wales.

– Ecosystems have been enhanced, improving

resiliencethrough decreased flood risk and improving

water quality.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 59

STRATEGIC REPORT

Linking monitored risks to TCFD

Each of our ERM risks is assessed

aspart of the annual review utilising

the ‘Risk Bow Tie’ methodology.

All of our ERM risks are actively monitored to

identify changes in the risk profile and

determine whether monitored risks need to

transition intomodelled or focused risks. Our

established ERM Framework and risk

community ensure any changes are captured

on a timely basis and any climate-related risks

are clearly identifiable. An example of a

monitored risk is shown below.



People and culture

Key risk: Our people and culture do not adapt in response to a changing environment and do not take

advantage of technological advancements to deliver enhanced business performance.

Overview: We have a team of over 9,000 employees based across our region, each playing their part to provide clean water

and wastewater removal to homes and businesses across the heart of the UK. We’ve created a culture that

encourages all our people to think of every single day as an opportunity to do something better. We embrace

new ideas, technologies and knowledge that can help us to achieve our goals.

Examples of integration into the

widerriskenvironment:

Failure to develop our people with the appropriate skills, knowledge and behaviours to enable them to fulfil

theirroleeffectively.

Failure to attract and retain the right people.

Drivers: Impact: Opportunity:

– Reaching our climate change

ambitions will require us to introduce

and scale up the introduction of

technology-related solutions.

– Innovation is key in helping us improve our

operational performance and deliver our ambitious

sustainability goals, including improving river

quality and mitigating the impacts of climate change

on every stage of our value chain.

– Technology is a key enabler for addressing climate

change and needs to be embraced by colleagues in

order to achieve our goals.

– Our success in sustainability depends on

innovation, and we’ve recognised the need for a

wider-ranging, inclusive approach. We’ve adopted

the ‘open innovation’ model, involving suppliers

and industry partners, rather than relying on just

our own research and development, and this has

supported the development of a number of

innovative approaches.

– Our framework allows us to utilise new technology

that is close to being ready for deployment, while

targeting research into new technologies that, if

proved, will boost resilience and reduce process

emissions in the future. We are also embracing

nature-based solutions to complement

technological advancements.

– Cutting-edge technology enables us to capture the

volume of emissions emitted on an asset-by-asset,

site-by-site basis and make the right interventions

onthe right assets.

– We have taken a very open and collaborative

approach to identifying and implementing

technologies; as a result our colleagues have been

supportive and view us as an enabler.

One of the key factors for mitigating climate-related risks is through exploring opportunities and delivering our mitigation strategies. Innovation

plays a critical role in reaching our targets within the committed timescales. Our plan is to build resilience for changing climate conditions,

including more frequent extreme weather events, which will help us to deliver a great service to our customers. We recognise it is vital to

understand the risks we face as the climate changes, and we need to deal with the impact of climate change now so we can adapt for the future.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202460

Quantifying the impact of physical and transition risks

As we continue to evolve our TCFD disclosure we are adapting our reporting processes to provide greater clarity on the financial impact that

climate change could have on our business. Outlined below are examples of events driven by a changing climate, and the impacts they have had on

our business. These examples demonstrate scenarios that, due to climate change, are increasing in likelihood, and as a result we have used our

learnings to adapt both our operational response and our proactive investment approach, to ensure we reduce future reactive costs and realise

the opportunities through learning from the impacts. More detail on the investments we make to mitigate the likelihood and impact of these

events is included in the Metrics and Targets section of this report, on pages 63 to 67. Post-mitigation, none of the below risks are considered

material to our business.

Relevant key risk:

Demand for water will increase as a result

ofpopulation growth and changing

weatherconditions.

Example event Impact

In 2018, hot weather events

resulted in an extra requirement

for 300 million litres of water,

impacting our operating costs by

£22 million.

Reactive costs to deliver water to

water-scarce areas impact overall

operational costs.

This year we took the opportunity

to engage with customers early,

resulting in lower reactive costs.

Opportunity

Our PR24 Business Plan already includes investment plans for

additional supply schemes, smart metering and demand management

totalling £700 million, to better respond to increased demand and

increase our resilience to changing weather. With better proactive

management we expect to encounter lower reactive costs in future hot

weather events, and as these increase in frequency this means a

potential annual saving.

Opportunity

(avoided additional

annual cost in prolonged

hotweather)

£22 million

Relevant key risk:

Changing societal expectations, resulting in stricter

legal and environmental obligations, commitments and/

or enforcement increase the risk of non-compliance.

Example event Impact

Governments and regulators are

expected to increase taxes in future

to drive businesses to act and

reduce emissions. The UK

Emissions Trading Scheme (‘ETS’)

was recently expanded to include

additional industries, which from

2028 will include waste incineration

and waste from the energy sector.

If the UK Government expands the

ETS to apply to our operational

activities, this would mean a

carbon tax of £35/t CO

against

our Scope 1 emissions of 366,338

tonnes would result in a cost of

£13 million.

Opportunity

Through our Triple Carbon Pledge and commitment to SBTs for

emissions reduction, we are targeting zero operational emissions by

2030, energy from 100% renewable sources and a fleet of 100% electric

or low-carbon vehicles. We expect a future carbon tax to have little to

no impact if we embed the right processes now, and would benefit from

an annual tax saving compared to others.

Opportunity

(potential annual tax

saving if ETS is expanded)

£13 million

Relevant key risk:

We do not transport and treat wastewater

effectively, impacting our ability to return

clean water to the environment.

Example event Impact

Severe rainfall increases the risk

offlooding and pollution events.

Increased flooding in 2016 and

2018 resulted in fines of

£0.8 million and £1.5 million

respectively. This year has seen 10

named storms between

September 2023 and February

2024.

Sustained heavy rainfall impacts

our operational costs. This year we

analysed our costs during storms

and incurred additional operational

costs of around £10 million in our

waste business, relating to

tankering between sites, additional

energy use and overtime.

Opportunity

We already have plans to invest across our WINEP programme, using

surface water separation and small works upgrades with nature-

based solutions. This year we invested £81 million to reduce sewer

flooding and £12 million in data improvement on storm overflows. Our

PR24 Plan outlines investment of £1.1 billion in storm overflows alone

in the next five years. As we invest to protect our network, we expect

to improve performance and reduce reactive costs as a result.

Opportunity

(avoided additional

annual cost in prolonged

severe rainfall)

£10 million

Relevant key risk:

The investment required to improve resilience and

meet long-term targets will impact customer bills

andaffect affordability for some.

Example event Impact

The increase in investment required

to tackle climate change could

impact our bad debts if we don’t

have the right support in place.

We have a statutory obligation

tosupply our services even

when bills are unpaid. This year

our bad debt charge was

£27million.

Opportunity

Our societal strategy is aimed at changing the lives of 100,000 people

to tackle the underlying causes of water poverty. The launch of our

enhanced Big Difference Scheme this year will support an average of

15,000 more customers per year by 2030, by donating nearly

£1 million towards their debt. There is an opportunity that by

supporting more people with affordability challenges, we could

realise an annual saving of c.£350,000 through a reduced bad debt

provision, realising a saving of c.£2 million by 2030.

Opportunity

(potential avoided

increasein bad debt

provision by 2030)

£2 million

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 61

STRATEGIC REPORT

TNFD maturity – Risk Management

We have established risk management

processes in place and a strong controls

environment. Our framework will be

expanded to explicitly incorporate nature

drivers and how these impact risks to our

business, as we have done for climate

drivers. We don’t expect this to be a

significant shift from how we already operate

our risk management processes, and given

how integral nature already is to our risk

profile we don’t anticipate implementation

issues. We are adopting a similar approach

tothat used for climate risks, to incorporate

nature drivers in our existing risk

management approach. We have more work

to do but assess ourselves at a good level

ofmaturity for TNFD Risk Management

requirements, and expect to be able to report

against these in full in our next disclosure.

All of our nature-related risks are managed in accordance with our

established risk management framework, as set out on pages 92

to94, with the same levels of materiality. Our strategy incorporates a

clear ambition to protect nature and this is evidenced in the

innovative risk mitigation strategies which are being applied

acrossthe business.

As an extractive company providing one of life’s essentials, water, we are

heavily dependent on nature for providing good water quality (e.g. healthy

soils, woodlands, and peatlands for filtering), consistent quantity, and

water security in the future. We are also reliant on habitats and river

hydrology to control the flow of, and to store, water for flood resilience.

A EB FC GD

Collect raw

water

Customers enjoy

our service

Clean raw

water

Collect

wastewater

Distribute

clean water

Clean

wastewater

Recycle water to

the environment

Drivers

We are reliant on

ecosystems to

provide water that

we can abstract

anduse to serve

customers. There

isa risk that if we

abstract too much

water we damage

our rivers and

aquatic life. There is

also adependency

on woodlands,

peatlands and

farmland to provide

high-quality water.

We use filtration and

chemicals to clean

raw water. This

requires energy and

can result in waste

that we must deal

with responsibly to

avoid chemicals

getting into the

environment.

Thereare carbon

emissions

associated with

thisprocess.

Distribution requires

energy, which will

have an associated

carbon emission

cost. Leakage from

our network means

that we are not

making as efficient

use of the water

aspossible.

Energy is required

tomaintain water

pressure. While we

can try and influence

responsible use of

water and what goes

into our waste

system, we do not

have direct control

over this. Therefore,

in hot weather, very

high volumes of

water can be used,

putting stress on

aquatic ecosystems.

Blockages and high

rainfall can result in

internal or external

sewer flooding,

causing pollution.

When it works well,

pollution events are

rare, and riverine

and aquatic systems

are preserved.

Energy is required to

maintain water

pressure to move

wastewater through

the system.

This stage in the

process uses energy

and, in some stages,

chemicals. Various

wastes are

produced, such as

biosolids and

cellulose. We rely on

farmland being able

to take biosolids

without causing

undue harm to

theenvironment.

If all processes are

followed, final

effluent released to

the environment is

clean, and will have

no adverse effect

onthe river. It may

restore flow to

lowrivers.

OUR NATURE RISK MANAGEMENT – PROGRESS TO DATE

Task Force on Nature-related Financial Disclosures

Risk Management – TNFD

requirements

– Describe the organisation’s processes for

identifying and prioritising nature-related

dependencies, impacts, risks and opportunities

in its direct operations.

– Describe the organisation’s processes for

identifying, assessing and prioritising

nature-related dependencies, impacts, risks

and opportunities in its upstream and

downstream value chain.

– Describe the organisation’s processes for

managing nature-related dependencies,

impacts, risks and opportunities.

– Describe how processes for identifying,

assessing, prioritising and monitoring

nature-related risks are integrated into and

inform the organisation’s overall risk

management processes.

Our nature risk management

As outlined within the Risk Management section of

our TCFD disclosure, we have a strong risk and

controls environment with effective risk

management processes across all levels of our

organisation. Our Principal Risks encompass

nature-related dependencies, such as how we

influence natural capital in our region. Key

documents address nature-related risks: for

example, our SSSI strategy outlines steps to

mitigate harm to SSSIs in delivering our essential

services. Manual interventions that are required to

help address issues such as Invasive Non-Native

Species are drawn up as part of detailed

biodiversity plans for individual sites. Nature is

embedded in the work we do, and we want to

expand on our existing risk management approach

to capture the impact of nature drivers on our

existing risk profile.

TNFD recommends that companies undertake an

internal LEAP assessment, which is a review to:

– Locate interfaces with nature;

– Evaluate dependencies and impacts onnature;

– Assess nature-related risks and opportunities;

and

– Prepare to respond to nature-related risks

andopportunities and to report on material

nature-related issues.

As part of our preparedness for full TNFD

reporting, we have completed an initial LEAP

assessment. The outcomes of this assessment

help us understand how nature supports our

valuechain, as set out in the diagram below,

through examples of nature-related

dependenciesand drivers.

Our value chain

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202462

METRICS AND TARGETS

We measure and manage a wide range of metrics, which

help us assess how effective these are in minimising our

risks in a changing future. These include a range of

metrics that measure our ability to provide and take away

water, our influence and impact on natural capital, our

adaptation measures and any changes in the regulatory

environment. These are reported annually in our

AnnualPerformance Report to Ofwat, which provides

atransparent assessment of our performance.

This section of our TCFD disclosure sets out the industry and cross

industry metrics and targets against which we have reported. We have

incorporated metrics used by the Board and management to measure

progress towards our targets, and the impact this has had in terms of

financial investment. These meet the ISSB and FCA guidance and our

metrics go above and beyond what the Sustainability Accounting

Standards Board (‘SASB’) recommends. The table on page 75 shows

how measures map across to the recommendations of SASB, and

further detail can also be found within our Sustainability Report.

Severn Trent has reported against the Metrics and Targets TCFD recommendations and CFD requirements below

TCFD recommendation Progress this year

CFD requirements

g) Describe the targets used by the company to manage

climate-related risks and to realise climate-related

opportunities, and performance against those targets.

h) Describe the key performance indicators used to

assess progress against targets used to manage

climate-related risks and realise climate-related

opportunities, and the calculations on which those key

performance indicators are based.

We were again awarded an A- from the Carbon Disclosure Project (‘CDP’) for our 2022/23 disclosure

(awarded in 2023/24). CDP requests information from companies about climate change and scores each

company on the quality and completeness of responses. Our climate change information is publicly

accessible.

We continue to expand on our TCFD disclosure to incorporate financial information, as we recognise the

importance of this in providing greater transparency over the impact climate change has on our

investment decisions. This will continue to expand as we set new targets and challenge ourselves to

deliver against our net zero ambitions in the next five years. Our PR24 Business Plan incorporates new

metrics and targets against a range of objectives, including tackling the challenges of water scarcity and

flood risk alleviation.

We implemented an internal carbon tax in 2022/23 which continued into 2023/24 across all directorates.

Thisraised another £5.2 million of funds, in addition to £5.2 million in 2022/23, that were invested in our

Net Zero Transition Plan, including new research and development innovations.

We continue to hold the Advancing Tier for the Carbon Trust Route to Net Zero Standard: this certification

recognises the progress of an organisation on its route to net zero.

Our financial planning processes – both for this AMP and for AMP8 – integrate carbon prices within both

our annual processes and our investment objectives, to support delivery of our ambitious transition plan

over the next AMP. In collating our submission to Ofwat for our PR24 Plan, we used a benefits assessment

tool (‘BAT’) to ensure our decisions are driven by least cost and best value, taking into account natural

capital, social, biodiversity and other non-monetary benefits, alongside financial return. Our analysis and

research for our PR24 Business Plan also provided customer insights into the impact of increased

investment on affordability. Customers support increased bills to benefit future generations, provided

that bill impacts are gradual. More information can be found in our LTDS.

TCFD recommendations – Metrics and Targets

a) Disclose the metrics used by the organisation to

assess climate-related risks and opportunities in line

with its strategy and risk management process.

b) Disclose Scope 1, Scope 2 and, if appropriate,

Scope3greenhouse gas (‘GHG’) emissions and the

relatedrisks.

c) Describe the targets used by the organisation to

manage climate-related risks and opportunities and

performance against targets.

Set out below are cross industry metrics and targets against which we aim to report, and our current process maturity which helps us assess

where to develop and enhance our reporting to meet evolving requirements.

Cross industry metrics and targets Reference

Process

maturity

GHG emissions See table on page 72 3

Transition risks – the amount and percentage

ofassets or business activities vulnerable to

transition risks

See sections 1 – 3 of Key Metrics and Investment table on pages 65 to 66 2

Physical risks – the amount and percentage of assets

or business activities vulnerable to physical risks

See sections 4 – 6 of Key Metrics and Investment table on pages 65 to 66 2

Climate-related opportunities – the amount and

percentage of assets or business activities aligned

with climate-related opportunities

See Key Metrics and Investment table on pages 65 to 66 2

Capital deployment – the amount of capital

expenditure, financing or investment deployed

towards climate-related risks and opportunities

See Key Metrics and Investment table on pages 65 to 66 3

Internal carbon prices (amount and explanation of

how it is used)

See section 1 of Key Metrics and Investment table on pages 65 to 66 3

Remuneration (% remuneration recognised in current

period that is linked to climate-related

considerations, and how these are factored in)

See section 3b of Key Metrics and Investment table on pages 65 to 66. Further detail can be

found within the Directors’ Remuneration Report on pages 169 to 173

We have rated our disclosure by reference to the maturity of our processes and readiness to disclose the required level of detail against the above cross industry metrics:

3 = we have incorporated the required detail within this disclosure across the subsequent pages.

2 = we have sought to provide detail on some of the required information while we establish more mature processes to improve the level of information available in future.

1 = we are working to establish new processes that support our work to provide a more detailed disclosure in future.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 63

STRATEGIC REPORT

Our key targets and milestones

In our business, we appreciate that water is a precious natural resource that we can’t take for granted. It is also one of the first resources

impacted by climate change, so we have set ourselves ambitious targets towards net zero and taken action to build resilience against the

potentialimpacts of climate change on our business, customers and communities, as outlined below.

Our plan

Triple Carbon Pledge commitment to:

Net zero operational emissions by 2030

from a 2019/20 baseline

100% energy from

renewable sources by 2030

SBT targets:

46% reduction in Scope 1 and 2 by 2031 from a 2019/20 baseline

100% electric or low

carbon vehicles by 2030,

where possible

Protecting our environment

Our Green Recovery

Programme launched

in 2021

target of 58,000m of

blue-green infrastructure for

surface water storage

Our Great Big

NatureBoost

increasing and exceeding our

2020 targets to enhance the

biodiversity on 10,000

hectares of land, and restore

2,000 acres of peatland in

England and Wales by 2025

Get River Positive

Our five Get River Positive

pledges were announced in

March 2022. More detail is

outlined on pages 36 to 37.

Expansion of

our catchment

management

programme

1,088 STEPS grants

awarded to date

Our

operations

Managing demand Managing supply

65%

of customers onto

awatermeter by 2024/25

3.5%

reduction in Per Capita

Consumption by 2024/25

15%

reduction in leakage

by 2024/25

New water treatment works

at Witches Oak

Pre-planning work started on our

Strategic resource options

including North-South water interconnector

Our value

chain and the

communities

we serve

AMP7 commitment

we have spent over

£1.5 billion,exceeding

ourcommitment

tospend£1.2 billion on

sustainability this AMP

Our £10m

Community Fund

and wider affordability

package supporting

customers who

struggletopay

Official Nature and

Carbon Neutral

partner for 2022

Commonwealth

Games

Launch of our

Societal Strategy

over 10 years we want to

change the lives of

100,000 people, investing

£30 million to tackle

the underlying causes of

poverty in our region

Science Based Targets

13.5% reduction in emissions from sold

products by 2026 from a 2019/20 baseline

70% of supply chain (by emissions) to set

SBT by 2026

Launched use

ofEcoVadis

to assess supplier

environmental and

socialperformance

Governance,

resource and

reporting

Continued

commitment to meet

TCFD requirements

Ongoing disclosure

via CDP

Established

net zero governance

and resources

Launch of an internal

carbon tax

for 2022/23, reissued for

2023/24 raising further

funds of £5.2 million

Executive

remuneration

linked to climate and

environmental

performance

Sustainability

LTIP launched in

2021 and targets

adaptedeach year

External

third-party assurance

of TCFD and EU Taxonomy

disclosures and LTIP

measures

Carbon Trust

Route to Net Zero

Standard (AdvancingTier)

Key planning documents

Draft WRMP

Final DWMP

SDS

PR24 Business

Plan

LTDS

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202464

MEASURING OUR PROGRESS

Key metrics and investment table

Outlined in the following table are the key metrics and targets that align with the transition (purple) and physical (green) risks and opportunities

associated with our business, as covered in the Risk Management section on pages 52 to 62 of this disclosure. These are outlined below alongside

the financial investment we have made this year to demonstrate the financial impact of climate change on our investment programme and

planning processes. We have identified both climate risks and climate opportunities in our strategy and capital deployment approach, within both

mitigation and adaptation objectives. We have also proposed a stretching package of commitments for 2030 to Ofwat as part of our PR24 Business

Plan, which are incorporated alongside our existing targets in the table below.

Metrics Investment update

A safe and secure supply of drinking water

Demand for water will increase as a result of population growth and changing weather conditions.

1a Customer meters

We need our customers to help save water, and giving them more insight

on usage helps them and us to focus in the right areas. We set a target to

get 65% of customers onto awater meter by 2025, as well as to install

1.1 million new smart meters and 1.4 million upgrades by 2035.

In 2023/24, we invested £6.1 million to install 36,980 smart meters. Weare on

track to meet our AMP 7 target in 2024/25.

1b Per Capita Consumption (‘PCC’)

We have committed to an ambitious target to reduce PCC by 3.5% by the

end of 2024/25. This equates to an annualtarget of 130.6 litres per

person per day (l/p/d).

This year we invested £2 million in reducing PCC through customer engagement

projects. We are working with customers directly to change behaviours around

water usage, and provide quick and easy ways to report leaks to us. Our PCC

figure for this year is 126.2 l/p/d, which is already ahead of our 2024/25 target.

1c Strategic resource options

We are collaborating with others in the water industry and beyond to

investigate and plan for strategic resource options (‘SRO’). These will

move water from areas of water surplus to areas of water scarcity, or

better utilise the water locally in those areas. Our target by the end of

2024/25 is to have a plan approved by Ofwat to begin construction of

relevant schemes in AMP8.

We have invested £3.2 million this year on SRO projects, including beginning the

pre-planning consultation for the Grand Union Canal transfer, an alternative

water source for the South East. Alongside this we are continuing to assess the

engineering and environmental viability of the Severn to Thames Transfer, and we

are working with RAPID to identify potential new SROs, alongside third parties,

that could benefit Severn Trent or neighbouring water companies.

1d Leakage reduction

Reducing leakage is a key area of focus. By helping engage customers to

preserve water, we can also reduce energy and chemicals waste. We

have set an ambitious leakage reduction target of 15% by the end of

AMP7 (averaged over three years at 14.3%) and 50% by 2045 (since

2019/20).

This year, we deployed capital investment of £56.1 million in both proactive and

reactive repairs to our pipes alongside proactive management of our network.

We have so far delivered a 10.8% reduction since 2019/20, and are on track to

meet our targets.

Transport and treatment of wastewater

We do not transport and treat wastewater effectively, impacting our ability to return clean water to theenvironment.

2a Public sewer flooding

In 2020 we committed to 7.4% reduction in public sewer flooding – the

only company in the industry to have such ameasure forAMP7.

This year we invested £81 million to prevent sewer flooding. We have

outperformed on our public sewer flooding target by 4% and we are

outperforming this measure by 10% on average across the AMP. Unfortunately

we missed this year’s challenging target for external sewer flooding by 94%.

More detail is set out on pages 21 to 22, although we remain frontier in the sector.

Storm events over the winter had a significant impact on our network, and some

areas experienced more than 35% of the average monthly rainfall. We are

working to get back on track and improve performance significantly, as we have

ambitions to demonstrate great outcomes here. This year, our ambitious

insourcing approach brought 400 new people from our reactive waste teams

inhouse, enabling us to increase focus on meeting customer needs.

2b External sewer flooding

We set ourselves an ambitious target at the beginning of AMP7 to reduce

external sewer flooding incidents by 8%. We know how important it is to

our customers to see performance in this measure improve, and to our

business to build resilience to the effects of climate change.

2c Combined sewer overflows (‘CSOs’)

As part of our Get River Positive river pledges (see pages 36 to 37), we

set a target to reduce spills from storm overflows to an average of 20

per year by2025 and it is our ambition to reduce RNAGS we are

responsible for to 10% by 2025, with less than 2% of waste RNAGS

remaining by 2030.

This year we have deployed capital investment of £12 million in improving the

data we have on storm overflows, creating new processes to manage and

monitor triggers. Whilst storm overflow spills increased this year from an

average of 18.4 to 24.9, our investment plans include £4.4 billion to tackle this up

to 2050 and we are targeting no more than 10 by 2045.

Affordability

The investment required will impact customer bills and affect affordability for some.

3a Financial support

Although we have one of the lowest bills in the country, weknow that 6%

of households in our region are in water poverty. In May 2022, we

launched our Affordability Strategy, a £30 million package of additional

financial support to an additional 100,000 customers.

This year, we have supported 160,167 customers through our Big Difference

Scheme, and will continue to support customers who struggle to pay their bill.

3b Community Fund

In the period 2020-25, we are aiming to award more than £10 million to

support new projects run by local charities and community groups in

our region.

We have invested over £2 million this year to support 103 organisations through

the Severn Trent Community Fund, directly benefiting over 329,000 people and

facilitating investment in people, place and environment across our communities.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 65

STRATEGIC REPORT

Metrics Investment update

Regulation and policy

Changing societal expectations resulting in stricter legal and environmental obligations, commitments and/or enforcements,

increasethe risk of non-compliance.

4a Carbon tax

To prepare ourselves for a future of potential carbon taxes, in 2023/24

wecontinued to apply our internal carbontax.

This year, we allocated all of the £5.2 million of carbon tax funds raised to trials

and new projects aimed solely at driving down our operational emissions.

4a Carbon pricing

We set ourselves a goal to adapt our internal processes before the end

of this AMP, in order to begin considering external carbon prices when

appraising capital projects.

We incorporate a price of £248 per tonne from Government Green Book shadow

prices for carbon into our process for capital investment appraisal. We have used

these prices for project assessment in preparation for PR24, alongside our

benefits assessment tool andprice models that take carbon prices and

adaptation costs intoaccount.

Climate change strategy

Severn Trent’s climate change strategy does not enable us to respond to the shifting natural climatic environment and maintain

essential services.

Mitigating climate change will require rapid decarbonisation.

5a Net Zero Transition Plan

In 2019, we made a commitment to achieve net zero operational

emissions by the end of 2030. We set out our targets within our Triple

Carbon Pledge. We have since committed to SBTs for Scope 1 and 2

emissions, our supply chain and sold products. These are outlined on

page 68.

This year, we invested £56.2 million in our Net Zero Transition Plan

andprogression against our SBTs. This includes investment of £13.9 million this

year to begin transforming one of our sites into our NetZeroHub.

5b Executive remuneration

In 2021, we restructured our Executive remuneration to incorporate a

sustainability element into the LTIP. 20% of the bonus paid under this

plan is based on sustainability performance measures and targets for

both innovation and actual carbonreduction.

The sustainability element of the LTIP vests for the first time in FY24, when we

will report on the bonus amounts and criteria. This year our Remuneration

Committee recommended for shareholder approval an increased weighting of

non-financial measures from 20% to 50%, and the incorporation of three new

measures focused on customers, river health and communities. More

information on our current remuneration structure, and proposed changes to our

2024 policy being tabled for shareholder approval at our AGM, can be found on

page 195.

Natural capital

We fail to positively influence natural capital in our region.

6a Green recovery

In July 2021, Ofwat awarded us £566 million (in 2017/18 prices) to invest

in our ambitious Green Recovery Programme. Projects include

collaborative flood resilience, via which we set a target to store

58,000m of surface water to reduce flooding risk to homes. You can

read more about this and our progress on page 34 to 35.

This year we invested £27.2 million in collaborative flood resilience as part of our

project in Mansfield to store more surface water and prevent flooding. We also

invested £15.4 million to support environmental improvements to rivers, through

our Bathing Rivers programme.

6b Biodiversity

In 2020, we launched our Great Big Nature Boost, committing to:

enhance the biodiversity of 5,000 hectares of land, which in May 2023

weincreased to 10,000 hectares by 2025; plant 1.3 million trees; and

restore 2,000 km of rivers, by 2027. We also committed to improve rivers

in 44 catchments covering 432,000 hectares through our Farming for

Water programme by working with two-thirds of all farmers in our

region. Over 380 hectares of our land will be managed using an

approved biodiversity action plan.

This year we have invested £1.3 million to plant 118,853 trees, reaching a total of

823,100 to date. We exceeded our target of enhancing the biodiversity of 5,000

hectares four years early, and have now enhanced over 11,500 hectares to date.

1,088 STEPS grants have been awarded since 2020, with a total investment

applied for of £7.4 million. You can read more about these initiatives on our

dedicated website pages: stwater.co.uk/about-us/environment/biodiversity/

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202466

Our PR24 Business Plan seeks to address the shortfall identified in our draft WRMP to address water scarcity and tackle the challenges of

increased demand and a changing climate. Our Business Plan also sets out detail of our monitoring programme to evaluate if and when we need

to trigger a move to adaptive pathways. We use demand, environmental and technology indices, as well as metrics, to measure climate change

trends more broadly. To support this, we will track the impact on our assets and services as it occurs. Having a live view of the impacts that can be

compared against current and future models will enable us to evaluate our resilience in real time to inform future investment choices. More detail

on our monitoring plan for PR24 can be found in our LTDS.

OUR NATURE METRICS AND TARGETS – PROGRESS TO DATE

Task Force on Nature-related Financial Disclosures

Metrics and targets – TNFD

requirements

The TNFD outlines detailed metrics by

whichto measure a company’s progress on

investing in nature. We are establishing

processes to report against these metrics

effectively and look forward to incorporating

these into our future disclosures.

– Disclose the metrics used by the

organisation to assess and manage

material nature-related risks and

opportunities in line with its strategy

andrisk management process.

– Disclose the metrics used by the

organisation to assess and manage

dependencies and impacts on nature.

– Describe the targets and goals used by

theorganisation to manage nature-

relateddependencies, impacts, risks

andopportunities and its performance

against these.

Our nature metrics and targets

There are a variety of ways in which the

scale and scope of our dependencies and

impacts on nature can be measured, and

there is considerable overlap between

suggested TNFD metrics and many of the

metrics we already use. For example, we

report on progress against our ODIs, and

the WINEP requirements, in our Annual

Performance Report and as part of our

Business Plan. Given the complexity of

reporting nature metrics which, unlike

climate metrics, useseveral factors to

determine performance and depend on

theecosystem and the scale used for

measurement, we are still establishing

processes toreport effectively against

theTNFD requirements and look

forwardtoincorporating these

intoourfuturedisclosures.

We have started work on measuring our

natural capital baseline which documents the

type, extent and condition of natural assets

we rely on, as well as the scale of the goods

and services provided by those natural

assets and their economic impact at

catchment scale. This is captured in our

dedicated Sustainability Report.

Through our work to establish our eligibility

and alignment under the EU Taxonomy,

weare now better able to identify how to

measure financial metrics aligned to nature,

although we need to develop new reporting

processes to effectively deliver this in detail

for the TNFD.

TNFD maturity – Metrics and targets

The TNFD outlines a large number of both

core and additional nature metrics that

businesses can use to measure themselves

against. Whilst not all metrics apply to us or

aren’t relevant to our business, there will be

an additional demand on our existing

processes to be able to report against the

TNFD Metrics and Targets requirements.

Setting up new reporting processes will be

our focus to enable delivery of a full TNFD

disclosure in future. We have confidence in

delivering the TNFD requirements given our

strong track record of implementing similar

requirements in the past, such as TCFD.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 67

STRATEGIC REPORT

OUR TRIPLE CARBON PLEDGE AND

SCIENCEBASED TARGETS COMMITMENT

The following outlines performance against our existing targets and highlights of our 2023/24 activities. Please refer to our dedicated

Sustainability Report online for more information.

Our Triple Carbon Pledge Our Science-Based Targets

Net zero

operational emissions Scope 1 and 2 across

ourbusiness by 2030 from a 2019/20 baseline

(includes renewable energy exports)

46% reduction

in Scope 1 and Scope 2 emissions

by 2031 from a 2019/20 baseline

21% (reduction)

100% reduction (target)

2030

Baseline

30% (reduction)

-46% (target)

2031

Baseline

– We developed and submitted our Business Plans with requests for

investment for the next regulatory cycle, 2025-30, targeting climate change

mitigation. This included a dedicated business case for £430 million to invest

in technologies that reduce operational emissions.

– We developed and submitted bespoke regulatory incentives for capital carbon.

– The technologies at our Net Zero Hub at Strongford are now being

commissioned, as we prepare to run a full range of technologies in tandem to

minimise our operational emissions, utilising the knowledge gained through

ongoing trials and through our international partnerships.

– We have maintained high internal engagement across the organisation to

mobilise resources, skills and our supply chain to deliver our transition plan.

– Good progress has been made towards our target. We’ve seen reductions from

our process emissions this year, which make up 80% of our Scope 1 emissions.

– We continue to improve our data by expanding our monitoring of process

emissions at site and increasing collection of actual data for capital projects.

– Despite an increase in energy consumption, energy efficiency improvements

have helped towards balancing our overall energyuse.

– We continue to restore peatland (c.485 acres this year) through work we have

funded ourselves, third-party grants on our own land, and through

partnership work on third-party land.

100%

of energy from renewable

sources (‘RS’) by 2030

70%

of our supply chain (by emissions)

having set a Science Based Target (‘SBT’) by 2026

83% (RS)

100%

(target)

2030

Baseline

58% (coverage)

70% (target)

2026

– Continued procurement of 100% renewable-backed electricity.

– Sustained investment in energy efficiency activities to mitigate impact of

wetweather.

– Continued to increase our renewable generation this year, supplying 56% of

our own electricity.

– Renewable energy generation continues to expand, including this year’s

acquisition of Andigestion.

– A total of 58% of our supply chain have now set a SBT.

– We regularly review our supply chain and engage with new contractors to

ensure that we have a live view of progress against our target.

– Contractual mechanisms have been introduced to incentivise supply chain

sustainability performance.

100%

electric vehicles, where available,

by 2030

13.5% reduction

in emissions from the use of sold products

by2031against a 2019/20 baseline

26% (EV fleet)

100% (target)

2030

Baseline

17% (increase)

-13.5% (target)

2026

– 69% of cars replaced by electric vehicles (‘EV’) (increased from 36% in

2022/23).

– 16% of Light Commercial Vehicles replaced by EVs (increased from 1% in

2022/23).

– Total of 729 EVs in fleet.

– 26% of our fleet (across cars and vans) are EV.

– Hydrotreated vegetable oil trials have concluded with positive outcomes and

modelling is now being conducted to review wider business applications to

support carbon reduction.

– Utilisation of existing EV site charge points is increasing, and home charge

growth has exceeded our target with 548 units installed.

– Further deployment is challenged by the market maturity of vehicles, the

growth in our own fleet as a result of insourcing and the lack of funding for

public infrastructure growth.

– Our emissions have increased by 17% from the use of sold products.

This increase has continued to be driven by utilisation of propane when

injecting biomethane into the national gas grid to meet energy criteria

regulations, which have been set at a higher level over most of 2023. It

has also increased as a result of the acquisition of Andigestion.

– As our business expands and maximises the value inherent in our core

resources by recovering more inputs such as ammonia and cellulose

and sell them as valuable products, this will increase our emissions

from the use of sold products whilst reducing the Scope 1 and 2

emissions for those we supply. Given this is supportive of a circular

economy, creating products from waste and reducing the impact of

production, we will revisit the best targets for our Scope 3 emissions

going forward.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202468

OUR NET ZERO

TRANSITION PLAN

What are we aiming for?

Our Net Zero Transition Plan brings together

our Triple Carbon Pledge (which we set in

2019) and our SBTs, approved in 2021. We need

to achieve these targets whilst continuing to

support a thriving environment and provide

the high-quality, affordable service our

customers expect.

What do we mean by net zero?

Net zero means achieving a balance between

the amount of emissions produced and those

removed from the atmosphere in order to limit

the impact from climate change. Our target is to

achieve net zero operational emissions (our

Scope 1 and 2, and some outsourced Scope 3)

by 2030. We will prioritise our net zero

investment to achieve this without purchased

offsets, but if we do need them, we will only use

high-quality offsets to meet our 2030target.

Our glidepath and future strategy

Our strategy considers the best operational,

technological and economic route to meeting

our climate goals. We constantly review this

aspart of our net zero programme to ensure

decisions reflect latest advancements and

bestpractice and this is reflected in our PR24

Business Plan.

Our approach

Achieving our plan is requiring us to re-think every aspect of our business processes and

adopt new ways of working. Our approach is to follow the carbon hierarchy to achieve our

2030 targets:

REDUCE

Reduce our emissions

REPLACE

Replace fossil fuels, for

example replacing natural

gas with greenenergy

REMOVE

Remove carbon emissions,

for example through

carbon sequestration and

insets from our landbank

and assets

What are we aiming for?

The chart below shows the significant

progress we have already made on our carbon

reduction journey, having delivered a 64%

reduction since 2010/11 and a 30% reduction

against our SBT of 46% by 2031 (against our

baseline in 2019/20). We have invested

£56 million to date on progress towards our

net zero targets and SBTs. In 2023/24 our

reported location-based Scope 1 and 2 total

greenhouse gas (‘GHG’) emissions were 526

ktCO

e compared with a 2020 baseline of 562

ktCO

e. A summary of the values reported is

given in the tables on page 72. This is forecast

to rise to 565 ktCO

e by 2030 as a result of

upward pressures from growth and statutory

drivers, if no interventions are made. Our plan

isdesigned to address these incremental

demands – but we still have a significant

amount of work after 2030 to deliver on these.

Operational net zero glidepath since 2010/11

Energy exports

2019/20 2020/21 2021/22 2022/23 2023/24 202 4/25 2025/26 2026/27 2027/28 2 028/29 2029/30 2030/31

800

600

700

400

500

300

200

100

-100

-200

SBTi baseline

ktCO

94% forecast

reduction against

SBT baseline

97% forecast

reduction

since 2010

Business as usual (net)

SBT Scope 1+2 Target

Net emissions

Operational

Scope 3

Scope 1 Scope 2

(market based)

Net emissions Business as

usual (net)

SBT Scope

1+2 Target

SCOPE 1

Since introducing process

emission measurement

systems from 2021, we

have been using more

accurate data and our

Scope 1 emissions

continue to reflect

enhancements in

ourreporting.

SCOPE 2

Since 2021, our electricity

imports have been

supplied by renewable-

backed sources which

reduce our market-based

emissions to zero. Our

renewable energy

generation capability

continued to expand

during the year.

SCOPE 3

Scope 3 is a major source

of emissions with our

biggest categories

consisting of capital

carbon, chemicals and

purchased goods and

services. We continue to

focus on this area with

oursuppliers.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 69

STRATEGIC REPORT

We highlighted last year that our net zero

journey will not be linear. The focus over

2023/24 has been on leveraging the results of

the research and development programmes,

and building a business case to secure funding

and ensure sufficient capital allocation to

deliver our net zero programme. There has

been significant progress in two key areas:

establishing our Net Zero Hub so it can become

operational in 2024/25 and submitting our PR24

Business Plan to put us on the right trajectory

to deliver the 2050 statutory requirements –

asummary of which is outlined below.

The emphasis on transparent and rigorous

reporting remains a key priority to ensure that

we invest in the right areas. As the science and

requirements of reporting standards and

frameworks evolve, it is important to

distinguish between changes in reporting

methodology and actual data. We continue to

improve the granularity and confidence of our

data as we move from estimates to actual data

as much aspossible across all our scope

emissions.

Net Zero in our Business Plans for AMP8

Our recently submitted five-year

Business Plan (the ‘Plan’) shows that

we remain deeply committed

toachieving net zero and addressing

the challenges that climate change

brings. This is critical to the future

success of our business. Our Plan sets

out how we are going to reduce the

GHG emitted from two of the most

significant contributors to our footprint:

wastewater and sludge treatment

processes and heat andfuel.

Our aim is to deliver a stretching GHG

emissions reduction of 338 kt in AMP8, making

a 72% reduction to our 2030 Scope 1 emissions

reduction target as shown in the chart below.

This builds on the existing reduction of 159 kt

from buying a renewable backed tariff. These

new activities are made up of a combination of

our core plan and a dedicated enhancement

request for investment, worth £430 million,

todeliver apackage of interventions in AMP8

to make decisive steps towards our

long-termtargets.

Our Scope 1 and 2 emissions sources make up

46% of our total GHG footprint and are directly

within our control. Our most material source of

emissions is nitrous oxide and then methane

from wastewater treatment, both of which are

potent greenhouse gases. Reductions in

methane in particular has been recognised as

the best wayto slow the rate of warming due to

being short-lived in the atmosphere, with the

Global Methane Pledge launched at COP26 to

reduce global methane emissions by at least

30% from 2020 levels by 2030. Consequently,

we are seeking funding for a range of tested

technologies to reduce this, as shown in the

Enhancement Investment summary table on

the following page. Within this, activated

sludge processes (‘ASP’) account for

approximately three-quarters of our

wastewater treatment process emissions

based on the population served by ASP sites.

Climate change action plan, including

our Net Zero Transition Plan

Given the status of our Plan, the Board intends to

defer the non-binding advisory vote on the

Company’s long-term approach to climate

change until its 2025 AGM, to ensure that the

Plan reflects the Final Determination expected in

December 2024 from our regulator, Ofwat. This

will ensure that the Company’s climate change

plan can properly reflect the new asset

management period for 2025-30. We remain on

track with the approach supported by

shareholders at our 2021 AGM, the Plan remains

unchanged and there are no material changes

proposed to the Plan at this time, which supports

the Board’s intention to defer the non-binding

advisory vote until its 2025 AGM. You can read

more in our Notice of Meeting.

Net Zero Hub —

Innovating for

the future

As described on page 68, the work on our

Net Zero Hub is now substantially

complete and is being commissioned.

We have established a route to reduce our

operational process emissions at the Hub.

From a starting position of 34kt CO

outlined below is the amount we estimate

each technology to reduce using a mass

balance approach to understand the sites

GHG baseline emissions and carbon

reduction efficacy of each technology.

The technologies that we selected are:

– Cellulose recovery (from toilet paper): we

will be installing the UK’s first cellulose

recovery plant.

– Actilayer: covering the activated sludge

plant lanes with the world’s first

catalytic cover.

– Sludge optimisation: optimising

thesludge digestion process.

– Digital twin: to make sure that all

thetechnologies work together.

– Fugitive emissions from methane leaks.

– Natural gas displacement with biogas.

– Chemically enhanced primary

treatment (‘CEPT’), optimising dosing

with chemicals.

2030

baseline

Green

fleet

Process

and fugitive

emissions

Process

emissions

Green

tariff

Renewable

energy

590

-57

-17

-48

-275

-159

Fossil fuel

phase down

-34

Running a Business that Goes Hand-in-Hand with Nature continued

6,700

10,700

7,600

850

4,600

2,500

6,750

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

tCOe

Cellulose

recovery

Actilayer

Sludge

optimisation

Digital twin

Fugitive

emissions

Natural gas

CEPT

We are now commissioning technologies

at the Net Zero Hub to prove the efficacy

of the individual technologies and how

they operate as a complete system, and

we are working with the Carbon Trust on

putting in place a detailed monitoring

andtesting programme to enable future

accreditation inline withISO 14064-3.

See our Sustainability Report for more

details on the technologies.

Our AMP8 proposed reductions

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202470

Enhancement Investment Summary Table

Activity Detail Funding route

Annual emissions

reduction (ktCOe)

Reduce:

Optimise processes toreduce

GHGemissions

Stop natural gas engines

Methane leakage (find and fix)

Cover secondary tanks

From business as usual expenditure 23

Process optimisation

Digital twin

ASP intensification

Active gas capture

Cover and treat ASP N2O

£351 million additional funding

requested from Ofwat

Replace:

Adapt assets to remove GHGs

onceemitted

Heat and fuel projects

Cellulose recovery

£79.4 million additional funding

requested from Ofwat

Low-carbon fleet

Green Tariff

From business as usual expenditure 17

159

Remove:

Change processes to prevent

GHGproduction

Peatland £1.26 million of additional funding

requested from Ofwat

After process emissions, the next largest

category of direct GHG emissions is natural

gas, diesel and fuel oil, which account for 14%

of our Scope 1 emissions. Our use of imported

natural gas for sludge treatment is set to

increase as we develop new processes to meet

higher environmental standards set by the

Environment Agency. Reducing emissions

from other heat and fuel sources will therefore

be critical to achieve ourtargets.

We have decided not to invest in areas where

uncertainty is high, for example where the

science behind the production and control of

process emissions is not well understood, or

markets such as hydrogen, where we are not

major drivers of the market. Our Business Plan

also does not include use of purchased offsets.

Our Scope 3 challenge

Our Scope 3 emissions are forecast to increase

over AMP8, driven by expanded statutory

obligations, including the Water Industry

National Environment Programme (‘WINEP’)

and water resources aimed at improving a

range of outcomes including cleaner rivers and

sustainable water abstraction which will drive

up our usage of chemicals and construction

activity. Our capital programme is forecast to

increase from £3.7 billion in AMP7 to

£6.2 billion in AMP8. While we are committed

to working with our supply chain and reducing

Scope 3 emissions, this will take time,

significant collaboration and further innovation

(and this is part of our SBT); this makes it more

important to make significant reductions

where we have direct control, notably in the

process emissions that are unique to our

sector and in heat and fuel emissions, and

where we can proceed at pace. We have also

requested a bespoke regulatory incentive on

capital carbon in our Plan to focus on

improving and incentivising carbon reductions

through our capital design.

As our business expands, and seeks to recover

precious resources such as ammonia and

cellulose to sell them as valuable products,

this will increase our emissions from use of

sold products. In addition, once we achieve our

engagement target, which faces challenges

with some large organisations and hard-to-

reach sectors, such as the chemical industry,

(with hundreds of smaller suppliers) we will

revisit the best targets for our Scope 3

emissions goingforward.

Affordability and our

customers’views

Investing significantly over AMP8 to tackle

process emissions is necessary because of

theurgency of the net zero challenge, and the

need to deliver sufficient progress and

enoughsolutions so that the whole sector can

efficiently and effectively deliver Scope 1 and 2

reductions in AMP9, thus aligning with the UK’s

statutory targets.

Customer research undertaken for our

regulatory plans, including the views of 68,000

customers taken in developing our Plan, shows

that customers are focused on climate change

and, in particular, the impacts of climate

change on future generations. Although

combating climate change is seen as vital,

customers aren’t necessarily well informed

about net zero. They expect us to play our part

in reducing GHG emissions and achieving net

zero. Compared with other investment areas,

working towards net zero is a medium-level

priority. This means that they are prepared to

support some increase in their water bills to

reduce process emissions. Some customers

would like us to go further and faster on

reducing GHG emissions but acknowledge that

affordability is a concern. See our investment

case on page 15 for further information.

Our long-term net zero plan takes into account

customer affordability and intergenerational

fairness. Our analysis demonstrates that

delaying investment will be more expensive in

the long term. Delaying this investment beyond

AMP8 is likely to result in larger bill increases

for future customers, impacting affordability

and intergenerational fairness. See our LTDS

for how we’ve made evidence-based decisions

about the pacing of our investment over

25years.

Our GHG performance

The following table shows our annual GHG

performance and accounts. Our reporting

method is documented overleaf along with

asummary of this year’s performance, with

supporting technical detail to ensure full

transparency, reflecting the complexity and

growing granularity of our data.

GHG reporting method

2023/24 is the 11th year we have reported GHG

emissions. For Severn Trent Water, which

accounts for 96% of our total Group emissions,

we have been publicly reporting our emissions

since 2002. We also continue to report our

energy use and generation data to provide

more detail on how we manage energy use.

Our GHG emissions are reported in tonnes of

carbon dioxide equivalent (‘tCO

e’), for the

period 1 April 2023 to 31 March 2024. We

report our location-based and market-based

emissions separately and report on 10 Scope 3

categories. We report using a financial control

boundary and follow the practices set out by

the Greenhouse Gas Protocol.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 71

STRATEGIC REPORT

Annual operational emissions – location and market based

Operational greenhouse gas

emissions (tonnes CO

ST Plc 2019/20

baseline

ST Plc 2020/21 ST Plc 2021/22 ST Plc 2022/23 ST Plc 2023/24

Scope 1 Emissions – Combustion of fossil fuel on site 18,215 29,669 48,716 51,167 51,905

Scope 1 Emissions – Process emissions – CAW

150,266 155,441 149,515 138,724 146,739

Scope 1 Emissions – Process emissions – Revisedmethodology

326,340 329,714 329,592 310,411 291,584

Scope 1 Emissions – Transport fleet 17,639 17,914 18,968 19,656 22,849

Scope 1 Total Emissions 362,194 377,297 397,276 381,233 366,338

Scope 2 Emissions (Electricity purchased for own use) – Location Based 199,635 182,768 159,638 149,964 159,295

Scope 2 Emissions (Electricity purchased for own use) – Market Based 163,581 1 – 8 112

Scope 1 and 2 Total Emissions – Location Based 561,829 560,065 556,914 531,197 525,633

Scope 1 and 2 Total Emissions – Market Based 525,775 377,298 397,276 381,241 366,450

Scope 3 Emissions (Business travel) 1,447 343 620 958 1,204

Scope 3 Emissions (Outsourced Bioresources activities) 3,187 3,340 2,424 2,463 2,683

Scope 3 Emissions (Electricity transmission and distribution) 16,985 15,718 14,127 13,719 13,781

Total Annual Gross Operational Emissions – Location Based 583,448 579,466 574,085 548,337 543,302

Total Annual Gross Operational Emissions – Market Based 547,394 396,699 414,447 398,381 384,118

Annual GHG intensity ratio (tCO

/unit)

ST Plc 2019/20

baseline

ST Plc 2020/21 ST Plc 2021/22 ST Plc 2022/23 ST Plc 2023/24

Gross Location Based Operational GHG emissions per £m turnover 316 317 295 253 232

1 The Carbon Accounting Workbook (‘CAW’) has been our historical and industry standard reporting method for process emissions, so it is provided for transparency and comparison.

2 Process emissions based on our trial and monitoring data; see page 73 for more details. Historical process emissions have been updated to reflect revised data and emissions factors.

Intensity factors have been updated to reflect these adjustments.

Avoided emissions

Our generation of energy from anaerobic digestion within our Severn Trent Water and Severn Trent Green Power businesses provides us with the

opportunity to export renewable energy to the grid. This energy displaces natural gas and electricity that might have come from other sources.

Weestimate the benefit of these avoided emissions below versus average grid emissions factors for electricity and natural gas in the UK.

Avoided emissions (tCO

ST Plc 2019/20

baseline

ST Plc 2020/21 ST Plc 2021/22 ST Plc 2022/23 ST Plc 2023/24

Estimated emissions benefit of the renewable electricity we export 46,954 40,648 33,961 29,547 31,533

Estimated emissions benefit of the renewable biomethane we export

32,926 45,006 54,032 73,393 77,699

Total avoided emissions 79,880 85,654 87,993 102,940 109,231

1 Benefits calculated using the latest UK grid emissions factors.

Scope 3 emissions

The table below shows our estimated Scope 3 emissions which are not included as part of our operational footprint. These emissions are part of

our SBT. We will be disclosing improved data on these areas in future, as explained in our dedicated Sustainability Report.

Scope 3 emissions

ST Plc 2019/20

baseline

ST Plc 2020/21 ST Plc 2021/22 ST Plc 2022/23 ST Plc 2023/24

1) Purchased goods and services 161,171 160,710 219,777 242,856 213,113

2) Capital goods 250,546 250,546 197,376 183,702 273,124

3) Fuel and energy-related activities – transmission and distribution 21,148 15,718 14,127 13,719 13,781

3) Fuel and energy-related activities – upstream well to tank emissions N/A 8,715 13,909 13,714 19,438

4) Upstream transportation and distribution 18,963 20,480 19,488 19,603 18,083

5) Waste generated in operations 6,440 6,084 10,280 10,380 14,513

6) Business travel 1,447 343 620 958 1,204

7) Employee commuting 3,471 3,471 5,250 4,907 6,590

8) Upstream leased assets N/A N/A N/A N/A 2,341

9) Downstream transportation and distribution N/A N/A N/A N/A N/A

10) Processing of sold products N/A N/A N/A N/A N/A

11) Use of sold products 32,907 33,568 37,454 36,995 38,564

12) End of life treatment of sold products N/A N/A N/A N/A N/A

13) Downstream leased assets 10,469 10,469 15,104 14,493 13,109

14) Franchises N/A N/A N/A N/A N/A

15) Investments N/A N/A N/A N/A N/A

Total Scope 3 506,562 510,104 533,385 541,327 613,860

1 Benefits calculated using the latest UK grid emissions factors.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202472

Method for calculating

processemissions

We used the UK Water Industry Research

(‘UKWIR’) standardised methodology for

estimating operational GHG and the Carbon

Accounting Workbook (‘CAW’) to calculate

our2019/20 baseline. However, developments

in scientific consensus led us to start an

industry-leading programme of direct

monitoring in 2021 reflecting guidance from

the Intergovernmental Panel for Climate

Change (‘IPCC’) to improve global emission

factors by taking measurements at country

and facility-specific levels. The results from

this monitoring demonstrated that process

emissions from wastewater treatment were

substantially higher than the previous

CAWestimations.

We have now rolled out direct effective

monitoring at wastewater and sludge

treatment facilities responsible for treating

42% of our wastewater and 40% of our sludge

loads. This data has already given us valuable

insights into seasonal and diurnal profiles as

well as an early indication of process-level

differences in emissions. Our commitment to

collect long-term datasets from these sites

will inform the development of country and

process-level emission factors.

This year we have refined our methodology to

use a combination of IPCC estimates and our

measured site specific data where long-term

dataset exists. Whilst much higher than the

CAW estimates, the emission factors across

our process emissions have decreased from

last year at our monitored sites. This

methodology has been applied to our

historical emissions, leading to an update

onprevious years to provide transparent

comparison values.

Assuring our data

The GHG data we report is tracked internally

during the year through our Corporate

Sustainability Committee and shared with the

Board. We have subjected our GHG data and

processes to external assurance by Jacobs.

Jacobs completed a full audit of our Scope 1, 2

and 3 data in line with the principals of the

IS014064 international standard for GHG

emissions and found our processes for

reporting are consistent with the reporting

requirements of the GHG Protocol.

In addition, we continue to hold the Advancing

Tier for the Carbon Trust pilot Route to Net

Zero Standard – this certification recognises

the progress of an organisation on its journey

to net zero with an interim verification that took

place on our 2022/23 GHG performance. This

included assurance against the principles of

the IS0 14064-3 international standard for GHG

emissions for our Scope 1 and 2 data, and a

small portion of our Scope 3 data. We intend to

re-certify our 2023/24 footprint and net zero

plan over the summer of 2024 with the Carbon

Trust to maintain our accreditation.

Summary of performance

Our emissions have fallen by 30% against

a2019/20 baseline, representing good

progress against our SBT of 46% reduction

by2031, driven predominantly by moving to

100% renewable backed electricity from

oursuppliers.

Our Scope 1 emissions have reduced by 6%

from 2022/23 mainly due to a reduction in

process emissions. This is primarily due to

lower measured emissions at our monitored

sites this year, which applies to over 40% of our

process emissions. In addition to this we have

also switched reporting at our unmonitored

sites using the IPCC tier 1 level emission

factor, which is lower than the factor we used

the previous year. Year-on-year variability on

measured emissions exist at site level, which

is in line with global observations, where

emissions have shown variation due to local

weather conditions; although the definitive

relationship is not yet fully understood.

Our use of natural gas continues to be higher

due to the ongoing deployment of thermal

hydrolysis sludge treatment processes (‘THP’)

at an increasing number ofsites, which

produces better quality sludge digestate and

more renewable energy, but requires high

temperatures to achieve this. This is balanced

by a reduction in our process emissions, which

continue to make up the majority of our Scope

1 emissions at 80%. Even though we are

processing higher volumes of sludge,

approximately 60% of our sludge is now being

treated using advanced digestion, including

THP and acid phase digestion (‘APD’), which

has approximately half the emission factor of

traditional anaerobic digestion.

For Scope 2, we have used more electricity

than in 2022/23 and explain why on page 74.

We also report the benefit of our 100%

renewable backed tariff as reflected in the

market-based emissions.

Also shown in our avoided emissions table is

the carbon benefit of the renewable electricity

which we export and biomethane we export to

the grid. We generate renewable energy in

both our regulated and non-regulated

businesses and continue to see growth in both

these areas. We use the proceeds to invest in

our research and development programme to

reduce Scope 1 emissions.

We have continued to see an increase in our

use of sold product and associated emissions,

due to higher use of propane to inject

biomethane into the national gas grid. The

propane is required to ensure our renewable

gas meets energy standards within the grid for

metering purposes and we are seeking ways to

reduce/replace the propane and improve our

performance. In addition, our use of sold

product has been increased as our business

expands with the purchase of Andigestion.

Our total Scope 3 footprint has increased by

13% from 2022/23 driven mainly by increased

expenditure and activity on capital goods, as

our investment starts to accelerate and our

capital programme increases volume of

delivery towards the end of AMP7. For

example, expenditure on our capital

programme has increased by over 50% in

2023/24. In addition, there continues to be

more complete reporting of our Scope 3

emissions in Severn Trent Business Services.

Conversely we have seen a decrease in

emissions in purchased goods and services,

which is the second highest source of Scope 3

emissions. This is a consequence of a

reporting method change where we have seen

a reduction in our emissions factors to better

reflect latest industry practices and changes

in feedstock. See our Sustainability Report for

additional information on our Scope 3 journey.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 73

STRATEGIC REPORT

Below is data on our energy

consumption and generation for the

last six years across the Severn Trent

Group. This is source data for the

carbon data reported above and is

tracked internally on a monthly basis.

All data is collected from metered

datafor electricity and gas imports

and exports. Biomethane combustion

information is calculated using

assumptions based on metered data.

Fuel use is reported based on financial

records of fuel purchased. We have

applied assumptions on standard

calorific values to convert all liquid and

gas fuel types to a common energy

metric (‘GWh’) and data is reported for

the period 1 April 2023 to 31 March

2024. All energy is used in the UK.

Energy performance

Our electricity consumption for this year was

983 GWh, with the increase primarily driven by

wetter weather and specifically, the 10 named

storms that occurred between September

2023 and February 2024. This caused an

increase in energy consumption across our

wastewater operations.

The figures below include the large quantity of

renewable biogas from organic waste, which we

generate from sludge and food waste and then

either combust in combined heat and power

engines or export to the national gas grid. Our

import of gas has increased over the last three

years, driven by the commissioning of new

heat-intensive sludge treatment processes and

our deployment of CHP generation fed by

imported gas to mitigate high electricity costs.

We have also increased our export of

biomethane into the gas grid and decreased

theamount of biogas we combust in CHP.

Energy efficiency

Although energy prices have fallen from

record highs, the costs to our business are still

significant. We have been able to manage these

costs through our proactive work and a

dedicated team. This year we have invested

£2.4 million in our energy efficiency

programme with a total of £36 million invested

over the last nine years. This includes

proactive maintenance of our energy-intensive

assets, such as pumps and air blowers,

investment in improved controls and

monitoring to reduce energy use. Our Energy

Management Policy and programme reflect

best practice outlined in ISO 50001, the

International Energy Management Standard.

We will shortly be submitting our response to

Phase 3 of the Government’s Energy Savings

Opportunity Scheme, which has involved

reporting total energy usage and looking for

opportunities that cover 95% of ourconsumption,

and we will work through the findings and build

them into our plans, wherepossible.

Energy generation

We’ve generated record levels of renewable

energy this year, including renewable biogas

which is produced from the anaerobic

digestion of sludge and food waste from both

Green Power and our own bioresources. Our

Group businesses also produce energy

through solar, wind, hydro andcrop anaerobic

digestion.

As part of our Triple Carbon Pledge, we have

seta target to source all of our energy from

renewable sources by 2030. This means that the

energy we use will either be directly renewable

or covered by a renewable-backed source of

gas or electricity, such as a Renewable Energy

Guarantee of Origin (‘REGO’) or green gas

certificate. To achieve this target, we will need

to increase our use of electricity and phase out

the use of fossil fuels in ourbusiness.

Promoting awareness

We engage in continuous discussions on

energy-related topics throughout our Group,

with a specific emphasis on individuals who

are involved in or responsible for energy-

intensive assets, such as asset owners,

projectmanagers, asset strategy teams,

operators and maintainers.

Our continued metering and billing activities

have been especially beneficial this year to

ensure what we are paying is true and accurate.

We participate in National Grid’s energy

flexibility schemes and engaged extensively

with operational and office staff on our use of

energy. We evaluate, develop and review

business cases for operating assets flexibly,

which involves adjusting demand in response

to market incentives.

REPORT ON ENERGY

Energy performance table

Energy type Source Units 2019/20 2020/21 2021/22 2022/23 2023/24

Electricity

Electricity imported GWh 780 784 752 775 769

Electricity generated from renewable sources and used onsite GWh 194 184 170 153 151

Electricity generated from renewable sources and exported GWh 184 174 160 153 149

Electricity generated from fossil gas and used on site

GWh

0 12 43 48 63

Gas fuels

Gas imported from the grid

GWh

44 120 208 233 241

Biogas generated and combusted on site GWh 1,061 1,003 921 843 799¹

Biomethane generated and exported to the grid GWh 181 245 336 403 457²

Liquid fuels

Fuel used by plant (gas oil and diesel) GWh 20 23 31 31 28

Fuel used by company fleet GWh 70 77 71 74 90

Fuel used for business travel (personal cars) GWh 6 4 2 2 3

Totals

Total energy used

(i.e. annual quantity of energy consumed from activities for which

theCompany is responsible, including combustion of fuel and

operationoffacilities)

GWh 2,175 2,195 2,156 2,112 2,081

Total energy imported

(i.e. annual quantity of energy consumed resulting from the purchase

ofelectricity and gas. No imports of heat, steam or cooling)

GWh 921 1,008 1,064 1,116 1,131

Normalised

metrics

Total energy per unit of revenue GWh/£m 1.18 1.20 1.11 0.97 0.89

Energy imported per unit of revenue GWh/£m 0.50 0.55 0.55 0.52 0.48

Clean water electricity use per unit treated kWh/Ml 698 718 726 744 698

1 We have restated ‘biogas generated on site’ volumes to update the density of biogas used in the calculation.

2 The value includes 42 GWh of propane which has become a larger proportion of our biomethane exports due to a change in requirements of the gas network’s acceptance tests.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202474

DISCLOSURE UNDER SUSTAINABILITY

ACCOUNTINGSTANDARDS BOARD

Companies in the Water Utilities and Services industries are recommended to report against the following metrics and topics for SASB standards

in the standard IFRS S2 (Climate-related Disclosures).

Topic Accounting Metric Severn Trent Disclosure

Energy Management (1) Total energy consumed, (2) percentage grid electricity, (3)

percentage renewable

Annual Report and Accounts

Distribution Network Efficiency Water main replacement rate Annual Performance Reports

Volume of non-revenue real water losses Annual Performance Reports

Effluent Quality Management Number of incidents of non-compliance associated with water

effluent quality permits, standards, and regulations

Annual Performance Reports

Discussion of strategies to manage effluents of emerging concern Drainage and Wastewater Management Plan

(‘DWMP’)

Water Affordability & Access Average retail water rate for (1) residential, (2) commercial, and (3)

industrial customers

Refer to our 2023/2024 Scheme of Charges –

Household Customers

Refer to our 2023/2024 Scheme of Charges –

Wholesale Charges Non-Household

Number of residential customer water disconnections for

non-payment, percentage reconnected within 30 days

We do not disconnect household customers for

non-payment of bills

Discussion of impact of external factors on customer affordability of

water, including the economic conditions of the service territory

Annual Report and Accounts

Drinking Water Quality Number of incidents of non-compliance associated with drinking

water quality standards and regulations

Annual Performance Reports

Discussion of strategies to manage drinking water contaminants of

emerging concern

Annual Report and Accounts

End-Use Efficiency Percentage of water utility revenues from rate structures that are

designed to promote conservation and revenue resilience

Annual Performance Reports

Customer water savings from efficiency measures, by market Annual Performance Reports

Water Supply Resilience Total water sourced from regions with High or Extremely High

Baseline Water Stress, percentage purchased from a third party

Refer to the EA Water Scarcity Strategy Report

(‘WSSR’), our reporting on sourcing from high-stress

regions is outlined within the EA WSSR

Volume of recycled water delivered to customers Annual Performance Reports

Discussion of strategies to manage risks associated with the quality

and availability of water resources

Draft WRMP

Network Resiliency & Impacts of

Climate Change

Wastewater treatment capacity located in 100-year flood zones DWMP

(1) Number and (2) volume of sanitary sewer overflows (SSO), (3)

percentage of volume recovered

Event Duration Monitor (‘EDM’) annual report

(1) Number of unplanned service disruptions, and (2) customers

affected, each by duration category

Annual Performance Reports

Description of efforts to identify and manage risks and opportunities

related to the impact of climate change on distribution and

wastewater infrastructure

Annual Report and Accounts

DWMP and draft WRMP

The reports referenced above can be located on the regulatory library section of our website.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 75

STRATEGIC REPORT

OUR EU TAXONOMY DISCLOSURE

Our Group Strategy to be ‘performance driven, sustainability led’ drives

ustoinvest in a way that contributes to social and environmental value.

Asabusiness we think it’s important to operate in a way that goes hand-in-

hand with nature and to drive positive change, whilst at the same time being

transparent about the impact we have on the world around us.

This disclosure provides a summary of how

we align to the EU Green Taxonomy, which

wehave chosen to use as it is the most

established system and aligns with our

sustainable investment objectives. It places

focus on businesses to do more, and is

designed to highlight sustainable choices

forboth investors and businesses.

This is our third disclosure, with our first

included in our Annual Report for the year to

31 March 2023 and our second published

as a standalone document in November 2023.

We continue to report eligible Turnover,

Operating Costs (‘Opex’) and Capital

Expenditure (‘Capex’) of 95%, 95% and 99%

respectively for our Group. Following our

previous alignment review, we have completed

a further detailed analysis of our activities, and

now report aligned Turnover, Opex and Capex of

74%, 71% and 83% respectively. Given our

substantial investment focused on our rivers

and biodiversity, we are delighted to benchmark

favourably against other companies that have

reported alignment to date. We recognise that

the detailed criteria of the EU Taxonomy ensure

a high standard is met, and we have used the

outcomes of this review to identify areas we can

further improve.

We expect our alignment to the EU Taxonomy

to increase as we act on the insights it

provides, and have already seen an increase of

over 15 percentage points in each of the three

financial key performance indicators (‘KPIs’)

as a result of action planning against our

previous gap analysis. In addition, as the scale

of our investment increases over the five-year

period to 2030 (from £6.6 billion in 2020-25 to

£12.9 billion in 2025-30), not only will absolute

values of investment aligned to the Taxonomy

increase, but our plan includes a greater mix of

green investment than previously delivered.

We expect that our alignment will expand

across the six objectives, giving greater

breadth to the disclosure and increasing

transparency of how much our business

contributes to these aims.

The companies included within this review are

Severn Trent Water Limited, Hafren Dyfrdwy

Cyfyngedig, Severn Trent Green Power

Limited, and Severn Trent Services Operations

UK Limited. These are the key operating

companies in our Group.

Governance

We established our Taxonomy Working Group

in February 2023 to embed new processes and

adapt our existing reporting approach so it was

in line with the EU Taxonomy requirements.

The Working Group includes finance and

sustainability professionals, is sponsored and

guided by senior Finance leadership, and

reports monthly to the Chief Financial Officer

(‘CFO’). To ensure the robustness of this

analysis, we invested in licensing specialised

EU Taxonomy analysis software from Celsia.

We appointed a third-line external assurance

provider, DNV Business Assurance Services

UK Limited (‘DNV’), to assure our analysis

ahead of publication. Third-line assurance is

not currently a mandatory requirement of the

EU Taxonomy; however, we chose to engage a

specialist sustainability assurance provider to

ensure the rigour of our disclosure and the

underlying processes.

Eligible and aligned activity

Where the EU Taxonomy identifies an activity

as being environmentally sustainable, it refers

to it as ‘eligible’ or ‘aligned’. An activity is

eligible if it is listed under any of the six climate

and environmental objectives. For each

eligible activity, we then assess the following

to determine if it is aligned:

EU Taxonomy alignment assessment

The EU Delegated Acts

To compile this disclosure we looked in detail

at our economic activities based on the EU

Taxonomy Regulation. This includes associated

legislative acts (the ‘Delegated Acts’) described

below, together with any additional guidance

released up until the date of reporting:

– The Climate Delegated Act (EU) 2021/2139

– this establishes the rules for deciding

whether an economic activity qualifies as

contributing substantially to one of the

climate objectives:

Climate change mitigation

Climate change adaptation

It also determines whether the economic

activity does no significant harm (‘DNSH’)

toany other environmental objectives.

– The Disclosure Delegated Act (EU)

2021/2178 – covers the content and format

of any information that we are disclosing

about environmentally sustainable economic

activities. It also determines the methods we

use to assess those activities.

– The Environmental Delegated Act (EU)

2023/2486 (‘EDA’) – determines whether

any economic activity has a substantial

impact on any of the following non-climate-

related environmental objectives:

Sustainable use of water and

marineresources

Transition to a circular economy

Pollution prevention and control

Protection and restoration of

biodiversity and ecosystems

Our approach

We carry out our analysis in three stages:

Eligibility assessment – we use

final and draft legislation available

to identify all eligible activities in

our business. We create a list of

these activities to identify SMEs

within each business area to

support the next stage of analysis.

Activity analysis – we assess which

activities we could align to the EU

Taxonomy with a detailed review

against all of the Technical

Screening Criteria, DNSH and MSS

requirements. The software we use

ensures a clear and supported audit

trail and we partner with Celsia, the

software provider, to ensure

effective training and engagement

for all SMEs.

Financial mapping – following

identification of eligible and aligned

activities we use existing and

adapted reports from our financial

systems to report the financial KPIs

set out in the Taxonomy.

Does it make a substantial

contribution to an

environmental objective?

Does it do no significant

harm (‘DNSH’) to other

objectives?

Does it meet minimum

social safeguards (‘MSS’)?

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202476

OUR ALIGNMENT TO THE EU GREEN TAXONOMY

We report alignment under the ‘Climate change mitigation’ and ‘Sustainable use and protection of water and marine resources’ objectives.

Climate change

mitigation

Climate change

adaptation

Sustainable use

and protection of

water and marine

resources

Transition

to a circular

economy

Pollution

prevention and

control

Protection and

restoration of

biodiversity and

ecosystems

Turnover

(£m)

Operating Costs

(£m)

Capital

Expenditure (£m)

Turnover (%)

Operating Costs

(%)

Capital

Expenditure (%)

EU Taxonomy activity Objective

Severn Trent activity

that aligns to the criteria

Construction, extension and

operation of water collection,

treatment and supply systems

CCM

Raw water transport, raw water

storage, water treatment and

treated water distribution

603 418 413 26% 30% 31%

Renewal of water collection,

treatment and supply systems

CCM

Raw water transport, raw water

storage, water treatment and

treated water distribution

210 146 145 9% 11% 11%

Construction, extension and

operation of wastewater

collection and treatment

CCM

Sewage collection and sewage

treatment

692 325 479 30% 24% 36%

Climate change mitigation alignment (A) 1505 889 1037 65% 65% 78%

Water supply (‘EDA’)

SPW

Water resources 173 78 36 7% 6% 3%

Sustainable urban drainage

systems (‘SuDS’)

SPW

Sustainable urban drainage

systems (‘SuDS’) in our Green

Recovery Programme

44 10 27 2% 1% 2%

Sustainable use and protection of water and marine resources alignment (B) 217 88 63 9% 6% 5%

Total aligned activities (A+B) 1722 977 1100 74%* 71%* 83%*

Other eligible activities

(seepage 79)

562 278 223 24% 20% 16%

Total eligible activities (C) 2283 1255 1323 98% 91% 99%

Non-eligible activities 55 120 6 2% 9% 1%

Total business activities (A+B+C)** 2338 1375 1329 100% 100% 100%

CCM

Climate change mitigation

SPW

Sustainable use and protection of water and marine resources

* Our final alignment percentages of 74% of Turnover, 71% of Opex and 83% of Capex were subject to third line assurance by DNV Business Assurance Services UK Limited (‘DNV’)

** Totals are derived from the statutory accounts included on pages 216 to 273 of this report. Operating costs here exclude depreciation and the charge for bad and doubtful debts and

capitalexpenditure excludes assets adopted at fair value.

Our aligned activities

The activities we report as aligned to the EU Taxonomy are set out in the table below:

As a Group, we are reporting alignment to the EU Taxonomy of over 70% within each of the three financial KPIs:

Turnover, Operating Costs and Capital Expenditure. This section provides an update on our summary position resulting

from afull alignment review against all of the six climate and environmental objectives included in the EU Taxonomy.

Turnover Operating Costs Capital Expenditure

74%

71%

83%

Eligible and aligned 74%

Eligible and not aligned 24%

Not eligible 2%

Eligible and aligned 71%

Eligible and not aligned 20%

Not eligible 9%

Eligible and aligned 83%

Eligible and not aligned 16%

Not eligible 1%

More detail on our eligible and aligned activities across the three financial KPIs has been captured and

reported in our ESG data book to assist investors in modelling our alignment.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 77

STRATEGIC REPORT

Detailed results

Since our last disclosure, published in November 2023, we have implemented action planning focused on climate adaptation resilience. Using EU

Taxonomy criteria, best practice guidance from Defra and insight from ISO standards ISO 14090 and ISO 14091 (Adaptation to Climate Change), we

have established centralised processes to identify, document and plan for climate adaptation risks across our business. We have been able to

prioritise implementation of these new processes in our Bioresources and Sewage Treatment business areas, as a result of high levels of

engagement in both leadership and operational teams.

Our increase in alignment

Our work to expand climate adaptation risk planning is the most significant contributor to increased Taxonomy alignment in our eligible activities

this year, as outlined in the table below. Beyond this, our work is beginning to embed new thinking and encourage the right behaviours that will

increase our resilience and enable better strategic planning around our climate projections and climate risk management. More detail on our

climate risk management approach is set out in our TCFD disclosure on pages 42 to 67 of this report.

Additional aligned

Turnover (£m)

Additional aligned

Operating costs

(£m)

Additional

alignedCapital

expenditure (£m)

Additional aligned

Turnover (%)

Additional

alignedOperating

costs (%)

Additional

alignedCapital

expenditure (%)

EU Taxonomy activity Objective Severn Trent activity

Construction, extension and

operation of wastewater

collection and treatment

CCM

Sewage treatment 391 178 401 17% 13% 30%

391 178 401 17% 13% 30%

CCM

Climate change mitigation

Turnover

53%

Opex

53%

Capex

62%

Turnover

74%

Opex

71%

Capex

83%

Our alignment 2022/23 Our alignment 2023/24

We have incorporated relevant legislation updates since our last disclosure, including expanded requirements to meet Minimum Social

Safeguards criteria and the now finalised Environmental Delegated Act. We continue to ensure we meet all DNSH criteria for our aligned activities.

For completeness, where EU directives do not apply directly to our activities, we report alignment only where we comply with relevant legislation

transposed into UK law, or equivalent requirements already included in UK legislation.

Our sewage treatment activity

We operate and maintain 1,005 waste treatment works, investing

around £500 million a year (across Opex and Capex) and work hard

to reduce blockages and to prevent flooding and pollution, whilst

taking action to reduce greenhouse gas emissions.

The DNSH criteria in the EU Taxonomy set out challenging

requirements to report alignment, ensuring no harm to biodiversity,

water resources, pollution prevention or climate change adaptation.

These include appropriate measures to mitigate excessive storm

overflows, and activity to ensure maximum pollutant limits are not

exceeded. Whilst we are proud to have zero pollution failures

against the Urban Waste Water Treatment Regulations in 2023/24,

we recognise this is a hugely important area. Over the next 25 years

we will invest £4.4 billion in storm overflows alone; £1.1 billion of

which will be by 2030, to meet targets at least five years earlier than

UK Government requirements. For more information, please refer

to pages 38 to 41 of this report.

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202478

Our business activities

EU Taxonomy

objectives

Alignment

next steps

Wastewater collection and treatment

Technical

screening

criteriato

investigate

further

– Renewal of wastewater collection and treatment

CCM

CCA

– Urban wastewater treatment

SPW

Bioresources

– Anaerobic digestion of sewage sludge

CCM

CCA

– Electricity generation from bioenergy

CCM

CCA

– Cogeneration of heat/cool and power from renewable non-fossil gaseous and liquid fuels

CCM

CCA

– Cogeneration of heat/cool and power from bioenergy

CCM

CCA

– Production of heat/cool from bioenergy

CCM

CCA

Severn Trent Green Power

Climate

adaptation risk

planning to

embed and

document

– Recovery of bio-waste by anaerobic digestion or composting

TCE

– Electricity generation using solar photovoltaic technology

CCM

CCA

– Electricity generation from wind power

CCM

CCA

– Electricity generation from hydropower

CCM

CCA

– Electricity generation from bioenergy

CCM

CCA

– Cogeneration of heat/cool and power from bioenergy

CCM

CCA

– Anaerobic digestion of bio-waste

CCM

CCA

– Composting of bio-waste

CCM

CCA

– Installation, maintenance and repair of renewable energy technologies

CCM

CCA

Other activities

Technical

screening

criteriato

investigate

further

– Conservation, including restoration, of habitats, ecosystems and species

PRBE

– Afforestation

CCM

CCA

– Forest management

CCM

CCA

– Restoration of wetlands

CCM

CCA

– Nature-based solutions for flood and drought risk prevention and protection

SPW

– Renovation of existing buildings

CCM

CCA

– Installation, maintenance and repair of energy efficiency equipment

CCM

CCA

– Installation, maintenance and repair of charging stations for electric

vehicles in buildings (and parking spaces attached to buildings)

CCM

CCA

– Installation, maintenance and repair of instruments and devices for measuring,

regulation and controlling energy performance of buildings

CCM

CCA

– Acquisition and ownership of buildings

CCM

CCA

– Close to market research, development and innovation

CCM

CCA

– Flood risk prevention and protection infrastructure

CCM

CCA

– Manufacture, installation and associated services for leakage control technologies enabling leakage

reduction and prevention in water supply systems

SPW

CCM

Climate change mitigation

CCA

Climate change adaptation

SPW

Sustainable use and protection of water and marine resources

TCE

Transition to a circular economy

PRBE

Protection and restoration of biodiversity and ecosystems

Our other eligible business activities

The nature of our business means we have a wide range of activities that areeligible under the EU Taxonomy. As reported previously, we identify

34 activities relevant to our business and we are fully aligned to the EU Taxonomy criteria within five of these. For the remaining 29 activities,

wehave further work to do to establish alignment, as set out in the summary table below.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 79

STRATEGIC REPORT

Our gap analysis

Primarily the gap between the value of our

eligible and aligned activities relates to three

key areas:

Climate adaptation planning

– As a business we have a Group-level

ClimateChange Adaptation Report and will

be publishing our next iteration of this in

December 2024. We also undertake extensive

scenario modelling as part of our Water

Resources Management Plan (‘WRMP’) and

Drainage and Wastewater Management

Plan (‘DWMP’) and bring these together in

our Long Term Delivery Strategy. We

highlighted in our previous alignment review

that we need to place greater focus on

ensuring our assets and activities are

resilient to a changing climate on a more

granular level. This includes embedding

more detailed climate adaptation risk

plansacross our assets and activities, and

creating dedicated climate action plans.

Wehave already made great progress in the

last six months, and now report increased

alignment percentages for our Sewage

Treatment activity asaresult.

– As part of our AMP8 Business Plan we have

proposed c.£5 billion of enhancement

expenditure, of which 6% relates to closing

the gap between current resilience and 2050

forecasts for the impact of climate change

on our business.

Complexity of criteria

– We undertake a broad range of activities

eligible under the EU Taxonomy. We have

agreat opportunity to review how we make

asubstantial contribution across different

objectives. As we progress this review

andtranslate the complex criteria for

different activities, we expect to see

greateralignment.

Challenging targets

– Whilst we are committed to ambitious

targets, including biodiversity and river

pledges, we acknowledge that the EU

Taxonomy requires heightened ambition to

tackle climate change. In our wastewater

activities, the EU Taxonomy sets atarget

forrenewal work to our waste network to

reduce energy consumption by 20%. As

part of our commitment to reduce

emissions under ourTriple Carbon Pledge,

we already target areduction in energy use

across our business. We don’t yet meet the

specific reduction target set by the EU

Taxonomy, but we continue to work

towardsthis through our future investment

planning and ambitions to focus on nature

based solutions.

The chart below sets out the key gaps between

eligibility and alignment for Capex. Given the

greater level of insight we now have into the EU

Taxonomy system, we look forward to

incorporating our findings into our strategic

plans, and welcome the insight and

opportunity this creates for our business and

the investor community.

We will continue to disclose the results of our

analysis in future publications of our Annual

Report and Accounts, ensuring visibility of our

Group’s alignment to the EU Taxonomy and our

gap analysis.

You can read more about our activities,

achievements and plans, both contributing

towards, and ensuring we do no significant

harm to, the environmental objectives, in the

documents set out in the table below.

Connected to this, you can also find more

detailon our Principal Adverse Impact

assessment in our ESG data book on

ourwebsite at severntrent.com.

Gap analysis between eligibility and alignment for Capex

Environmental objectives

Read more in our other reports and disclosures

Climate change mitigation

Please see the following documents:

Our TCFD disclosure within this Annual Report on pages 42 to 75

Our Water Resources Management Plan

Our Drainage and Wastewater Management Plan

Our Drought Management Plan

Our Sustainability Report

Climate change adaptation

Sustainable use and protection

of water and marine resources

Pollution prevention and control

Please see:

Page 22 of this Annual Report

Protection and restoration of

biodiversityandecosystems

Please see:

Page 42 of this Annual Report

Our Sustainability Report

Transition to a circular economy

Please see:

Our Sustainability Report

Delivering against the six environmental objectives – other documents

Current

alignment

Climate risk

planning

Reducing energy

by 20%

Other

activities

Current

eligibility

83%

99%

12%

Running a Business that Goes Hand-in-Hand with Nature continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202480

Financial methodology

We voluntarily report against the

three financial KPIs set out in the

EUTaxonomy legislation: Turnover,

Operating costs and Capital

expenditure. Wereportthese for

allbusiness activities against each

environmental objective, following

guidance and rules set out in the

EUTaxonomy User Guide, alongside

expert support and advice.

We report the KPIs based on our standard cost

allocation approach used for both entity and

regulatory reporting. For the regulated entities

Severn Trent Water and Hafren Dyfrdwy we

use price controls to report our activities to

Ofwat, and these broadly map to some of the

EU Taxonomy activities, so for these

businesses we already report costs by

business activity and consider it is reasonable

to map the related financial values to the EU

Taxonomy activities. As required by the

legislation, the actual values reported have

been adjusted by the differences between

Ofwat regulatory reporting and statutory

reporting under International Financial

Reporting Standards (‘IFRS’), in order to

arriveat a proportion of the Turnover, Opex

andCapex reported in our Annual Report

andAccounts.

Calculating the financial KPIs

– The Turnover KPI is reported as the

proportion of net Turnover derived

fromproducts or services (including

intangibles) that are taxonomy-aligned

ortaxonomy-eligible.

– The Capital Expenditure KPI includes

Capital Expenditure that is either already

aligned or is part of a plan to extend or reach

environmental sustainability in the next five

years and is credible and feasible. It is

calculated based on intangible and tangible

asset additions, excluding any depreciation

or amortisation. We have included in the

disclosure our Capital Expenditure related

to our leakage reduction targets. These

costs are associated with our long-term

reduction activity as Severn Trent Water

istargeting a 50% reduction by 2045 from

a(three year averaged) 2019/20 baseline,

and this company expects to achieve at least

a 20% reduction (the target set by the EU

Taxonomy) by 2025/26, i.e. within the next

five years.

– The Operating Costs KPI relates to costs

such as maintenance or servicing assets

associated with taxonomy-aligned or

taxonomy-eligible activities, building

renovations, research and development, or

short-term leasing costs. It can also include

enabling costs associated with the aligned

activities as well as costs associated with

aplan to reach environmental sustainability

in the next five years. We have included

Operating Costs associated with our leakage

reduction targets on the same

basis as those included for the Capital

Expenditure KPI.

– The legislation sets out that for the Climate

change adaptation objective, only the

Operating Costs and Capital Expenditure

associated with making an activity climate

resilient are considered. As we expand on

our work to document the risks and

solutions associated with adapting to

climate change, we expect to increase

investment in adaptation-aligned activities

and for this to be visible in future EU

Taxonomy disclosures.

Assumptions and assertions

We ensure that centralised costs not directly

attributable to business activities, such as

those related to executive costs, HR, Finance

and Strategy, are excluded, in line with EU

Taxonomy legislation. We include a pro-rata

allocation of turnover and costs from within

our retail price control, representing the costs

for delivering our services to customers. We

follow Regulatory Accounting Guideline 4

which outlines the costs and associated

activities to be captured for each of our

appointed business activities, ensuring only

the retail costs associated with our regulated

activities are captured. We believe this

remains in line with the EU Taxonomy

requirements to include only costs directly

attributable to our business activities when

reporting them as eligible and aligned.

Where our existing financial reports don’t

support the breakdown required to report

under the EU Taxonomy, we have applied a

reasonable apportionment, using proportions

from underlying data toallocate values

between activities.

The EU Taxonomy identifies separate activities

for ‘Renewal’ and ‘Construction’ of water and

wastewater assets and systems. We continue

to allocate these costs between the separate

activities by reference to our Capex profile,

although we have to make some assessments

in this approach. This includes assuming that

the interpretation of what might be classed as

a ‘Renewal’ for EU Taxonomy purposes would

be the same as that already used in the UK

water industry for regulatory and statutory

reporting purposes.

Assurance

As part of our commitment to disclose robust

and transparent information, we continue to

use a third-line assurance provider to review

our analysis. DNV reviewed the detailed

workings for our Severn Trent Water business,

where all of our currently aligned business

activities are reported. The remainder of our

analysis for other companies in our Group

wassubject to internal first and second-line

assurance. The assurance statement can

beviewed on our website.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 81

STRATEGIC REPORT

BUSINESS SERVICES

PERFORMANCEREVIEW

Business Services operates a UK-based portfolio that

complements the Group’s core competencies and is well

positioned to capitalise on market opportunities in three areas:

Operating Services, Property Development and Green Power.

Operating Services

Operating Services provides a variety of

operational water and wastewater services

toprivate clients across the UK. The main

customers are the Ministry of Defence (‘MoD’),

a variety of businesses requiring legionella

monitoring and internal water treatment

services (including several large facilities-

management companies, universities and

government departments), regulated water

companies and new appointments and

variations. Wealsohave a reports-based

service whichproduces water and drainage

search reportsfor conveyancing solicitors with

clientsthat are buying both domestic and

commercial properties.

This year, Operating Services’ businesses

generated £104 million revenue (an increase

of5% on the prior year), primarily from the

MoD contract, including supplementary project

work, and our water hygiene and treatment

business. Earnings before Interest, Tax,

Depreciation and Amortisation (‘EBITDA’) of

£19.9 million has been achieved through

exceptional customer service and operational

excellence, which has helped to offset the

slowdown in our property searches business

as the property market continues to

remaindepressed.

Aqualytix, our legionella monitoring and water

treatment business, successfully integrated

anacquired business during the year and

completed a further acquisition towards the

end of the year. Further targets are being

explored, reflecting our growth ambition in

thisarea.

Delivery of excellent customer service (98%

customer KPI score) and aworld-class Net

Promoter Score of +90, supported by our

investment in automation toimprove efficiency

and accuracy of ourservices.

Property Development

Our operational footprint continues to evolve

as we deploy innovation to deliver our services,

which can result in land becoming available for

the development of new homes and businesses

in our region. We remain on track to deliver

£150 million PBIT from the sale of surplus land

between 2018 and 2032.

Since 2018, we have sold land with planning

permission to build 1,650 new homes and

1.7 million square feet of commercial space,

creating over 2,000 new jobs. We are currently

promoting 1,000 acres of land for

redevelopment, part of our plan to deliver a

further 3,000 new homes and over 6 million

square feet of commercial space, which will

create a further 6,500 new jobs.

During the year, we completed two sales

following the grant of planning permission.

Meir Depot, a 4.4-acre site in Stoke-on-Trent,

was sold. Newbold, a 4.2-acre site in Rugby,

was sold to a developer to enable the

construction of a new storage and distribution

facility to meet the demands of regional

manufacturing and distribution companies

with the opportunity to create up to 70 jobs.

We continue to progress our major planning

applications. For example, in October 2023, the

planning committee approved our planning

application for a logistics and employment

scheme on our 22-acre site at Junction 15 of

the M40 Longbridge, Warwick. Our planning

application submitted in 2022 at Hayden seeks

to deliver 1,100 new homes on a site to the west

of Cheltenham, delivering high-quality,

well-designed sustainable housing to meet

local and regional needs. Alongside this, the

application includes affordable housing as well

as a flexible mixed-use area with a community

hub, a primary school and green recreational

space for community enjoyment.

Operating Services EBITDA

2023/24 £19.9m

2022/23 £20.8m

2021/22

£22.5m

Property Development EBITDA

2023/24 £4.0m

2022/23 £2.0m

2021/22

£13.2m

Green Power EBITDA

2023/24 £29.5m

2022/23 £35.7m

2021/22

£17.5m

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202482

Green Power

As the UK’s largest producer of renewable

energy from food waste in the UK, we provide

cost-effective and sustainable recycling

solutions through our award winning network

of facilities across England and Wales. We then

turn waste into renewable energy to power

UKhomes and businesses and produce a

nutrient-rich liquid biofertiliser for farmland

tohelp grow new crops. The green energy

produced from food waste contributes to

meeting our net zero targets and keeping our

energy costs down.

We operate a high-quality portfolio of assets

including 11 anaerobic digestion facilities

andfive composting sites that recycle over

500,000 tonnes of food waste and more than

100,000 tonnes of green waste every year.

Inaddition, we operate a diverse portfolio of

renewable energy production facilities,

including 33 solar parks, six wind turbines

andthree hydro-electric turbines.

In September 2023, we also confirmed the

acquisition of Andigestion Ltd. This gives

Green Power new reach into South West

England, covering cities such as Bristol,

Gloucester and Exeter, helping more

businesses to process and recycle their food

waste into renewable energy.

In 2023/24, we generated 302 GWh of green

energy, an 11% year-on-year growth. This has

been achieved by delivering an average 94%

plant efficiency across our portfolio,

commissioning our plant expansion at Stoke

Bardolph, the acquisition of Andigestion Ltd

and refurbishing our anaerobic digestion

facility in Derby during the autumn, bringing

anadditional 30GWh of energy generation.

Lightning Strike at Cassington, Oxfordshire

On 2 October 2023, one of our Green Power sites atWorton Farm,

Cassington was struck by lightning. Thestrike ignited three of the

digester tank roofs.

Our safety procedures and protocols

operated effectively and the site was

immediately evacuated. None of our

employees or any ofthe local communities

were injured. Emergency services responded

promptly and the site was made safe. The

Health and Safety Executive and the

Environment Agency were notified promptly

in line with our reporting obligations.

The nature of our operations, enabled us to

promptly divert food waste lorries to other

sites in our portfolio, Wallingford, Bishop’s

Cleeve and Roundhill, so that we could

treatthe volumes of food waste normally

processed at our Cassington site,

therebyminimising disruption to our

foodwaste customers.

In response to the event, an independent

lightning protection specialist was appointed

to undertake a risk assessment acrossthe

Group’s estate. In parallel, an internal

review was commenced, including physical

asset inspections at all of the Green Power

sites to review assets and site records

related to the Dangerous Substances and

Explosive Atmosphere Regulations

(‘DSEAR’). Thisreview included a review of

previous risk assessments to ensure no

further actions were required in response to

the event.

94%

plant efficiency across

ourGreenPowerportfolio

302 GWh

of green energy generated,

an11%year-on-year growth

500k

tonnes of food waste recycled every year

100k

tonnes of green waste recycled every year

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 83

STRATEGIC REPORT

CHIEF FINANCIAL OFFICER’S

REVIEW

We have delivered robust financial performance in the year, in line

with expectations. Profit before interest and tax (‘PBIT’) of

£511.8 million (2022/23: £508.8 million) was in line with the

previous year, and with lower finance costs, due mainly to lower

inflation on index-linked debt, profit before tax was 19.9% higher at

£201.3 million.

A summary of our financial performance for the year is set out below:

2024 2023 Change

£m £m £m %

Turnover 2,338.2 2,165.1 173.1 8.0

PBIT 511.8 508.8 3.0 0.6

Net finance costs (281.5) (362.6) 81.1 22.4

Gains/losses on financial instruments, share

of results of joint venture and impairment of

loans receivable (29.0) 21.7 (50.7) (233.6)

Profit before tax 201.3 167.9 33.4 19.9

Tax (61.1) (35.7) (25.4) (71.1)

Profit for the year 140.2 132.2 8.0 6.1

Group turnover was £2,338.2 million

(2022/23: £2,165.1 million) up £173.1 million

(8.0%), driven mainly by higher revenues in our

Regulated Water and Wastewater business

(up£156.6 million).

Group PBIT was broadly in line with the

previous year, up £3.0 million to £511.8 million.

In Regulated Water and Wastewater, PBIT grew

by £12.1 million, partially offset by lower PBIT

in Business Services. The segmental

performance is set out in more detail below.

Net finance costs were lower as falling

inflation in the period reduced the cost of our

index-linked debt. Our effective interest cost

was 150 bps lower at 4.7% (2022/23: 6.2%); our

effective cash cost of interest (which excludes

the inflation uplift on index-linked debt)

increased to 3.2% (2022/23: 3.0%).

The tax charge of £61.1 million reflects our

full (including current and deferred tax)

effective tax rate this year of 30.4%

(2022/23: 21.3%). This is higher than the

statutory rate of tax of 25% (2022/23: 19%)

due to true-ups for prior year provisions,

which increased the effective rate by 3.7%,

and depreciation on non-qualifying assets

and other permanent differences, which

increased the effective rate by 1.7%. During

the year, full expensing of qualifying capital

expenditure replaced the super deduction,

which in the previous two years had given a

130% tax allowance. The significant

allowances derived from this resulted in our

current tax charge, excluding true-ups for

prior year provisions of £0.5 million and our

adjusted effective tax rate of 0.2% (2022/23:

nil). As a result of the enhancements to the

capital allowances regime in recent years,

theGroup has losses carried forward of

£871 million that are available to set off

against future taxable profits.

Group profit after tax was £140.2 million

(2022/23: £132.2 million) and our adjusted

basic earning per share (‘EPS’) was 79.4 pence

£2,338.2m

Group turnover in 2023/24

£173.1m

up from previous year

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202484

(2022/23: 58.2 pence) reflecting the increase in

adjusted earnings partially offset by the

increase in the number of shares from the

equity placing in October 2023. Basic EPS was

51.0 pence (2022/23: 52.7 pence).

Our balance sheet remains strong. At 31 March

2024 our adjusted net debt was £7,187.9 million

(2023: £7,123.9 million based on our revised

definition – see note 43). Our shadow regulated

gearing, taking into account our Green

Recovery Programme, was 59.7%

(2023: 59.8%) and our regulated gearing using

FD RCV (see page 86) was 61.3% (2023: 60.5%).

This was higher due to investments in relation

to Green Recovery, transitional expenditure

and other items that will be reflected in the

regulated capital value (‘RCV’) as ‘midnight

adjustments’ at the end of the AMP.

Our net pension deficit on an IAS 19 basis is

£213.0 million (2023: £279.4 million). The

discount rate, which is based on the yield

observed on high-quality corporate bonds,

increased by 10 bps and inflation expectations

over the life of the liabilities decreased by 10

bps which, combined, reduced the deficit by

£53 million. We also paid contributions of

£68 million, in line with our funding plan. This

was partially offset by other actuarial

adjustments of £37 million, service and

administration costs of £5 million and

£13 million from unwinding of the discount on

the opening deficit.

Operational cash flow was £760.8 million,

(2022/23: £713.1 million). Earnings before

interest, tax, depreciation and amortisation

(‘EBITDA’) increased by £14.0 million and

pension contributions were £32.6 million lower

as in the previous year we paid two years’

deficit reduction contributions in the year.

Cashcapex was £1,146.2 million, up

£459.6 million due to the increasing capital

programme including transitional expenditure

for AMP8. After the net receipt of £1 billion

from the issue of shares, net cash inflow

before changes in adjusted net debt was

£64.9 million (2022/23: outflow of

£440.4 million).

Severn Trent Water’s Return on Regulated

Equity (‘RoRE’) for the year was 5.7%, 180 bps

above the base return of 3.9% and bringing

our cumulative RoRE for the AMP to 8.1%.

Outperformance came mainly from our

customer ODI rewards of £55 million, with

76% of our measures in reward, and

financing, reflecting our continued low cash

interest cost and the impact of higher inflation

in the year compared to Ofwat’s assumption

in the Final Determination.

Although in the current year we have continued

to see an adverse impact from higher inflation

on our operating and finance costs, in the

longer term we expect to see the benefits

through indexation of our RCV, revenue growth

and lower gearing, all of which underpin our

inflation-linked AMP7 dividend policy.

Our proposed final dividend of 70.10 pence

(2022/23: 64.09 pence), is in line with our

inflation-linked dividend policy and payable

on17 July 2024.

Regulated Water and Wastewater

Turnover for our Regulated Water and Wastewater business was £2,152.0 million

(2022/23: £1,995.4 million) and PBIT was £479.6 million (2022/23: £467.5 million).

2024 2023 Change

£m £m £m %

Turnover 2,152.0 1,995.4 156.6 7.8

Net labour costs (200.9) (158.2) (42.7) (27.0)

Net hired and contracted costs (251.8) (217.2) (34.6) (15.9)

Power (283.0) (204.6) (78.4) (38.3)

Bad debts (27.3) (24.5) (2.8) (11.4)

Other costs (291.9) (284.6) (7.3) (2.6)

(1,054.9) (889.1) (165.8) (18.6)

Infrastructure renewals expenditure (207.2) (238.4) 31.2 13.1

Depreciation (410.3) (400.4) (9.9) (2.5)

PBIT 479.6 467.5 12.1 2.6

Turnover increased by £156.6 million with the

main movements being:

– an increase of £138.6 million from the

annual CPIH + K increase in prices;

– a £91.7 million decrease representing

therecovery of higher revenue in 2021/22

underthe RFI mechanism where revenue

recovered quicker than expected

postCOVID-19;

– £131.4 million increase for the in-AMP fast

money allowance for the Green Recovery

Programme and ODI reward recognised in

revenue in year;

– £10.4 million reduction due to lower

Non-Household consumption and increased

support given to customers as part of the

Big Difference Scheme, supporting

customers struggling to pay their bill; and

– a net decrease of £11.3 million due to

lowergas and electricity export income in

Bioresources as a result of significantly

lower export prices partly offset by higher

renewable energy incentive income and

increased tankered trade and

domesticwaste.

Net labour costs of £200.9 million were 27.0%

higher year on year. Gross employee costs

increased by £80.3 million, of which

£25.7 million was driven by a pay increase

of7.5% and £16.7 million was due to higher

National Insurance and employer pension

contribution costs. A planned increase in our

headcount driven by the insourcing of our

reactive sewage services teams from

Customer Solutions Plus earlier this year, and

additional resource to support the delivery of

our biggest ever capital programme, resulted

in an increase of £27.7 million. This was partly

offset by higher capitalisation of employee

costs as expected due to the significant size

ofour capital programme.

Net hired and contracted costs increased by

£34.6 million (15.9%), £15.8 million of which

isdue to the planned step-up in the Green

Recovery Programme. The remaining increase

is driven by higher spend on third-party gangs

to support with leakage and other operational

improvement activities, and increases on

building maintenance contracts and third-

party technology contracts.

Although in the current year we have continued to see an

adverse impact from higher inflation on our operating and

finance costs, in the longer term we expect to see the

benefits through indexation of our RCV, revenue growth

and lower gearing, all of which underpin our inflation-

linked AMP7 dividend policy.

Helen Miles

Chief Financial Officer

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

STRATEGIC REPORT

Economic Equity Value Added

This measure gives an indication of the

economic value generated by the Group over

the AMP to date. The RCV, which has no

equivalent under IFRS reporting, is the most

significant component of this measure.

Each year Ofwat publishes the RCV for each

company which sets out the RCV from the Final

Determination, updated for inflation (the ‘FD

RCV’). This metric does not include costs that

we have incurred and that will be added to the

RCV as ‘midnight adjustments’ between the end

of the current AMP and the start of the next

AMP. Our new RCV measure, which we refer to

as our Economic RCV, includes estimates of

these items along with the FD RCV for Severn

Trent Water and Hafren Dyfrdwy combined.

Our Economic Equity Value Added metric

measures the growth in our Economic RCV and

our investment in our non-regulated business

net of changes in Group adjusted net debt,

pension liabilities and cash tax. We measure

this over the AMP period:

Chief Financial Officer’s Review continued

Power costs were £78.4 million or 38.3%

higher, mainly driven by the higher wholesale

price of electricity on imports, hedged over the

course of 2022 which was affected by the

significant increase in wholesale market

energy prices at that time. Power consumption

on our pumping stations was around £2 million

higher due to the exceptionally wet weather.

Higher power prices are partially offset by

self-generation and incentive income

inbothour Bioresources and Green

Powerbusinesses.

Bad debt charges increased by £2.8 million

and represented 1.5% of household revenue

(2022/23: 1.7%) reflecting the impact of higher

revenue on our bad debt cost, partly offset by

improved collection performance in the latter

part of the year as pressure on household

incomes started to ease.

Other costs were up by £7.3 million, including

higher costs of repairing third-party damage,

increased insurance costs and higher

regulatory fees, partly offset by lower

chemical costs.

Infrastructure renewals expenditure was

£31.2 million lower compared to 2022/23. This

was driven by less reactive activity required as

well as improved efficiency and cost per km on

distribution mains renewals, partly offset by

additional activity on comm pipe renewals. Our

work mix switched towards more capital

activity in the year.

Depreciation of £410.3 million was £9.9 million

higher due to completion of Strongford THP,

Minworth CHP and additional vehicle leases as

we progress towards a 100% electric fleet and

vehicle purchases for the insourced reactive

sewage services teams.

Return on Regulatory Equity

RoRE is a key performance indicator for the regulated business and reflects our combined performance on totex, customer ODIs and financing

compared to the base return allowed in the Final Determination.

Severn Trent Water’s RoRE for the year ended 31 March 2024 and for the four years ended on that date is set out in the following table:

2023/24

AMP7 todate

Base return 3.9 3.9

Enhanced RoRE reward

– 0.1

ODI outperformance

0.7 1.1

Wholesale totex performance

(3.8) (0.8)

Retail cost performance – (0.2)

Financing outperformance 4.9 4.0

Return on Regulatory Equity

5.7 8.1

1 Fast track reward taken over the first three years of AMP7.

2 ODI performance includes Per Capita Consumption (‘PCC’) and forecast C-MeX and D-MeX outturn. Includes in-period ODI outperformance only.

3 Includes impact of land sales. All calculated in accordance with Ofwat guidance set out in Regulatory Accounting Guideline 4.12, which precludes adjustment for corporation tax.

4 Calculated in accordance with Ofwat guidance set out in RAG 4.12, which excludes Ofwat’s AMP7 tax true-up mechanism.

We have delivered RoRE of 5.7% in the year,

outperforming the base return by 1.8% as a

result of:

– ODI outperformance of 0.7%, driven by

strong performance across the majority of

measures, with 76% meeting or exceeding

regulatory targets;

– financing outperformance of 4.9%, driven by

our AMP7 financing strategy of maintaining

a low level of index-linked debt and the tax

benefit of 100% capital allowances; and

– partly offset by the impact of high energy

costs on our totex as previously guided.

Regulatory performance measures

In addition to RoRE we have developed further

performance measures to highlight aspects of

value created by the Group that are not

reflected in our financial performance

indicators. These are set out below.

2023/24

£m

AMP7

opening

£m

Value added

£m

Economic RCV 12,540 9,382 3,158

Revenue earned not billed 238 – 238

Regulated economic value 12,778 9,382 3,396

Other Group investments 68

Change in adjusted net debt, pensions and tax (963)

Retained Economic Equity Value Added 2,501

Cash flows from equity holders (181)

Economic Equity Value Added AMP to date 2,320

The components of the Economic RCV are shown below:

2023/24

£m

AMP7

opening

£m

Value added

£m

FD RCV 12,004 9,382 2,622

Green Recovery 329 – 329

Real Options 87 – 87

Transitional Expenditure 47 – 47

Other RCV adjustments 73 – 73

Economic RCV 12,540 9,382 3,158

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202486

Regulatory Income

This measure reflects income that will be

recognised in IFRS financial statements in

future years. IFRS financial statements do

not currently reflect rights that we have

earned in the period to bill additional

revenue in future periods.

In addition, the inflation accretion on the

principal amount of our index-linked debt is

charged to finance costs in our IFRS financial

statements but the inflation uplift on our RCV

is not recognised under IFRS. Our regulatory

income metric includes the benefit of inflation

on RCV and the cost of inflation on index-

linked debt for Severn Trent Water and Hafren

Dyfrdwy combined.

2023/24

£m

2022/23

£m

Adjusted IFRS earnings (see note 14) 218 146

Change in year of revenue earned not billed 76 (14)

RCV inflation 526 1,093

Total Regulatory Income 820 1,225

The movement in revenue earned not billed in the year is set out below in its major components:

Revenue

£m

ODIs

£m

Totex

£m

True-ups

£m

Total

£m

At 1 April 2023 13 159 38 (48) 162

Inflation 1 15 4 (4) 16

Earned in year 9 50 96 (18) 137

Billed in year 14 (91) – – (77)

Change in the year 24 (26) 100 (22) 76

At 31 March 2024 37 133 138 (70) 238

Revenue – this is an adjustment for the

difference between revenue billed and the

amount allowed in the Final Determination.

These adjustments are generally billed two

years in arrears.

ODI rewards earned in a given period can be

recovered through revenue after two years

(orcarried forward further at the company’s

choice). This is shown net of tax, in

currentprices.

Differences between totex spent and the

amount allowed are ‘shared’ with customers

inthe following AMP. Part of this difference is

recovered through adjustments to revenue

(included here) and the remainder through

adjustments to the RCV (included in Economic

RCV above).

True-ups – the regulatory model includes a

number of ‘true-ups’ for differences from

original assumptions arising through the AMP

and recovered from customers in the next

AMP. These true-ups include tax, land sales,

cost of debt and the RPI-CPIH wedge in AMP7.

The Green Recovery RCV represents our

investment to date in the Green Recovery

Programme that will be recovered in future

AMP periods.

Real Options are commitments that were

agreed with Ofwat at PR19 to be adjusted to the

RCV at the end of the AMP contingent on the

delivery of environmental benefits, which are

either delivered or on track.

Transitional Expenditure is investment that

wehave brought forward into AMP7 from

AMP8 under Ofwat’s transitional expenditure

mechanism but will not be included in the RCV

until the start of AMP8.

Other RCV adjustments consists of ‘true-ups’

that are made to the RCV at the end of the AMP

under the regulatory model, including the RCV

element of totex performance sharing. This

adjustment is split between RCV and revenue

inthe regulatory model and so part of the

adjustment is included here, and the remainder

is included in revenue earned not billed below.

The Green Recovery adjustment is included

inOfwat’s shadow RCV measure. If we had

included all of the adjustments in our

Economic RCV metric, our shadow regulated

would have been 58.7%.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 87

STRATEGIC REPORT

Chief Financial Officer’s Review continued

Corporate and other

Corporate costs were £10.5 million

(2022/23: £8.7 million). The increase is driven

by higher legal costs related to the Leigh Day

defence as well as pay increase on corporate

overheads. Our other businesses generated

PBIT of £1.1 million (2022/23: £0.7 million).

Net finance costs

Net finance costs for the year were

£81.1 million (22.4%) lower than the prior

yearat £281.5 million. Although average

netdebt was up 7.4% at £7,216.6 million

(2022/23: £6,720.6 million), lower inflation in

the year reduced the cost of our index-linked

debt by £107.7 million. Our effective interest

cost was 4.7% (2022/23: 6.2%).

We raised around £1.5 billion of new debt

atcompetitive rates but higher than the

embedded debt it replaced and as a result our

effective cash cost of interest (excluding the

RPI uplift on index-linked debt and pensions-

related charges) was higher at 3.2%

(2022/23: 3.0%).

Capitalised interest of £69.6 million was

£13.0 million higher year on year, due to

increased capital work in progress compared

with the previous year, partially offset by the

lower effective interest cost.

Our EBITDA interest cover was 3.5 times

(2022/23: 2.6 times) and PBIT interest cover

was 1.9 times (2022/23: 1.4 times). See note 43

for further details.

Gains/losses on financial instruments

We use financial derivatives solely to hedge

risks associated with our normal business

activities including:

– exchange rate exposure on foreign

currencyborrowings;

– interest rate exposures on floating

rateborrowings;

– exposures to increases in electricity prices;

and

– changes in the regulatory model from RPI

toCPIH.

We hold interest rate swaps with a net notional

principal of £442.9 million floating to fixed, and

cross currency swaps with a sterling principal

of £674.6 million, which economically act to fix

the sterling liability on certain foreign

currency borrowings.

We revalue the derivatives at each balance

sheet date and take the changes in value to the

income statement, unless the derivative is part

of a cash flow hedge.

Where hedge accounting is not applied, if the

risk being hedged does not impact the income

statement in the same period as the change in

value of the derivative, then an accounting

mismatch arises and there is a net charge or

credit to the income statement. During the year

there was a loss of £9.0 million (2022/23: gain of

£35.7 million) in relation to these instruments.

Note 11 to the financial statements givesan

analysis of the amounts charged tothe income

statement in relation to financialinstruments.

As part of our power cost management

strategy, we have fixed the wholesale price for

around 100% of our estimated net energy

usage for 2024/25, and around 43% for

2025/26, through physical hedges with

suppliers and natural hedges from the export

of self-generated energy.

Share of loss of joint venture

Water Plus incurred a loss after tax of

£8.1 million, mainly due to increased bad debt

charges. Our share of Water Plus’s result for

the year was a loss of £4.1 million

(2022/23: £nil).

Business Services

Change

2024

£m

2023

£m £m %

Turnover

Operating Services and Other 104.3 98.5 5.8 5.9

Green Power 87.6 78.6 9.0 11.5

191.9 177.1 14.8 8.4

EBITDA

Operating Services and Other 25.6 28.1 (2.5) (8.9)

Green Power 29.5 35.7 (6.2) (17.4)

Property Development 4.1 2.0 2.1 105.0

59.2 65.8 (6.6) (10.0)

Business Services turnover was £191.9 million

(up 8.4%) and EBITDA was £59.2 million (down

10.0%).

In our Operating Services and Other

businesses, turnover increased by £5.8 million

due to activity on the MoD and other Aqualytix

contracts. EBITDA was £2.5 million lower as

the increased revenue was offset by the impact

of the 7.5% pay increase and higher technology

licence costs.

In Green Power, turnover was £9.0 million

higher year on year from increased generation,

higher renewable energy incentive income and

gate fees. Generation increased by 23 GWh

from the Andigestion acquisition and 4 GWh

due to our Derby Food Waste Plant being

commissioned in the second half of the year.

Green Power EBITDA was £6.2 million

lowercompared to 2022/23 due to one-off

Andigestion acquisition costs of £3.7 million,

apay increase of 7.5% and higher food waste

and haulage costs.

EBITDA from Property Development was

£4.1 million, £2.1 million higher year on year.

Despite some delays in our 2023/24 plans, we

remain on track to achieve long-term plans to

deliver £150 million profit by 2032.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202488

Taxation

We are committed to paying the right amount

of tax at the right time, and were pleased to be

awarded the Fair Tax Mark for the fifth

successive year. We pay a range of taxes,

including business rates, employer’s National

Insurance and environmental taxes such as

theClimate Change Levy as well as the

corporation tax shown in our tax charge

intheincome statement.

Further details on the taxes and levies that we

pay can be found in our report ‘Explaining our

Tax Contribution 2023/24’, which will be made

available at on our website when our Annual

Report andAccounts is published in June.

No tax was paid relating to the year as the

allowances available from full expensing

resulted in a loss for tax purposes (2022/23: nil

due to super deduction).

Note 12 in the financial statements sets out the

tax charges and credits in the year, which are

described below.

The current tax charge for the year was

£5.5 million, which arose from £0.5 million

corporation tax payable in respect of our

Guernsey-based captive insurance subsidiary

and £5.0 million adjustments to tax provisions

from previous years (2022/23: £0.2 million).

The deferred tax charge was £55.6 million

(2022/23: £35.5 million).

Our effective tax rate was 30.4%

(2022/23: 21.3%), which is higher than the UK

rate of corporation tax in both years (25% in

2023/24 and 19% in 2022/23), mainly due to the

true-up of prior year provisions and permanent

differences arising from costs incurred that are

not deductible for tax. In the prior year, deferred

tax on temporary differences arising during the

year charged at 25% was partially offset by

thebenefit of the 30% element of the super

deduction in excess of the cost of the assets.

Our adjusted effective current tax rate was

0.2% (2022/23: nil) (see note 43).

UK tax rules specify the rate of tax relief

available on capital expenditure. Typically this

is greater in the early years than the rate of

depreciation used to write off the expenditure

in our accounts. In the current year a

significant proportion of our capital

expenditure qualified for 100% deduction for

tax in the year of spend. In the previous year,

this was enhanced by the super deduction for

certain capital expenditure, which gave a 100%

tax deduction in the year of spend plus an

additional allowance of 30%.

The impact of this timing difference applied

across our significant and recurring capital

programme tends to reduce our adjusted

effective current tax rate and corporation tax

payments in the year. By the same token we

make a provision for the tax that we would pay

in future periods if the depreciation charge

arising on expenditure for which tax relief has

already been received is not offset by further

tax allowances in those periods. However, the

nature of our business, including a significant

rolling capital programme and the long lives of

our assets, means we do not expect these

timing differences to reverse for the

foreseeable future, and they may never do so.

This is the most significant component of our

deferred tax position.

Our net deferred tax provision is reduced by the

benefit of taxable losses amounting to

£871 million that we have incurred as a result of

the capital allowances claimed under the super

deduction and full expensing.

2024

£m

2023

£m

Tax incurred:

Corporation tax 0.5 –

Business rates and property taxes 90.4 84.4

Employer’s National Insurance 39.2 35.3

Environmental taxes 6.6 6.6

Other taxes 6.7 6.0

143.4 132.3

The corporation tax charge for the year recorded in the income statement was £61.1 million (2022/23: £35.7 million) and we received net

corporation tax repayments of £9.0 million in the year (2022/23: net payments of £4.0 million). The difference between the tax charged and the tax

paid is summarised below:

2024

£m

2023

£m

Tax on profit on ordinary activities 61.1 35.7

Tax effect of timing differences (53.2) (28.3)

Impact of deferred tax at 25% – (7.7)

Overprovisions in previous years (7.4) 0.3

Corporation tax payable for the year 0.5 –

Amount payable in the next year (0.5) –

Net (receipts)/payments in respect of prior years (9.0) 4.0

Net tax (received)/paid in the year (9.0) 4.0

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 89

STRATEGIC REPORT

Chief Financial Officer’s Review continued

Operational cash flow was £760.8 million

(2022/23: £713.1 million). The increase arose

from higher EBITDA and lower pension

contributions.

Net cash capex increased to £1,146.2 million

(2022/23: £686.6 million), reflecting progress

against our core capital programme, increased

spend on Green Recovery and transitional

spend for AMP8.

Our net interest payments of £210.3 million

(2022/23: £203.5 million) were in line with the

previous year as the impact of higher average

adjusted net debt, with the effective cash cost

of interest (which excludes the non-cash

indexation charge on index linked debt) broadly

in line with the previous year.

The benefits of the full expensing capital

allowances meant that we had no taxable profit

in the year and therefore paid no corporation

tax but received repayment of the amount

recoverable at the previous year end. In the

previous year we paid net tax payments of

£4.0 million related to prior years.

We raised £986.4 million net proceeds from

the equity placing in October 2023 and received

£14.3 million from the exercise of options

under the employee Save As You Earn share

scheme. In the prior year we received

Our long-term credit ratings are:

Long-term ratings Severn Trent Plc Severn Trent Water Outlook

Moody’s Baa2 Baa1 Stable

Standard and Poor’s BBB BBB+ Stable

Fitch BBB BBB+ Stable

We invest cash in deposits with highly rated banks and liquidity funds. We regularly review the

list of counterparties and report this to the Treasury Committee.

Profit for the year and earnings pershare

Total profit for the year was £140.2 million (2022/23: £132.2 million).

Basic earnings per share was 51.0 pence (2022/23: 52.7 pence), down due to the share issue in the year. Adjusted basic earnings per share was 79.4

pence (2022/23: 58.2 pence) as the growth in adjusted earnings was greater than the impact of the share issue. For further details see note 14.

Cash flow

2024

£m

2023

£m

Operational cashflow 760.8 713.1

Cash capex (1,146.2) (686.6)

Net interest paid (210.3) (203.5)

Purchase of subsidiaries net of cash acquired (41.5) (0.4)

Net payments for swap terminations (4.4) (11.2)

Net tax received/(paid) 9.0 (4.0)

Free cash flow (632.6) (192.6)

Dividends (301.4) (261.3)

Issue of shares 1,000.7 15.3

Purchase of own shares (1.8) (1.8)

Change in adjusted net debt from cash flows 64.9 (440.4)

Non-cash movements (128.9) (212.1)

Change in adjusted net debt (64.0) (652.5)

Opening adjusted net debt (7,123.9) (6,471.4)

Closing adjusted net debt (7,187.9) (7,123.9)

2024

£m

2023

£m

Bank loans (783.5) (713.0)

Other loans (7,357.9) (6,474.2)

Lease liabilities (120.0) (110.9)

Net cash and cash equivalents 951.4 28.7

Fair value accounting adjustments 29.8 47.9

Exchange on currency debt not hedge accounted 19.7 22.3

Loans due from joint ventures 72.6 75.3

Adjusted net debt (7,187.9) (7,123.9)

£15.3 million from such option exercises. Our

dividends paid increased in line with our policy

to increase by CPIH each year during AMP7.

These cash flows resulted in a decrease in

debt of £64.9 million (2022/23: increase of

£440.4 million).

At 31 March 2024 we held £951.4 million

(2023: £28.7 million) in net cash and cash

equivalents. Average debt maturity was around

14 years (2023: 14 years). Including committed

facilities, our cash flow requirements are

funded until February 2026.

Adjusted net debt at 31 March 2024 was

£7,187.9 million (2023: £7,123.9 million).

Regulated gearing (adjusted net debt of our

regulated businesses, expressed as a

percentage of estimated RCV) was 61.3%

(2023: 60.5%). Shadow regulated gearing was

59.7% (2023: 59.8%).

The estimated fair value of debt at 31 March

2024 was £465.3 million lower than book value

(2023: £366.2 million lower). The change in the

difference between book and fair value is

largely due to the impact of inflation

expectations on the fair value of our index-

linked debt.

Our policy for the management of interest

rates is that at least 40% of our borrowings

should be at fixed interest rates, or hedged

through the use of interest rate swaps or

forward rate agreements. At 31 March 2024

interest rates for 67% (2023: 67%) of our gross

debt of £8,213.7 million were fixed; 6% were

floating and 27% were index linked. We

continue to carefully monitor market

conditions and our interest rate exposure.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202490

Pensions

We have three defined benefit pensions

arrangements, two from Severn Trent and

onefrom Dee Valley Water. The schemes

areclosed to future accrual.

The most recent formal actuarial valuation

forthe Severn Trent Pension Scheme

(‘STPS’), which is by far the largest of the

schemes, was completed as at 31 March 2022.

The future funding plan agreed with the

Trustee was unchanged from the 2019

valuation (savefor inflationary uplifts where

applicable) and includes:

– deficit reduction payments to be made each

year until 31 March 2027, with a payment of

£39.2 million in the year ended 31 March

2024, increasing in line with CPI (based

onincreases in the inflation measure

covering the 12-month period to the previous

November);

– payments under an asset-backed funding

arrangement of £8.2 million per annum to

31 March 2032, which will only continue

beyond 31 March 2025 if the scheme’s

assets are less than the scheme’s technical

provisions; and

– inflation-linked payments under an

asset-backed funding arrangement, with a

payment of £20.0 million in the year ended

31 March 2024, potentially continuing to

31 March 2031, although these contributions

will cease earlier should a subsequent

valuation of the STPS show that these

contributions are no longer needed.

In June 2021 we executed a bulk annuity buy-in

for the Severn Trent Mirror Image Pension

Scheme, which represents around 4% of the

Group’s defined benefit liabilities. Under the

buy-in, the liabilities of this scheme will be met

by an insurance policy and as a result the

Group’s risk is substantially reduced.

Hafren Dyfrdwy participates in the Dee Valley

Water Limited Section of the Water Companies

Pension Scheme (‘DVWS’). DVWS funds are

administered by Trustees and held separately

from the assets of the Group. The DVWS is

closed to new entrants. The most recent formal

actuarial valuation of the DVWS was completed

as at 31 March 2020 and no deficit reduction

contributions are required. In March 2023, the

DVWS also entered into a bulk annuity buy-in

insurance policy that covers the majority of the

scheme obligations and, in March 2024, the

DVWS closed to future accrual.

On an IAS 19 basis, the net position (before

deferred tax) of all of the Group’s defined

benefit pension schemes was a deficit of

£213.0 million (2023: £279.4 million) and the

funding level increased to 89% (31 March

2023: 86%).

The movements in the net deficit during the year were:

Fair value of

schemeassets

£m

Defined benefit

obligations

£m

Net deficit

£m

At start of the period 1,785.3 (2,064.7) (279.4)

Amounts credited/(charged) to income statement 78.3 (96.2) (17.9)

Actuarial gains/(losses) taken to reserves (17.0) 33.4 16.4

Net contributions received and benefits paid (41.6) 109.5 67.9

At end of the period 1,805.0 (2,018.0) (213.0)

The income statement includes:

– current service costs of £0.1 million on the

DVWS, which was open to further accrual

during the year but is now closed;

– scheme administration costs of £4.2 million;

and

– interest on scheme liabilities and expected

return on the scheme assets – together a

net cost of £13.4 million.

Higher interest rate expectations increased

the discount rate, which is derived from yields

on high-quality corporate bonds, by 10 bps.

Inflation expectations have decreased by

around 10 bps since the previous year end. The

impacts of these changes resulted in a net

decrease in the scheme liabilities of around

£53 million.

Changes to demographic assumptions, partly

offset by an update to the most recent CMI data

tables reduced scheme liabilities by around

£6 million.

The actual outturn in the year for inflation

andother assumptions was worse than the

long-term assumption and this increased

scheme liabilities by £26 million.

Higher bond yields impacted the value of

scheme assets, which decreased in value by

£17 million more than the return included in

the income statement in the year.

Contributions paid to the STPS in the year

included:

– the amounts due under the asset-backed

funding arrangements (£28.2 million); and

– the deficit reduction payment of

£39.2 million.

There were also payments of benefits

underthe unfunded scheme amounting

to£0.5 million.

Dividends

In line with our policy for AMP7 to increase the

dividend by at least CPIH each year, the Board

has proposed a final ordinary dividend of 70.10

pence for 2023/24 (2022/23: 64.09 pence). This

gives a total ordinary dividend for the year of

116.84 pence (2022/23: 106.82 pence).

The final ordinary dividend is payable on

17 July 2024 to shareholders on the register

at31 May 2024.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 91

STRATEGIC REPORT

MANAGING RISKS AND OPPORTUNITIES

2023/24 risk environment

2023/24 has seen continued attention and

scrutiny on the water sector to challenge the

industry to improve its environmental

performance. Within the regulatory framework

we continue to perform well and are confident

of achieving EPA 4* status for the fifth

consecutive year, demonstrating our

commitment to the environment. The UK

economic growth slowed over 2023 in the

faceof rising interest rates, high inflation

andelevated levels of uncertainty. These have

impacted disposable household income and

some of our customers’ ability to pay bills.

Weoffer several schemes to support our

customers who are struggling to pay their bills

(see pages 110 to 111 for more information).

Globally, geopolitical issues have intensified

and spread across the Middle East, which has

the potential to impact global supply chains, as

shipment delays through the Suez Canal can

hinder the supply of components and increase

the cost of raw materials. In response to this,

we completed a full review of our supply chain

and are confident in our ability to manage any

issues that could arise.

Severn Trent operates Critical National

Infrastructure (‘CNI’) and we performed a

detailed review of the National Risk Register

which covers economic, social, environmental,

and technological risks. This ensures we are

aligned with the Government’s assessment of

the risks facing the UK in the short, medium

and long term.

This year was the second warmest on record

for the UK, narrowly behind the record set as

recently as 2022. 2023/24 was also relatively

wet, with 1,290mm of rainfall and we

experienced the most active start to the storm

season since naming storms began in 2015.

We are embracing opportunities enabled by

technology, for example there is a leading AI

trial to predict weather conditions and this will

allow us to take appropriate preventative

action to protect our network.

In October 2023, we submitted our ambitious

PR24 Business Plan (the ‘Plan’) to Ofwat,

outlining our strategy and objectives over

AMP8. We successfully completed a £1 billion

equity placing in 2023 in order to raise funding

to support the significant step up in investment

planned for AMP8. Our Plan has been

developed to ensure we are prepared to meet

future challenges, which include climate

change, population growth and new legislation.

Our aim is to continue to make a positive

difference to our customers, communities and

the environment both now and in the future.

Risk appetite statement

All businesses are exposed to a variety of

uncertainties and need to take a degree of risk to

achieve strategic objectives. Severn Trent will

only take calculated risks that are consistent

with our purpose, values and strategy, are

thoroughly understood and can be effectively

managed. The Board has overall responsibility

for determining the nature and extent of the

risks Severn Trent takes and for ensuring our

risks are well managed across the Group.

The Board monitors the Group’s risk profile

toachieve an appropriate balance between

risk and leveraging opportunities which are

critical to delivering our strategic objectives.

Additionally, the Board considers risks, and

combinations of risk, in the short, medium

andlong term to ensure we have appropriate

mitigation strategies in place. Risks related to

our longer-term prospects and the viability of

the Group have been assessed (see our

Viability Statement on pages 103 to 107).

The water sector has inherent risks,

particularly due to the nature of operations

and services provided. As such, risks need to

be appropriately managed in line with the scale

of our infrastructure, with a strong focus on

the environment and the health, safety and

wellbeing of our colleagues and the

communities we serve.

Our sector is subject to high levels of political,

regulatory, and financial scrutiny, and we

recognise the importance of our stakeholders’

evolving expectations and the impact of

climate change when we are planning and

responding to risk.

Within the Severn Trent Group, we operate both

regulated and non-regulated businesses, which

have different risk profiles and tolerances:

– Our regulated water and wastewater

businesses are monopoly providers that are

regulated and characterised by relatively

stable, inflation-linked cashflows.

– Our non-regulated businesses have more

variable cash flows and operate in less

predictable and competitive environments.

Our risk priorities

In addition to managing the inherent risks

associated with our business, we prioritise the

following due to their alignment with the

strategic areas of focus for Severn Trent:

– The health, safety and wellbeing of our

people and the communities we serve and

we haveno appetite for risks brought on

byunsafe actions.

– Protecting the environment is a key

long-term commitment. We aim to enhance

the water environment, including rivers, and

improve the biodiversity in our region

through effective risk management.

– Adherence to laws and regulations is

afundamental requirement and we are

committed to ensuring compliance with all

UK water regulations and to operate within

our licence permits. As a result, we have no

appetite for compliance-related risks.

– Our approach to financing is to take

measured risks which are consistent with

providing resilience, delivering sustainable

outperformance and offer the best long-term

value for our customers and shareholders.

– We are determined to play a leading role in

addressing the impact of climate change

through mitigating our own impact and that

of our supply chain. We will adapt to the

challenges which climate change may

bringin the future.

Our risk and opportunities

management framework

Our approach to risk allows us to adapt to

changing internal and external factors through

utilising the three lines of defence model and

combining top-down with bottom-up risk

management approaches. This model provides

both a clear articulation of risk appetite and a

comprehensive process for risk identification,

assessment and management. Combining

top-down and bottom-up approaches is

necessary to be agile and respond to a

continuously changing environment and

consequently, a changing risk landscape.

Our approach cannot, and does not, seek to

eliminate all risk entirely, but ensures we can

effectively navigate the challenges and

opportunities we face, only taking risks that

are within our risk appetite.

A key component of our framework is the

range of cross-departmental groups which

facilitate and support collaboration, analyse

data, provide insight and enable risk-based

decision making. Our risk management

framework outlines the groups and the roles

performed in risk management across Severn

Trent, which is underpinned by effective

communication channels.

We operate a robust risk and opportunity framework to

effectively identify, assess and mitigate risks to delivering

ourstrategic priorities.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202492

Risk governance and oversight

The Board:

– Sets the risk culture.

– Defines and regularly reviewsthe risk appetite.

– Challenges the level of risk takentopursue objectives.

– Makes risk-informed decisions andprovides oversight for

keystrategicrisks.

– Responsible for effective riskoversight of enterprise-

widerisksatGroup level.

– Undertakes an annual assessment ofPrincipal Risks.

– Provides insight and challenge to horizon scanning.

The Audit and Risk Committee:

– Supports the Board in monitoring significant risks

and tracking progress against risk mitigation plans.

– Approves the ERM Risk Management Policy.

– Ensures that risks and opportunities are effectively managed

across the Group.

– Discussions on both existing and emerging risks.

Risk management and oversight

The Executive Committee:

– Supports the Board in the management and oversight of risk.

– Assesses the level of risk taken in achieving objectives by challenging the AMP7 Business Plan and the forthcoming AMP8

Business Plan.

– Individual members of the Executive Committee are assigned relevant risks and review the risk mitigation strategies.

– Sets and evaluates risktolerances.

– Identifies and assesses Principal and EmergingRisks.

– Reviews horizon scanning.

Risk ownership, management and oversight

1st line of assurance 2nd line of assurance 3rd line of assurance

Strategic planning:

– Develops longer-term, holistic

riskresponse plans, e.g. WRMP.

– Establishes critical controls forensuring

the operational effectiveness

ofessentialservices.

Service Area Boards:

– Assesses capital investment

programmemanagement.

– Implements strategic risk management

processes, such as the DWMP.

– Assesses all categories of risk

atanoperationallevel.

ERM Co-ordinators and Risk Champions:

– Day-to-day risk and incident management.

– Identifies, assesses and responds to risks

atalocallevel through continual

monitoring.

– Produces risk response plans

andstrategies.

– Develops, implements and monitors

keycontrols.

– Follows our Risk Management Framework.

Strategic Risk Forum:

– Assesses the Business Units reported

risks and mitigation plans, and

challenges any ERM information or

deliverables.

– Reviews and validates all ERM reporting

and risk-related information prior to

Board meetings, including the Principal

Risks.

Central ERM Team:

– Applies the risk management

frameworkand establishes best

practicerisk processes.

– Owns the corporate ERM system and

reports key risk information, including

response plans and risk tolerance.

– Provides guidance and training for the

risk community.

Technical and Governance Assurance:

– Ensures the 1st line of assurance is

effectively designed, embedded and

operating as intended.

– Provides expertise to support, monitor

and challenge on risk related topics.

Internal Audit:

– Provides assurance for significant

risk mitigation strategies.

– Assesses the effectiveness of

riskprogrammes by testing

keycontrols.

– Evaluates the internal

controlenvironment.

Top-down

Bottom-up

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 93

STRATEGIC REPORT

IDENTIFIED

RISK

EVENT

REACTIVE

CONTROLS

Minimise impact

of the risk event

Linked to strategic

outcomes

RISK

CONSEQUENCES

Detective

Corrective

Financial

Reputational

RISK

CAUSES

Sources of

the risk

Minimise

likelihood of risk

event occurring

PROACTIVE

CONTROLS

Hazards

Threats

Preventative

Directive

Managing Risks and Opportunities continued

Risk reporting

Risk information from our business units is combined to form a

consolidated view of risk across the Group. Our significant risks form

our Group risk profile which is reported to the Strategic Risk Forum

(‘SRF’), and subsequently the Executive Committee for review and

challenge. This is then formally reported to the Audit and Risk

Committee and the Board every six months. The report provides an

assessment of the effectiveness of controls for each risk in our Group

profile, and action plans to improve controls wherenecessary.

Our ERM risks are linked with our Licence to Operate obligations. This

helps to create a dynamic link with our core commitments as a water

company and improves our risk reporting to the Board and Audit and

Risk Committee.

Our risk management process

Risk management principles are embedded throughout the business

and are a core component of our overarching structure to achieve our

strategic priorities.

We have an established ERM cycle, shown to the right, with a strong

focus on continuous improvement and feedback. Our ERM cycle is

divided into four main stages which help us to identify, evaluate,

manage, report and assure our risks. This ensures a consistent

approach to risk management is applied across SevernTrent.

Our ERM approach also provides a comprehensive overview of

significant risk events, including emerging risks through horizon

scanning, which must be managed within the Group’s risk appetite and

supported by appropriate assurance activity.

Our Central ERM Team oversees the ERM Risk Management Policy,

which forms part of our governance process and supports our values

and culture. Our risk community, which includes ERM Co-ordinators

and Champions, helps to embed and drive risk management across

our business.

Our strong continuous improvement culture ensures that risk

discussions occur on a consistent basis at all levels of the business. The

bottom-up approach helps ensure risk management is informed by, and

embedded in, our everyday operations. From day-to-day asset operation

and monitoring, medium-term through the deployment of capital

investment, to the long-term modelling of our asset health and

performance. We also adapt our approach to reflect societal expectations

and environmental changes. A standardised criteria is used to consider

the likelihood andvelocity of risk occurrence and provides aframework

to quantify potential financial and reputational impacts.

Risk Bow Tie

We utilise the ‘Risk Bow Tie’ management tool which is used by many

organisations to simply convey complex risks. The tool enables a clear

differentiation between proactive and reactive risk management and

creates a consistent structure for capturing causes andconsequences.

The potential causes, impacts and controls related to each risk are

documented in our corporate risk system. The risk causes have also

been linked with recognised climate drivers, where the likelihood could

be exacerbated by a different climatic future.

The ‘Risk Bow Tie’ assessment provides confidence that we have

developed and deployed effective risk response strategies. This also

provides an opportunity for the Central ERM Team to challenge whether

additional controls are required.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202494

OUR PRINCIPAL RISKS

In accordance with the 2018 UK Corporate Governance Code, the

Board is responsible fordetermining the nature and extent of the

Principal Risks of the business.

Our Principal Risk profile is updated each year to reflect the changing

risk landscape. The Board and Executive Committee have completed a

robust review and assessment of the Principal Risks facing the Group,

including those that would threaten its business model, future

performance, solvency or liquidity. This review ensures we have

appropriate coverage for risks which have the potential to:

– adversely impact the safety or security of the Group’s employees,

customers, communities and assets;

– have a material impact on the financial or operational performance

and resilience of the Group;

– impede achievement of the Group’s strategic objectives and financial

targets; and/or

– adversely impact the Group’s reputation or stakeholder expectations.

Following our latest review, the number of Principal Risks has

increased from 11 to 13. These changes do not reflect any deterioration

in our overall risk position and are necessary to reflect changes in our

risk environment and ensure our mitigation strategies remain

appropriate. The changes provide greater alignment with our strategic

objectives and ERM risks.

Risk assessments form a key part of our business and decision-making

processes, enabling us to respond promptly to risks when they arise

and ensure that our stakeholders are well informed. To appropriately

detect early warning signals and prepare for Emerging Risks, we track

and report these as part of the embedded reporting cycle. We also

undertake regular horizon scanning and this is reviewed by the SRF,

Executive Committee, Audit and Risk Committee and Board. A summary

of the key Emerging Risks is shown on page 102.

Severn Trent Water is the principal operating subsidiary of the Group

and this structure is reflected in how we categorise and report our

Principal Risks. For each Principal Risk reported on pages 95 to 101

wehave included the following:

– examples of risk mitigation strategies;

– changes to risk profiles since the last report; and

– key risk indicators to track the probability of a

PrincipalRiskmaterialising.

We have also provided details of how each Principal Risk is aligned

toour strategic objectives under our Corporate Strategy:

How our Principal Risks link to our Corporate Strategy

Stakeholders

Our customers

Our colleagues

Our communities

Shareholders and investors

Suppliers and contractors

Regulators and Government

Change in year

Increase in risk exposure

Decrease in risk exposure

No change in risk exposure

Re-scoped risk

New risk

Health and safety

Principal Risk 1

Due to the nature of our operations, we could endanger the health

and safety of our people, contractors and members of thepublic

Strategic

objectives

Stakeholders

Examples of risk mitigation

– The Group’s Goal Zero Policy clearly sets out our target that no

one should be injured or made unwell by what we do.

– We have a well-established Health, Safety and Wellbeing

Framework to ensure all our operations and processes are

conducted in compliance with health and safety legislation

andin the interests of the safety of our people and contractors.

The Framework is subject to regular review.

– We have a competency framework and compliance with

mandatory training is regularly monitored.

– Our supply chain is monitored through site manager forums and

on-site inspections, including health and safety reviews to

ensure compliance.

– Health and safety bulletins are cascaded throughout the Group,

including our supply chain.

– A dedicated Health, Safety and Wellbeing Toolkit, called Safety

Net, allows real-time data recording to capture, analyse and

report on all health, safety and wellbeing incidents. Targeted

interventions are tracked to ensure they are implemented in a

timely manner.

– We monitor and investigate relevant health and safety incidents

to identify lessons learned.

Key updates in the year

– The Health and Safety Team supported the transition and

insourcing of the Customer Solutions Plus wastewater contract

activities into our Waste Networks Team. The Team worked

closely with the business to ensure the onboarding and induction

processes provided all the appropriate health and safety prior to

the go-live. The focus on health and safety continues in this area.

– On 2 October 2023, one of our Green Power sites at Worton

Farm, Cassington was struck by lightning. The strike ignited

three of the digester tank roofs. Our safety procedures and

protocols operated effectively and the site was immediately

evacuated. None of our employees or any of the local

communities were injured. In response to the event, an

independent lightening protection specialist was appointed to

undertake a risk assessment across the Group’s estate. In

parallel, an internal review was conducted, including physical

asset inspections at all of the Company’s DSEAR sites to review

assets and site records. The process also included a review of

previous risk assessments to ensure no further actions were

required in response to the event (read more on page 82 to 83).

– Additional auditing is underway of our Tier 2 suppliers to ensure

our health and safety protocols are adhered to. This is

particularly pertinent due to the high level of investment

required in AMP8.

– Health and safety performance is shared with colleagues

through our monthly Team Talk.

– Our Goal Zero report provides interactive Health, Safety,

Security, and Wellbeing information in relation to colleagues and

contractors. The report enables us to drill down into the data for

every team.

KPIs

– Lost Time Incident (‘LTI’) rate target, see page 17

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 95

STRATEGIC REPORT

Our Principal Risks continued

Infrastructure failure and

assetresilience

Principal Risk 2

We do not provide a safe and secure supply of drinking water to

ourcustomers

Strategic

objectives

Stakeholders

Examples of risk mitigation

– We have developed comprehensive resilience plans, such as our

WRMP and Drought Plan, to inform our capital investment

programme and Business Plan.

– Key operational employees are required to complete mandatory

water quality competency training.

– We have invested in our in-house capability to bolster repair

teams and accelerate response times.

– Our 24/7 Control Centre monitors our operations and assets,

including real-time telemetry coverage from our loggers.

– We run strategic modelling to assess potential changes to

supply and demand on our water network, including the impact

of climate change. See Principal Risk 11.

– We regularly review and update processes, standards and

operational procedures.

– Business continuity plans are in place across the Company for

incident management and our teams are well versed in the

actions which need to be taken in the event of a hot weather

incident, including a standby rota for colleagues to provide

additional support.

Key updates in the year

– We have refreshed our CRI sustainability plan to ensure we

focus on the right improvement areas to further drive our

baseline CRI performance. Our reservoirs are at higher levels

than previous years, with water storage in the Severn Trent

region at 98.5% of capacity on 25 March 2024.

– Our draft WRMP 2024 provides details on how we secure our

water supply, taking into account future challenges (e.g. climate

change, increased demand).

– We have outlined in our AMP8 Business Plan that we will use a

combination of enhanced treatments, including ultraviolet (‘UV’)

and advanced ceramic membranes, to ensure our customers

continue to benefit from high-quality drinking water.

– To reflect our commitment to supporting customers and Licence

Condition G: Principles for Customer Care, which was

introduced by Ofwat in February 2024, we will be publishing our

Customer Vulnerability Strategy in the summer of 2024. This will

include details on how we: provide a high level of service to

vulnerable customers; ensure inclusivity by design; effectively

capture extra needs; and provide additional support when

required. We also have a Priority Services Register and we

actively encourage customers, friends or family to let us know of

anyone who might benefit from extra help, for example, if there

is an issue on the network or if they would appreciate receiving

their bills in a different format.

KPIs

– Supply interruptions (no. of minutes), see page 16

– Leakage % (Ml/d) target, see page 16

– CRI (index), see page 16

– % water quality competency training competed target

– Priority Services Register (%), see page 17

Infrastructure failure and

assetresilience

Principal Risk 3

We do not transport and treat wastewater effectively, impacting

our ability to return clean water to the environment

Strategic

objectives

Stakeholders

Examples of risk mitigation

– We complete strategic modelling, such as for the DWMP, to

assess potential changes to the supply and demand on our

wastewater network. This enables us to proactively reduce

service issues and potential damage to the environment.

– Our 24/7 Control Centre monitors our asset performance,

including real-time telemetry coverage.

– We have an in-house Wastewater Network Response Team and

key operational employees are required to complete mandatory

training programmes to ensure continued competence with

evolving standards.

– We run educational programmes for customers to promote safe

use of the wastewater system, including appropriate disposal of

wet wipes and cooking fat.

– We monitor all sites with Flow to Full Treatment (‘FFT’) permit

requirements via our dedicated Flow Performance Team.

Key updates in the year

– In May 2023, we in-sourced over 400 people to our reactive

waste team to further improve our services for customers. This

allows us to react even faster to pipe blockages and flooding.

– We have experienced several named storms in 2023 and 2024

placing increased stress on our waste network. Our operational

teams responded quickly to the extreme weather events and we

increased the number of colleagues available to help meet the

increased demand on our network.

– We have 24/7 Incident Response Teams who provide extra

support during events, including delivering additional tankers.

– There are more than 2,400 storm overflows across our region,

which are designed to protect homes and businesses from

flooding and we are working towards having 40,000 sewer

sensors within our network by 2025. This is a game changer as

they provide data at least once every 15 minutes so we can

constantly monitor and proactively address any issues before

they arise.

– We are transforming wastewater management with an industry-

leading AI trial to predict weather conditions, forecast

maintenance and control waste flow to effectively predict issues

and prevent them before they occur.

– Our WINEP programme of ‘no-regrets’ investment will deliver

benefits to protect and enhance the water environment, whilst

also preparing for future requirements. Our AMP8 WINEP

programme was developed over 18 months and represents an

EA approved, best-value programme of work that satisfies our

statutory obligations.

KPIs

– Internal sewer flooding (no. of incidents), see page 16

– External sewer flooding (no. of incidents), see page 17

– Public sewer flooding (no. of incidents), see page 17

– Pollutions incidents (no. of incidents), see page 16

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202496

Supply chain and capital

projectdelivery

Principal Risk 5

Key suppliers cannot meet contractual obligations, causing disruption

to capital delivery (cost and quality) and/or critical operational services

Strategic

objectives

Stakeholders

Examples of risk mitigation

– We have framework agreements covering multiple contractual

partners, to provide a flexible and diverse supply chain.

– We use a gated capital process to provide assurance around the

design and delivery of our projects.

– We have dedicated quality and assurance teams who perform

in-depth quality reviews. Commercial auditing is performed on

key activities which are delivered by suppliers.

– We regularly review contracts and have contract performance

meetings. These include a review of KPIs and proactive supplier

and market assessments.

– Appropriate regular training is provided for contract

management teams.

– We regularly verify the financial stability of the Severn Trent

supply chain through a robust process, which includes lead

measures.

– We have regular management reviews with our critical material

suppliers, including at CEO level if needed.

– We audit our supply chain on various key indicators, such as

Modern Slavery.

Key updates in the year

– We undertook a review examining the resilience of our supply

chain, identifying supply chain risks and building mitigation

actions associated with the Middle East conflict and in particular

associated attacks on commercial vessels in the entry/exit to the

Red Sea.

– We continue to conduct supplier heat-mapping for all our

contracted supply chain, which helps provide ongoing

monitoring and early warnings, including financial stability.

– AMP8 will see us launch our biggest investment programme of

£12.9 billion. We have tested the strength and resilience of our

supply chain to ensure readiness for AMP8. You can read more

on pages 6 and 7.

– We have a wide range of Tier 2 and 3 suppliers in our framework,

increasing the reliability of the supply chain, with quality

alternatives in the event a supplier is no longer available.

– We perform an annual exercise to confirm our capital delivery

suppliers are compliant with the contract and other key aspects

(e.g. health and safety certificates).

– A review has been performed to determine interdependencies

within the water sector in relation to the supply chain, and

appropriate actions have been taken to reduce any risk.

– Our Cyber Security Team have completed surveys on our

supplychain.

– We use EcoVadis to assess suppliers’ sustainability risk and

maturity levels.

KPIs

– Number of project milestones completed on time

(no.ofprojects)

– Ratio of critical single source supplier (%)

Customer service

andexperience

Principal Risk 4

We do not meet the needs of our customers or anticipate changing

expectations through the level of customer experience we provide

Strategic

objectives

Stakeholders

Examples of risk mitigation

– Service Level Agreements (‘SLAs’) are in place and are

communicated to our customers who require assistance.

– We have a specialist Digital Team that monitors activity and

enables us to engage with and respond to customers digitally,

whether on social media or WhatsApp, to inform them of

planned and reactive work.

– With customer-tested acceptability levels of 76%, our AMP8

Business Plan is well supported by our customers.

– The Priority Services Register supports customers with special

requirements to give them a more personalised service.

– We have a robust incident management process, which includes

procedures for vulnerable customers in the event of operational

events that impact service levels.

– Our Retail Transformation Plan and Customer Experience

Steering Group help drive further improvements in relation to

our customers’ end-to-end journeys.

– Our Developer Services Team proactively engages with local

new-build developers, to ensure the appropriateness of supply

planning and connections.

– A dedicated Non-Household Customer Team actively engages

with and responds to market retailers.

Key updates in the year

– Our billing system will be replaced with the cutting-edge and

award-winning utilities Kraken system to transform the

experience our customers receive. We are working hard to ensure

there is a smooth transition, without any data loss or reduction in

customer service levels which could impact C-MeX performance

– We want to ensure our customers receive a high level of service

and adhere to Licence Condition G, which was introduced by

Ofwat in 2024. We have focused on ensuring we have an

appropriate strategy and supporting processes for keeping our

customers informed and updated. The full diversity of our

customer needs has also been identified and understood.

– We recognise that applying a regional focus can deliver

significant improvements across the Group. Our County Cup

initiative is acounty-based challenge for all colleagues at Severn

Trent Water. Everyone has the opportunity to get involved and go

above and beyond for our customers and communities (you can

read more on page19).

– Our customers can now use the Video your Notes (‘Vyn’)

platform to send a video of any issues directly to our engineers

for review and then contact customers to book a visit.

– We launched a new initiative ‘Going the Extra Mile’ to promote

greater customer service and colleagues taking ownership of

the end to end customer journey.

KPIs

– C-MeX (index), see page 16

– D-MeX (index), see page 16

– Customer written complaints (no. of complaints)

– Priority Services Register for customers in vulnerable

circumstances (%)

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 97

STRATEGIC REPORT

Security and resilience

Principal Risk 6

Core operational capabilities are compromised through physical,

people or technological threats

Strategic

objectives

Stakeholders

Examples of risk mitigation

– Our Information Security Team and Data Privacy Officer are

responsible for monitoring information security and cyber threats.

– A dedicated Security Team and Alarm Receiving Centre,

arequirement of Defra (Department for Environment, Food and

Rural Affairs) /DWI (Drinking Water Inspectorate), allows us to

monitor and respond remotely on our most critical sites that

have had physical and electronic security upgrades.

– Proactive and robust support is in place for our monitoring

technology (e.g. alarms and cameras), with appropriate

maintenance plans.

– Mandatory annual cyber security training for all employees.

– A robust operational security programme, including physical

access controls, on-site and remote system protection. There is

a programme of regular internal and third-party testing of our

security network and systems.

– An effective vulnerability management system, including

penetration testing of publicly accessible systems, behavioural

alerts, patching processes, data disposal and access controls,

including multi-factor authentication.

– We work closely with third-party IT service partners to manage

risk and improve technical standards.

– We have disaster recovery plans that are stress tested and

updatedannually.

– Migration to cloud platforms is improving the resilience of our

disaster recovery and business continuity plans.

– Security standards are understood with relevant ‘What If’ scenarios

documented and tested. Documented security investigation

processes are in place, including root cause analysis.

– We have appropriate operational asset protection including both

physical and electronic protection.

– All operational and office sites have business continuity and crisis

management plans in place, which are regularly tested.

Key updates in the year

– We have refreshed the wording of this Principal Risk to include

physical and people threats as they can all compromise our core

operational capabilities.

– To further drive our strong security position, we have submitted

two security enhancement cases with our AMP8 Business Plan:

enhancing cyber security to increase cyber resilience in line with

National Cyber Strategy 2022; and physical security to meet the

Security and Emergency Measures (Water and Sewerage

Undertakers and Water Supply Licensees) Direction 2022 (‘SEMD’).

– We achieved compliance with the Network and Information

Systems Regulations (‘NIS-R’) a year early, demonstrating our

commitment to early adoption and the protection of our

operational capabilities.

– We have an IT Business Continuity Board to ensure risks are

effectively managed.

KPIs

– Number of high- and medium-priority incidents (no. of incidents)

Political, legal and regulatory

Principal Risk 7

Changing societal expectations, resulting in stricter legal and

environmental obligations, commitments and/or enforcements,

increase the reputational risk of non-compliance

Strategic

objectives

Stakeholders

Examples of risk mitigation

– A fundamental process when developing our plans (e.g. AMP8)

isto perform detailed customer research. This enables us to

understand the views and priorities of customers and

keystakeholders.

– We actively engage with the UK Government, MPs, the Welsh

Government, regulators and other stakeholders about the future

direction of the water sector.

– We operate an established Governance Framework, comprising

policies and training, to ensure ongoing compliance with

applicable laws and regulations. This includes Competition Law

for the operation of separate wholesale and retail businesses

and between our Group businesses and the General Data

Protection Regulation (‘GDPR’). These are regularly reviewed to

capture any changes.

– Investment plans are subject to regular reviews, at least on an

annual basis, to take account of changes to legislation,

regulation and our business.

– External legal advisers provide detailed updates in respect of

upcoming legislation that may affect the Group.

– As part of our Licence to Operate process, we ask relevant

managers, Strategic Leaders and Directors to complete a

self-declaration twice a year.

Key updates in the year

– In February 2024, Severn Trent Water was fined £2 million for a

pollution event which occurred at our wastewater treatment

works in Barlaston during 2020. We take all events of this nature

very seriously, at all levels of the Group. We have implemented

lessons learned to improve our preparedness, and minimise the

likelihood of similar events in the future. Please refer to page 15

for more details.

– There has been continued public and media attention, especially

for combined sewer overflow (‘CSO’) spills. We want to go

further and faster than we’ve been asked to do, by reaching the

Government’s 2050 target five years quicker.

– We have created a Zero Spills Hub where we will deploy

solutions, at scale and in combination, to ensure we understand

our catchment system and can take wastewater safely away to

reduce overflow spills and flooding. This will utilise AI, machine

learning, alongside other technologies in order to improve our

network optimisation.

– We have a dedicated CSO Team and are taking our commitment

to performance a step further by creating an ODI Centre of

Excellence. This includes a team of analytical specialists from

across the business who will critically review our plans for key

ODIs and identify improvement opportunities.

Our Principal Risks continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 202498

Financial liabilities

Principal Risk 9

We do not have access to funds to meet ongoing commitments and

finance the business appropriately

Strategic

objectives

Stakeholders

Examples of risk mitigation

– The Group’s treasury activity is overseen by our Treasury

Committee, with support from dedicated advisers.

– The Group has a diversified capital structure, in terms of both

tenor and access to global debt capital markets, in order to

mitigate risks.

– The Group maintains liquidity headroom of at least 15 months in

line with the Board approved Liquidity Policy.

– The Group has committed credit facilities for five years.

– The Group cash balances are deposited across a range of

investment-grade counterparties to spread and mitigate risk.

– The proportion of the Group’s debt maturing in any AMP period

does not exceed 40% of the Group’s total debt in order to reduce

refinancing risks.

– Treasury policy statements and procedure manuals are in place

and operating effectively. These are reviewed at least annually.

– We successfully completed a £1 billion equity raise to fund

unprecedented long-term growth opportunities in preparation

for AMP8.

Key updates in the year

– As at 31 March 2024 the Severn Trent Group is in a strong

liquidity position with £953 million cash and £1.1 billion undrawn

committed facilities, providing liquidity until early 2026.

– In September 2023, Severn Trent Plc raised £1 billion in new

equity to support our AMP8 investment programme, ensuring

financeability of our AMP8 Business Plan.

– We have also been active in the debt markets having raised

around £1.4 billion in new debt from a range of diverse sources,

including a €500 million sustainable EUR bond.

– Our strong balance sheet, stable investment grade credit ratings

and sector-leading operational performance means we are well

positioned to continue to raise new finance as we move into AMP8.

– Please also refer to our Viability Statement on pages 103 to 107.

KPIs

– Months of liquidity (no. of months)

Financial liabilities

Principal Risk 8

We fail to fund our Severn Trent defined benefit pension

schemesustainably

Strategic

objectives

Stakeholders

Examples of risk mitigation

– Our deficit recovery plans are agreed by the Trustees and the

Company. The plans state the cash contributions required from

Severn Trent to the scheme.

– In November 2022, the Company agreed the triennial actuarial

valuation as at 31 March 2022, including unchanged repair

payments of c.£65 million per annum.

– Interest rate, inflation and equity risks are managed through

appropriate hedging strategies to manage downside risks, with

regular monitoring in place.

– We continue to work with the Trustees in considering the

Pensions Regulator’s consultation on its Funding Code Of

Practice.

– The Company is represented on the Investment Committee of

the scheme and the Investment Policy is formally approved by

the Chief Financial Officer.

Key updates in the year

– The IAS 19 pension deficit at the year end has reduced to

£213 million (net).

– Our current position remains above our funding journey plan

agreed at the last valuation.

KPIs

– Pension deficit (£m)

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 99

STRATEGIC REPORT

Strategy

Principal Risk 10

Unforeseen changes in the external environment could impact our

ability to achieve our ambitions within the regulatory framework

Strategic

objectives

Stakeholders

Examples of risk mitigation

– Our ambitious PR24 Business Plan sets out the progress we will

make from 2025-30 towards the 2050 aims outlined in our

Long-Term Delivery Strategy (‘LTDS’).

– Our LTDS brings together every aspect of our planning over 25

years and uses Ofwat’s adaptive planning approach to create the

best long-term strategy for our customers and our region. Our

approach ensures we have strategic flexibility built in to adapt to

changing circumstances.

– Our Strategic Direction Statement sets out our long-term

priorities based on our view of future trends and the areas of

importance to our customers, regulators, investors, employees

and wider society.

– Horizon scanning is completed on a regular basis to monitor

external trends, including political, economic, social,

technological, environmental and legal (‘PESTEL’) factors to

help identify potential threats and opportunities early.

– Scenario planning is completed to explore different potential

outcomes and impacts, ensuring we have robust strategies

which can adapt to changes.

– We foster a culture of innovation to develop new products,

services or business models that can adapt to changing

marketneeds.

Key updates in the year

– The Central ERM Team has led the Group’s annual horizon

scanning exercise for 2023/24, identifying Emerging Risks

through a systematic assessment of potential threats and

opportunities. Early insights enable us to proactively manage

risks and identify opportunities to drive growth within our

business. We have leveraged well-recognised external

publications for the horizon scanning exercise.

– Our Plan sets out the progress we will make towards the aims

outlined in our LTDS. The Strategy is based on a rigorous

adaptive planning approach, which has involved many iterative

steps and engagement with customers, stakeholders and our

Board. It accounts for future uncertainty by using different

pathways and scenarios to test investment propositions. This

gives us confidence we are making the right long-term choices

in our plan. A copy of the plan is available on our website.

Climate change, environment

andbiodiversity

Principal Risk 11

Severn Trent’s climate change strategy does not enable us to

respond to the shifting natural climatic environment and maintain

our essential services

Strategic

objectives

Stakeholders

Examples of risk mitigation

– We utilise scenario planning and data modelling to understand

the impact climate change could have on our essential services

(see Principal Risks 2 and 3).

– Our WRMP and DWMP provide a 25-year, longer-term planning

approach to address future challenges, including climate change.

– Our AMP7 and AMP8 Business Plans support increased

resilience against the potential impacts of climate change

through the delivery of capital schemes (see Principal Risk 5).

– We have a climate change strategy (described in more detail on

pages 47 to 48, which ensures a robust response in order to

protect our value chain.

– Our Triple Carbon Pledge commits us to net-zero operational

emissions, 100% renewable energy and an all-electric fleet

(where available) by 2030 (see page 68 for more details).

– We have committed to significantly reducing our greenhouse gas

emissions by 2030 (read more on pages 68 to 75).

Key updates in the year

– During 2023/24, details of climate-related risks were shared

with the Board and discussed.

– In October 2023, the Board held its annual Board Strategy Day,

where time was spent exploring topics relevant to the future of

our business, including ESG considerations.

– Our Plan sets out the priorities of the Group to support the

long-term sustainability of our business for customers and

stakeholders. The Business Plan recognises that our world is

changing faster than ever before through: new technologies;

climate change; shifts in demographics, societal expectations;

and the economy, which create both challenges and

opportunities.

– In our 2022/23 Annual Report we published our first ever EU

Taxonomy disclosure and expanded on this with a standalone

disclosure in November 2023, outlining both our eligibility and

alignment under the rules. Our latest disclosure is incorporated

into this Annual Report on pages 76 to 81.

KPIs

– See the Metrics and Targets section that forms part of our

approach to climate change on pages 63 to 67

Our Principal Risks continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024100

People and culture

Principal Risk 13

Our people and culture do not adapt in response to a changing

environment and take advantage of technological advancements

to deliver enhanced business performance

Strategic

objectives

Stakeholders

Examples of risk mitigation

– We have a robust recruitment strategy which is focused on

attracting top talent with the desired skills for both now and

in thefuture.

– There are dedicated apprenticeships and graduate schemes

available to ensure we have the right skills for the future.

Wealso embraced the Government’s Kickstart Scheme

bysupporting 16-to-24-year-olds who are at risk from

long-term unemployment by creating six month work

experience opportunities.

– Our Ofsted-accredited Academy facilitates the training and

upskilling of our colleagues in order to embrace technological

advancements. The team at our Academy works closely with the

business to understand the training needs and then targets

training accordingly. We also recognise that everyone learns in

different ways and the Academy goes beyond classroom

learning, using a combination of the latest technology, with

virtual reality, simulation and online learning. These all help to

ensure our colleagues are equipped with the right skills to adapt

to a changing environment.

– Our Diversity and Inclusion (‘D&I’) Strategy and our ‘Wonderfully

You’ D&I ambition ensures we continue to reflect the

communities we serve.

Key updates in the year

– As part of our Innovation Strategy, which was published in 2023,

we have developed four trial hubs and each is focused on a

specific strategic challenge. We will work with water companies,

third-party suppliers and academics on the hubs, which provide

a platform for proving technologies that support the delivery of

commitments outlined in our AMP8 Business Plan, ODIs and

UMEs. We will bring together artificial intelligence, machine

learning and other critical technologies in order to deliver

appropriate solutions.

– We want to embrace AI as a tool to be more creative and

productive, while also protecting our privacy and data.

– Our colleagues now have access to Copilot, which offers the

capabilities of GPT-4, with commercial data protection

fromMicrosoft.

– We have created podcasts and held roadshows and leadership

events for both colleagues and external stakeholders to share

our plans for technology and demonstrate how it will be a

keyenabler.

Climate change, environment

andbiodiversity

Principal Risk 12

Failure to act as a steward of natural capital in our region providing

social, environmental and economic benefits

Strategic

objectives

Stakeholders

Examples of risk mitigation

– Our Get River Positive pledges demonstrate our passion to make

a positive impact on the communities and the environment

where we live and work.

– We support the Get Nature Positive journey in our region to

protect biodiversity by working in partnership with regulators

and other stakeholders.

– Strategic plans and a number of ODI commitments are in place

to enhance biodiversity in our region and protect the local

environment, including reducing the likelihood of pollution

incidents, delivering biodiversity improvements and ensuring

environmental compliance.

– Catchment management practices are used to work with

landowners in our region to mitigate the effect of pesticides,

fertilisers and organic nutrients on the environment and

biodiversity.

– Modelling is utilised to determine the impact of increasing

pressures on nature, for example from climate change through

drought or extreme weather events (see Principal Risk 11) and

biodiversity loss that has potential to impact ecosystems.

– Using our in-house ecology expertise to enhance the Group’s

capability to work towards enhancing biodiversity.

Key updates in the year

– As part of our AMP8 Business Plan and LTDS we have outlined a

number of initiatives to enhance the natural environment of the

various habitats across our sites. This ensures we are resilient

to a number of nature-related risks and are able to explore

opportunities. Modelling and scenario planning have been used

to inform our decisions.

– Nature is critical as we move to more nature-based solutions.

Our approach builds on a track record of delivering significant

improvements to the biodiversity of our natural environment,

both independently and through third-party co-operation. For

example, our Zero Spills Hub will enable us to trial combinations

of different approaches, including AI to optimise asset use and

nature-based solutions to preventspills.

– You can read about our approach to managing the range of

nature-related risks and opportunities, and how we are

preparing for TNFD, in our TCFD disclosure on pages 42 to 67.

– As part of our Green Recovery Programme we are installing

over 157,000 smart water meters for our customers. A further

250,000 will be installed before March 2025.

– Our groundbreaking work, which includes the creation of a new

£40 million Net Zero Hub, won the coveted title of ‘Net Zero

Carbon Initiative of the Year’ at the 2023 Water Industry Awards.

KPIs

– Biodiversity (no. of hectares improved), see page 42

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 101

STRATEGIC REPORT

EMERGING RISKS

We define Emerging Risks as

upcoming events which present

uncertainty; and those that we are

currently monitoring as a potential

threat. These Emerging Risks are not

yet fully quantifiable, but we monitor

developments carefully. The SRF,

Executive Committee, Audit and Risk

Committee and Board have carried

out a robust assessment of the

Group’s Emerging Risks.

Emerging Risk management ensures potential

risks are identified, with plans evaluated and

stress tested in case they were to materialise.

Our processes aim to identify new and changing

risks at an early stage and analyse them

thoroughly to determine the potential exposure

for Severn Trent. We continually identify and

monitor Emerging Risks using our top-down

and bottom-up processes. Our network of ERM

Co-ordinators, ERM Champions and Risk

Owners use techniques such as cross functional

workshops and PESTEL analysis. This

culminates in anEmerging Risk horizon map

which is shared with the SRF, Executive

Committee, Audit and Risk Committee and

Board on a regular basis.

We closely monitor Emerging Risks that may,

with time, become complete ERM risks and be

incorporated into the existing corporate risk

reporting process; be superseded by new

Emerging Risks; or cease to be relevant as the

internal and external environments in which

we operate evolve.

Our regular horizon scanning exercise

identifies Emerging Risks that have the

potential to increase in significance and affect

the performance of the Group.

The table below provides examples of

Emerging Risks.

Title Detail

Relevant

Principal Risk

Relevant

Strategic Objective Time Horizon

Escalating global

geopolitical tensions

and supply

chaindisruption

– Ongoing conflicts around the world could intensify and spread,

with possibilities for sanctions to discourage further escalation

and increase pressure on supplychains.

– Supply chain shortages and resource security pressures

increase commodity prices and could result in an economic

slowdown.

– State sponsored cyber attacks target key sectors, including the

water industry.

– 5, 6 and 7

Short-term and

medium-term

AI driven innovation

– AI presents many opportunities, but needs to be developed in

an ethical way to mitigate against potential data security and

cyber attack risks and address growing concerns across

consumer groups. We expect further legislation following the

EU AI Act 2023, the first regulation on artificial intelligence.

– AI-generated content becomes more prevalent with the

possibility of spreading misinformation.

– Increased processing power will automate basic activities and

support decision-making (e.g. maintenance schedules).

– 4, 7 and 13

Short-term and

medium-term

Evolving legislation

– The UK General Election, which must be held by 28 January

2025, could result in a change of Governmentand an

acceleration of legislation changes asper the published

manifestos issued by political parties.

– Increasing research into the impact of per- and polyfluorinated

substances (‘PFAS’), known as ‘forever chemicals’, could result

in changes to existing regulations andimpact testing and

treatment processes.

– Tighter reporting requirements and greater public focus on our

environmental performance (e.g. CSOs).

– Changing legislation to reduce the use of chemicals

as it is deemed to be unsustainable due to the carbon footprint,

(e.g. phosphate chemicals as a protective scaleon lead pipes).

– 2, 3 and 7

Medium-term

andlong-term

OUR PRINCIPAL RISKS

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024102

VIABILITY STATEMENT

Assessment of current position and

long-term prospects

The directors’ assessment of the Group’s

current financial position is set out in the Chief

Financial Officer’s review on pages 84 to 91.

Important aspects of that assessment that are

most relevant to the assessment of viability are:

– The shadow regulated gearing is 59.7%, well

within Ofwat’s acceptable range;

– The Group has sufficient cash and available

facilities to fund its financial commitments,

including returns to debt and equity

investors, operating and capital expenditure

until February 2026;

– The Group’s credit ratings from three

agencies (S&P, Fitch and Moody’s) are above

the investment grade base level and are

stable; and

– The defined benefit pension deficit

decreased to £213 million in the year, and we

are ahead of our deficit reduction plan in the

most recent triennial valuation as at

31 March 2022.

Severn Trent Water, the Group’s principal

subsidiary, is a regulated long-term business

characterised by multi-year investment

programmes and relatively stable revenues.

The water industry in England and Wales is

currently subject to economic regulation

rather than market competition and Ofwat, the

economic regulator, has a statutory obligation

to secure that water companies can (in

particular through securing reasonable

returns on their capital) finance the proper

carrying out of their statutory functions. Ofwat

meets this obligation by setting price controls

for five-year Asset Management Periods

(AMPs) including mechanisms that reduce the

risk of variability in revenues from the

regulated business in the medium term by

adjusting future revenues to balance over or

under recovery compared to the original plan.

AMP7 runs to 31 March 2025 and Severn Trent

Water has developed its plans to deliver the

operational and financial performance set out

in Ofwat’s determination. We have based our

assessment of prospects for the next year on

those plans.

PR24, the price review for AMP8, is currently

underway. We submitted our Business Plan

toOfwat in October 2023 and their Draft

Determination will be published in June 2024.

We will respond to the Draft Determination by

14 August and expect to receive Ofwat’s Final

Determination in December 2024. We have

included the AMP8 Business Plan submitted to

Ofwat in the base case for our assessment of

viability. In view of Ofwat’s duty to ensure that

water companies can finance the delivery of

their statutory obligations we consider that any

adverse outcomes in the Final Determination

would be covered by the stress test scenarios

that we have modelled.

When considering the Group’s prospects

beyond 2030, it is necessary to make

assumptions about the price review process

for the period 2030-2035 (PR29), which will

take place in 2029. In making this assessment

we have taken account of:

– Ofwat’s statutory duty to secure that

companies can finance the proper carrying

out of their functions;

– Severn Trent Water’s financial structure,

which is within Ofwat’s acceptable range;

– Severn Trent Water’s plans for AMP8, the

successful execution of which would deliver

benefits to all stakeholders and financial

incentives that would help to further

strengthen our financial resilience in the

period beyond 2030; and

– Severn Trent Water’s longer-range plans,

set out in our Water Resources Management

Plan and Drainage and Wastewater

Management Plan.

We have significant investment programmes,

largely funded through access to capital

markets. Our strategic funding objectives

reflect the long-term nature of the Severn

Trent Water business and we seek to obtain a

balance of secure long-term funding at the

best possible economic cost. Our Treasury

Policy requires us to maintain sufficient

liquidity to cover cash flow requirements for a

rolling period of at least 15 months to limit the

risk of restricted access to capital markets.

Our Group treasury team actively manages our

debt maturity profile to spread the timing of

refinancing requirements and to enable such

requirements to be met under most market

conditions. The weighted average maturity of

debt at the balance sheet date was 14 years.

Our Business Plan for AMP8 includes a

significant increase in the size of our capital

programme. We have made an early start to

this and are already operating at the run rate

required to deliver the AMP8 programme. We

recognise the requirement for equity funding

to play its part in financing this increase. To

that end we raised £1 billion in a private

placing of equity in October 2023.

We have an established process to assess the

Group’s prospects. The Board undertakes a

detailed assessment of the Group’s strategy on

an annual basis and the output from this

assessment sets the framework for our

medium-term plan, which we update annually.

Our medium-term plan reflects the Group’s

prospects and considers the potential

impacts of the Principal Risks and

uncertainties. We perform stress tests to

assess the potential impact of combinations

of those risks and uncertainties. The plan

also considers mitigating actions that we

might take to reduce the impact of such risks

and uncertainties, and the likely effectiveness

of those mitigating actions.

Period of assessment

The Board considered several factors in

determining the period covered by the

assessment. The long-term nature of our

principal business, together with relatively

stable revenues and a model of economic

regulation that places a duty on the regulator

to secure that water companies can finance the

proper carrying out of their functions, support

a longer period of assessment.

However, the changing nature of regulation of

the Water industry and the uncertain

geopolitical and macroeconomic outlook

increase the uncertainty inherent in our

financial projections. We have an established

planning and forecasting process and the

Board considers that the assessment of the

Group’s prospects is more reliable if based on

an established process. Our latest medium-

term plan extends in detail to the end of the

AMP8 period in 2030, with less detailed

projections looking beyond this.

A longer period of assessment introduces

greater uncertainty because the variability of

potential outcomes increases as the period

considered extends.

Bearing in mind the long-term nature of our

business; the enduring demand for our

services; our established planning process;

and the changing nature of the regulation of

the Water industry in England and Wales, the

Board has determined that seven years is an

appropriate period over which to assess the

Group’s prospects and make its viability

statement this year.

Assessment of viability

In assessing our future prospects, we have

considered the potential effects of risks and

uncertainties that could have a significant

financial impact under severe but plausible

scenarios. The risks and uncertainties

considered were identified in the Group’s ERM

process, which is described on pages 156 to

157, and from the key assumptions in the

financial model.

While we have estimated the size of each of the

severe but plausible scenarios described

below, we have grouped scenarios with similar

impact types together and performed stress

testing for the scenario with the greatest

impact. Where the scenario occurs at a point in

time, we have assumed that it occurs at the

point in the plan with the lowest headroom.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 103

STRATEGIC REPORT

The risks and scenarios tested are described below:

Risk assessed Severe but plausible scenario Stress test applied

Due to the nature of our operations we could

endanger the health and safety of our

people, contractors and members of the

public.

Serious injury, ill health or death of

employees, contractors or members of the

public as a result of what we do.

An extreme one-off event.

We do not provide a safe and secure supply

of drinking water to our customers.

Catastrophic breach of a large raised

reservoir (>25,000 cubic metres).

Service failure leads to increased operating

expenditure or failure to meet performance

commitment targets.

An extreme one-off event.

Totex underperformance in each year of the

forecast.

ODI penalty in a single year.

We do not transport and treat wastewater

effectively, impacting our ability to return

clean water to the environment.

An extreme breach in a sludge lagoon at a

large sewage treatment works.

Service failure leads to increased operating

expenditure or failure to meet performance

commitment targets.

An extreme one-off event.

Totex underperformance in each year of the

forecast.

ODI penalty in a single year.

A financial penalty.

We do not meet the needs of our customers

or anticipate changing societal expectations

with the level of customer service

weprovide.

Our customer performance is well below their

expectations across a range of measures.

ODI penalty in a single year.

Key suppliers cannot meet contractual

obligations causing disruption to capital

delivery and/or critical operational services.

Significant increase in capital programme

costs.

Service failure leads to increased operating

expenditure or failure to meet performance

commitment targets.

Totex underperformance in each year of the

forecast.

ODI penalty in a single year.

Core operational capabilities are

compromised through physical, people or

technological threats.

A cyber attack results in a critical loss of

personal data leading to regulatory action.

An extreme one-off event.

A financial penalty.

Changing societal expectations, resulting in

stricter legal and environmental

obligations, commitments and/or

enforcements, increase the risk of non-

compliance.

A breach of law or regulations results in a

significant one-off penalty.

Failure to deliver regulatory obligations and

expected performance levels.

A financial penalty.

ODI penalty in a single year.

We fail to fund our Severn Trent defined

benefit pension scheme sustainably.

Increasing pension deficit leading to higher

deficit reduction contributions.

Increased pension contributions.

We do not have access to funds to meet

ongoing commitments and finance the

business appropriately.

N/A N/A

Unforeseen changes in the external

environment could impact our ability to

achieve our ambitions within the

regulatoryframework.

Failure to provide water network and

treatment capacity to meet requirements in

future AMPs.

Failure to safeguard wastewater network and

treatment capacity to meet demand or

increased environmental obligations in

future AMPs.

Totex underperformance in each year of the

forecast.

ODI penalty in a single year.

Severn Trent’s climate change strategy does

not enable us to respond to the shifting

natural climatic environment and maintain

our essential services.

Service failure leads to increased operating

expenditure or failure to meet performance

commitment targets.

Totex underperformance in each year of the

forecast.

ODI penalty in a single year.

Failure to act as a steward of natural capital

in our region providing social,

environmental and economic benefits.

Failure to deliver regulatory obligations and

expected performance levels.

ODI penalty in a single year.

Our people and culture do not adapt to a

changing environment and take advantage

of technological advancements to deliver

enhanced business performance.

Failure to adapt leads to operational

inefficiencies and increased expenditure.

Totex underperformance in each year of the

forecast.

Viability Statement continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024104

We also applied stress tests relating to economic factors: higher and lower inflation (including deflation); higher interest rates and a combined

scenario taking into consideration totex under-performance, ODI penalties and a financial penalty.

The amounts of the stress tests applied were:

Stress test applied Amount modelled

An extreme one-off event A one-off impact of £250 million at the point in the forecast with the lowest headroom.

Totex underperformance An increase in Totex of £260 million in each year of the forecast.

ODI penalty A penalty of £172 million in a single year.

Financial penalty A penalty of £125 million in a single year (c.6% of turnover).

Increased pension contributions Contributions increase by £32 million per annum.

Combined scenario 1 An increase of Totex of £260 million in each year, an ODI penalty of £86 million in one year, and a one-off

impact of £250 million in one year.

Combined scenario 2 Combined scenario 1 plus a 10% spike in CPIH inflation.

Combined scenario 3 Combined scenario 1 plus deflation (CPIH of -1%) for two years.

Higher inflation for three years 10% spike in CPIH followed by two years at 5%.

Lower inflation in each year Decrease of 2% in CPIH.

Deflation for two years CPIH of -1%.

Higher interest rates New debt financed at 2% above the iBoxx index; or

A sustained 400bps increase to the cost of debt.

We assessed the impacts of the scenarios on our financial metrics, credit metrics and debt covenants. Where the result of the stress test indicated

more than a limited impact, a risk of a downgrade of credit rating or a breach of a bank covenant, we considered what mitigating actions would be

available and whether they would be sufficient to mitigate the potential impact of the stress test.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 105

STRATEGIC REPORT

Viability Statement continued

The table below sets out the potential impacts of the stress tests and the mitigating actions that would be available to address the impacts.

Stress test applied Potential impacts on viability withoutmitigatingaction Mitigation available (see below)

An extreme

one-offevent

Increased gearing and deterioration in credit metrics that,

without mitigating action, might lead to a downgrade in

ratings although still at investment grade.

Engage with ratings agencies to discuss the short-term nature of the impacts.

Manage liquidity by temporarily reducing working capital.

Close out derivative financial instruments in asset positions to generate cash.

Consider new sources of funding, including hybrid debt.

Reprofile capital programme to ease short-term pressure on ratings.

Consider reducing dividend in the year or downgrading the Dividend Policy.

Totex

underperformance

Pressure on earnings and cashflows, but with average

earnings higher than the dividend indicated by our current

policy.

Increased gearing and significant deterioration in credit

metrics that, without mitigating action might lead to a

downgrade below investment grade.

Headroom against debt covenants significantly reduced.

Cost reduction programme focused on reducing discretionary expenditure to

support profitability.

Manage liquidity by temporarily reducing working capital.

Close out derivative financial instruments in asset positions to generate cash.

Consider new sources of funding, including hybrid debt.

Consider downgrading the Dividend Policy.

ODI penalty The penalty would flow through revenue two years after the

performance commitment was breached, and in that year

profit is lower than the dividend indicated by our policy.

Increased gearing and deterioration in credit metrics that,

without mitigating action, might lead to a downgrade

although still at investment grade.

Accelerate recognition of accumulated ODI rewards not yet taken.

Engage with ratings agencies to discuss the short-term nature of the impacts.

Manage liquidity by temporarily reducing working capital.

Consider reducing dividend in the year.

Financial penalty Lower profits lead to dividend cover less than one.

Deterioration in credit metrics that, without mitigating

action, might lead to a downgrade although still at

investment grade.

Engage with ratings agencies to discuss the short-term nature of the impacts.

Manage liquidity by temporarily reducing working capital.

Consider reducing dividend in the year.

Increased pension

contributions

Deterioration in credit metrics that, without mitigating

action, might lead to a downgrade in ratings although still

at investment grade.

Manage liquidity by temporarily reducing working capital.

Close out derivative financial instruments in asset positions to generate cash.

Consider new sources of funding, including hybrid debt.

Combined

scenarios

Significant reduction in profitability and cash flow, with

earnings in the year lower than the dividend indicated by

our policy.

Significant increase in gearing and deterioration in credit

metrics that, without mitigating action, might lead to a risk

of downgrade in credit ratings below investment grade and

a breach of covenants.

Engage with ratings agencies and banks to discuss the impacts on ratings and

covenants.

Manage liquidity by temporarily reducing working capital.

Close out derivative financial instruments in asset positions to generate cash.

Cost reduction programme focused on reducing discretionary expenditure to

support profitability.

Reprofile capital programme.

Consider downgrading the Dividend Policy.

Higher inflation Short term adverse impact to profit, dividend cover and cash.

However, in the longer term higher inflation increases

revenue and RCV leading to higher profits and lower

gearing.

Engage with ratings agencies to discuss the short-term nature of the impacts.

Manage liquidity by temporarily reducing working capital.

Close out derivative financial instruments in asset positions to generate cash.

Sustained lower

inflation

Pressure on profit and cash, but with average earnings

higher than the dividend indicated by our current policy.

Increased gearing and deterioration in credit metrics that,

without mitigating action might lead to a downgrade in

credit ratings below investment grade.

Pressure on gearing covenants.

Engage with ratings agencies to discuss the short-term nature of the impacts.

Cost reduction programme focused on reducing discretionary expenditure to

support profitability.

Our Dividend Policy is index-linked and therefore low inflation would reduce

the dividend payable. We would also consider downgrading the Dividend

Policy.

Deflation for

twoyears

Pressure on profit and cash in the years following the

deflation years, that may sustain in future years.

Increased gearing and deterioration in credit metrics that,

without mitigating action might lead to a downgrade in

ratings below investment grade.

Engage with ratings agencies to discuss the short-term nature of the impacts.

Consider new sources of funding, including hybrid debt.

Cost reduction programme focused on reducing discretionary expenditure to

support profitability.

Our Dividend Policy is index-linked and therefore deflation would reduce the

dividend payable. We would also consider downgrading the Dividend Policy.

Higher interest

rates

Reduction in profit.

Deterioration in credit metrics that, without mitigating

action, might lead to a downgrade in ratings below

investment grade.

Engage with ratings agencies to discuss the impacts and the regulatory

true-up mechanism that would mitigate the impacts in the longer term.

Cost reduction programme focused on reducing discretionary expenditure to

support profitability.

Manage liquidity by temporarily reducing working capital.

Consider reducing dividend in the years impacted or downgrading the

Dividend Policy.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024106

The mitigating actions available are described in more detail below:

Mitigating action Details

Engage with ratings agencies

andbanks

While ratings agencies and banks apply formulaic calculations as part of their ratings and covenant assessments,

judgment is also applied. Where a threshold for a particular rating is breached or a covenant ratio not met, a downgrade

might not be applied or a temporary covenant waiver might be granted if the agency/bank considers the situation to be

temporary and likely to reverse in the near future.

Manage liquidity by temporarily

reducing working capital

We would seek to accelerate collection of amounts receivable with particular focus on overdue accounts. We would work

with our suppliers to negotiate longer credit terms where appropriate.

Cost reduction programme We would review discretionary expenditure to identify costs that could be avoided or reduced without a detrimental

impact to customer service.

Reprofile capital programme By deferring elements of capital expenditure, we could mitigate the impact of significant events on our cash flow and

smooth the effect on key ratios over a number of years, reducing the size of the impact in any one year.

Close out derivative financial

instruments in asset positions

Derivative financial assets such as swaps can be closed out with the agreement of the counterparty, generating cash in

the short term.

Consider new sources of funding,

including hybrid debt

The Group has access to a wide range of capital markets and maintains a diverse range of funding sources. However,

there are instruments that we do not currently use that would be available when more traditional funding was not. Hybrid

debt instruments are a form of debt that has some of the characteristics of equity, for example a bond that features an

option to convert to equity.

Consider reducing dividend in the year Our current Dividend Policy for AMP7 is to grow the dividend by CPIH each year. If necessary, we would consider diverging

from this Policy to deal with short term pressure on credit metrics or ratings.

Consider downgrading the

dividendpolicy

In circumstances where the pressure on metrics, ratings or covenants was sustained, we would consider amending our

Dividend Policy for the AMP to relieve the pressure while giving investors a basis to set their expectations for returns.

In selecting which mitigating actions to apply,

we would seek to balance the interests of all

stakeholders and, in particular, would prioritise

mitigating actions that would not lead to a

breach of our commitments to customers.

We have significant funding requirements to

refinance existing debt that falls due for

repayment during the period under review and

to fund our capital programme. Under all

scenarios considered, the Group would remain

solvent and have access to sufficient funds in

normal market conditions. Our Treasury Policy

requires that we retain sufficient liquidity to

meet our forecast obligations, including debt

repayments for a rolling 15-month period.

In making its assessment, the Board has made

the following key assumption:

– Any period in which the Group is unable to

access capital markets to raise finance

during the period under review will be

shorter than 15 months.

On this basis, the stress tests indicated that

none of these scenarios, including the

combined scenario, would result in an impact

to the Group’s expected liquidity, solvency or

debt covenants that could not be addressed by

mitigating actions and are therefore not

considered threats to the Group’s viability.

Governance and assurance

The Board reviews and approves the medium-

term plan on which this Viability Statement is

based. The Board also considers the period

over which it should make its assessment of

prospects and the Viability Statement. The Audit

and Risk Committee supports the Board in

performing this review. Details of the Audit and

Risk Committee’s activity in relation to the

Viability Statement are set out in the Audit and

Risk Committee report in this Severn Trent Plc

Annual Report.

This Statement is subject to review by Deloitte,

our external auditor. Their audit report is set

out on page 209.

Assessment of viability

The Board has assessed the viability of the

Company over a seven-year period to March

2031, taking into account the Company’s

current position and Principal Risks.

Based on that assessment, the Directors have

a reasonable expectation that the Company

will be able to continue in operation and meet

its liabilities as they fall due over the period to

31 March 2031.

Going concern statement

In preparing the financial statements the

Directors considered the Company’s

ability to meet its debts as they fall due for

a period of one year from the date of this

report. This was carried out in

conjunction with the consideration of the

Viability Statement above.

The Directors have reviewed the cash and

committed facilities available to the Group

alongside a cash flow forecast extending

beyond the period considered for this

Going Concern Statement. The Directors

have considered the potential impacts, in

the period of one year from the date of this

report, resulting from the scenarios

described in the Viability Statement set

out above.

The Directors are satisfied that the Group

will have sufficient funds to continue to

meet its liabilities as they fall due for at

least 12 months from the date of approval

of the financial statements, and that the

severe but plausible downside scenarios

considered indicate that the Group will be

able to operate within the amount and

terms (including relevant covenants) of

existing facilities.

On this basis the Directors considered

itappropriate to adopt the going

concernbasis in preparing the

financialstatements.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 107

STRATEGIC REPORT

STAKEHOLDER

ENGAGEMENT

We are focused on driving long-term

sustainableperformancefor the benefit ofour

customers,shareholders and widerstakeholders.

This section provides insight into how the

Board engages with our stakeholders to

understand what matters to them and further

inform the Board’s decision making and the

actions taken as a consequence. You can read

more in our dedicated Section 172 Statement

(‘s.172’) on pages 122 to 125, which sets out our

approach to s.172 and provides examples of

decisions taken by the Board during the year,

with a particular focus on how stakeholder

views and inputs have been considered in its

decision making. The principles underpinning

s.172 are not only considered at Board level,

they are part of ourculture.

They are embedded in all that we do and

impacts on stakeholders are considered in the

business decisions we make across the

Company, at all levels, and strengthened by

our Board setting the right tone from the top.

Pursuant to the Companies Act 2006, this

information is incorporated by cross reference

in the Governance Report from page 128. You

can also read more in our separately published

Sustainability Report which can be found on

our website.

Our Engagement in Action section showcases

some of the exciting opportunities we have

hadthroughout the year to engage with our

keystakeholders.

We welcome any feedback from

ourstakeholders.

Who are our stakeholders?

Our customers

In serving our customers, we want to provide

strong service delivery over the long term.

Ourconsultation with customers helped our

Severn Trent Water Limited 2020-25 Business

Plan to be fast-tracked by Ofwat and we have

engaged with our customers in development

ofour PR24 Business Plan.

Our colleagues

Our relationship with our

colleagues is open and honest, and

they are appropriately supported,

developed and rewarded to

encourage them to do their best

inall that they do.

Our communities

Our aim is to be a force for good in the

communities we serve and, in doing so,

create value for all our stakeholders.

Shareholders and investors

Continued access to capital is vital to the

long-term performance of our business.

We work to ensure that our shareholders,

investors and investment research analysts

have a strong understanding of our strategy,

performance, ambition and culture.

Many of our shareholders are also our

customers, employees and pensioners.

Suppliers and contractors

Along with our employees, our

suppliers support us in delivering

for our customers. Strong supplier

relationships ensure sustainable,

high-quality delivery for the

benefit of all stakeholders.

Regulators and government

The policy framework for the water sector in

England and Wales is set by the English and

Welsh Governments respectively. We seek

toengage constructively to achieve the best

outcomes for customers and the environment.

Below the policy framework, our industry is

regulated by Ofwat and others. We agree

commitments with our regulators and report

our performance against these. We work

closely with our regulators to shape our

industry to help ensure the right outcomes

for customers andthe environment.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024108

Why are our stakeholders important to our strategy?

Our customers

To deliver value forcustomers, we needto

understand theirimmediate andlonger-term

expectations of us. Asour customers’ expectations

change, weneed to evolve our services to ensure we

continue to meet them.

Our colleagues

Our colleagues are theface of our company and we

could not deliver our services without them, so

maintaining productive relationships built on trust

is vital to delivering our purpose.

Our communities

Our work puts us attheheart of local communities,

the places where our customers and colleagues live

andwork. We want tosupport our communities and

increase understanding of the impact and

contribution our work has on everyday life.

Shareholders andinvestors

It is important that investors have confidence in the

organisation and howitis managed. Investors are

critical to ensuring that continued investment can be

made to deliver improved outcomes for our

customers now and overthe long term.

Suppliers and contractors

We rely on suppliers todeliver our services. Good

relationships helpensure projects aredelivered

on time, tohigh quality and atefficient costs.

Awareness of potential issues in the supply chain

means we can address them together and become

more resilient.

Regulators and government

Our regulators and government influence the

long-term national water strategy and environmental

priorities, which has the potential toimpact how all

businesses operate.

Key:

Strategic objectives

Outcomes Nature

People Change

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

STRATEGIC REPORT

109

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

Stakeholder Engagement – Engagement in Action

OUR CUSTOMERS

We have a relentless focus on improving servicedelivery for

customers. Our continuous engagement with them ensures that

we are able to understand what matters to them and deliver

further improvements in service, both now andover time.

High quality and reliable Sustainable

A high-quality, reliable service that can be

depended on, where our customers know

they are valued.

Confidence we are doing the right thing

forthe environment, society and

futuregenerations.

How we are responding to feedback How we are responding to feedback

– New water resources – 100 million

litres per day from new and

replacement sources – soweare not

taking too much from existing ones.

– Bigger tanker fleet – to keep our

customers on supply if an issue occurs.

– A better connected network – so we

can move an extra 280 million litres a

day to where our customers need it

most during periods of sustained, hot

weather. That’s enough to fill 112

Olympic swimming pools – every day.

– Water saving customers – helping

customers save water, with rewards

forsmarter water users, more than

1 million free smart water meters and

face-to-face expert advice.

– Operational net zero – cutting 240,000

tonnes of CO

, the equivalent of taking

152,000 petrol cars off the road.

– Less pollution – cutting pollution

incidents by 30%, setting a new frontier

for the sector’s performance.

– Fewer spills – improvement of at least

562 storm overflows, deploying

improvements faster so we can meet

the Government’s target five

yearsearly.

– Tackling surface water – using nature,

AI, and tried and tested engineering

solutions in four urban areas to remove

almost 160,000 m

of rainfall

fromsewers.

Driving lasting change – Development of our PR24

Business Plan

Every five years, water companies in England and Wales put together their plans for the future.

Wetalk to our regulators, Government and, most importantly, our customers to find out what is

important to them. As part of the development of our PR24 Business Plan (our ‘Plan’), we carried

out our largest ever programme of engagement with customers, including in-depth research of

affordability and acceptability. From the 68,000 customers and 630 stakeholders who took part

in our research, three main priorities were made clear:

– High quality and reliable;

– Sustainable; and

– Affordable

What matters to them

– Customer service and performance

– Leakage and supply reliability

– Affordability and value for money

– Assistance in times of need

– Responsible investment

– Environment, river quality and

climate change

How we engage across the Company

– Quarterly management level meetings

with Consumer Council for Water.

– Frequent discussion and consultation

with our online customer community.

– Quarterly tracking of customer

perceptions against key indicators

including trust and satisfaction.

– Online self-service options for

customers and made it easier to check

for and report problems through our

‘Check My Area’ app and ‘Report a

Problem’ services.

– Customers can contact us 24/7

including through two-way messaging

functionality through SMS, WhatsApp,

TapChat and Apple Business

Chatchannels.

How we delivered on feedback

this year

– Developed Customer Vulnerability

Strategy.

– ‘Weather the Winter Together’

campaign.

– Good progress on our affordability and

societal strategies.

– Published our second Get River

Positive Annual Report on progress

against our riverpledges.

– Net Zero Hub at Strongford.

– Created our ODI Centre of Excellence.

Outcomes from engagement

– ODI outperformance of £55million.

– Supported c.260,000 customers

through our Affordability Schemes this

year.

– 9% of our customers signed up to our

Priority Services Register.

We talk to our regulators, the Government and, most importantly,

ourcustomers to find out what is important to them.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024110

Open challenge session for our Business Plan

In April and November 2023, we held two ‘Your

water, your say’ sessions where our customers

and stakeholders helped shape our Plan.

These sessions provided a great opportunity

for individuals and organisations to hear about

our plans to help deliver change in the next five

years, and to ask any questions they may have.

The sessions focused on a range of themes

including customer service priorities,

environmental outcomes and affordability.

Our PR24 customer roadshows

In 2023 we went on tour with an open invitation to all of

our customers to share more about how our huge

£12.9 billion investment programme will benefit local

communities – including the creation of7,000 new jobs

and £550 million of financial support.

The 10 county customer roadshows covered the whole of our region

and every customer was welcome as we showcased ourfuture plans,

including guaranteeing secure water supplies forgenerations to

come, ensuring storm overflows cause no harm torivers, and that

customers continue to receive a sector-leadingservice.

We were excited to unveil our new £550 million package of financial

support for our customers, including a pledge to install money-

saving smart water meters to a million households. Theproposals

means that around 700,000 customers will get help paying their bills

– around one in seven of our customers.

As part of our roadshow events we took the opportunity to engage

with customers providing winter readiness advice, including pipe

lagging, plus tips on saving water and energy around the home and

our free leak detection service.

Scan the QR code tofind out more about

our Business Plan.

Affordable

Water should be affordable for everyone –

sothat no person or generation is

leftbehind.

How we are responding to feedback

– We are keeping the impact on

households as low as possible. Our

bills are currently 1.2% of the average

household’s disposable income, and by

2030 our bills will have increased only

to 1.3% of a household’s

medianincome.

– Bills will increase gradually between

2025-30. On average, a combined

monthly household bill will increase

by£2.32 each year over the next

fiveyears.

– No one need struggle to pay their bill.

Ourfinancial support package will go

further than any other water company

and means almost 700,000 of our

customers getting help with their bill

by2030.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 111

STRATEGIC REPORT

Stakeholder Engagement – Engagement in Action continued

OUR COLLEAGUES

Our people are highly engaged across our organisation, whichplays

a crucial role in building trust and facilitating openand effective

communication at all levels. We dedicate asignificant amount of

time listening to colleagues, offering opportunities for them to

contribute ideas and suggestions, and express their perspectives.

Our culture of openness and trust fosters collaboration.

Our employee voice

Employee voice means different things to

different people and, as such, we use multiple

employee engagement initiatives to ensure the

views and perspectives of our people are fully

understood. We have a combination of

collective and direct employee feedback

mechanisms that focus on two-way inclusive

dialogue across the business. These include:

Collective voice Direct voice

Company, business

and local Trade

Unionforums

Annual employee

engagement survey

Departmental

meetings and

communities

ofpractice

Comm cells

Annual leadership

events

Whistleblowing

procedure

OnTap news and

Friday ‘News

Splash’updates

Line manager

meetings and

catch-ups

Monthly Team Talk Ask Liv

All-people

roadshows

Yammer

Diversity and

Inclusion (‘D&I’)

advisory groups

SafetyNet reporting

Meet Our

Boardevents

Feedback at the Tech

Bar and Ask HR

roadshows

All of these communication and engagement

mechanisms are well established, well utilised

and cover the full breadth of our organisation.

Overall, when we speak to other businesses,

we are confident that our approach to

engagement and listening to our workforce is

mature and effective.

Engagement with our

CompanyForum

Providing opportunities for our employees to

stay connected with the direction of the

Company and be involved in business decisions

is a key part of our culture. Our Company

Forum facilitates this in a structured way.

The Company Forum meets four times a year

and attendees are invited from Trade Unions,

all leadership levels, the Executive Committee

and the Board. Through the Company Forum,

we engage with employees on all ways of

working and matters of strategic significance

to the Group to ensure employee views are

considered. It is jointly chaired by the Director

of Capital and Commercial Services and the

Joint Secretaries of our Trade Unions (Unison

and GMB). Board directors are invited to attend

and participate at meetings and, over the last

12 months, Christine Hodgson, Tom Delay and

Sarah Legg, as well as Liv Garfield, have

attended meetings, to listen to the discussions

and to talk about their areas

of responsibility and interests.

The agenda is wide-ranging and topics for

discussion this year have included PR24, our

Societal Strategy, our annual employee

engagement results, our women’s welfare

programme, occupational health, learning and

training at our Academy and Company-wide

initiatives such as Diversity and Inclusion.

Additionally, regular updates are provided on

Company performance, year end results and

significant change programmes. Our strong

and enduring relationships with our Trade

Unions allow for constructive two-way

dialogue and challenge on many areas

impacting the workforce and, earlier this year,

helped us reach a two-year pay settlement.

The Company Forum feeds back to the

Company on the value that they get from

Boardmember attendance and the Trade

Union national officers highlight how unique

this is to the experience that they have in

otherorganisations.

Business and local forums

In order to reach all parts of the business and

tailor conversations relevant to each area, we

hold local forums chaired by area Business

Leaders to discuss performance, health and

safety, successes and areas of concern. Over

the past year, more local forums have been

created to further increase their reach,

including in our Water Networks business and

through the introduction of a specific Hafren

Dyfrdwy-focused forum.

To act as a bridge between the Company Forum

and local forums, there are operational and

What matters to them

– Health, safety and wellbeing

– Diverse and inclusive workplace

– Opportunities to reach full potential

– Open and honest environment

– Fair pay and reward

How we engage across the Company

– Employees are invited to attend the

‘Meet Our Board’ events.

– In addition to Board member

attendance, our Company Forum

brings together employee

representatives at quarterly meetings,

including Trade Union representatives.

– Continual communication to

employees on mental and physical

health awareness.

– Employees are invited to attend the all

colleague roadshows held throughout

theyear.

How we delivered on feedback

this year

– Further developed our Employee

Advisory Groups.

– Hosted our 2023 Leadership event.

– Continued to narrow our gender and

ethnicity pay gaps.

– Improved our all-employee benefits,

including discounted childcare and

support for elderly dependants.

– Facilitated the 2023 two year pay offer

with Trade Unions.

– All-people roadshows with Liv, hosting

over 59 events over 13 locations and

seeing nearly 5,000 of our people.

Outcomes from engagement

– Our employee engagement survey

score of8.6 out of 10 ranked us in the

top 3% of utility companies globally.

– 14 LTIs this year compared to 16 in

2022/23, our best ever performance.

– 8th on Social Mobility Index.

– Level 2 Disability Confident Employer.

– Glassdoor Ranking of 4.5/5.

– 350 Senior leaders attended our

leadership event.

The activities discussed below are just

afewexamples of how we live our values

and respond to our employees’ feedback

to create a positive work environment.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024112

customer business forums. They meet to

discuss business updates and to resolve

matters that cannot be solved at a local level.

There is also a separate Health and Safety

Company Forum and Business Services has its

own non-unionised Employee Forum.

All company engagement

We are constantly reviewing our

communication and engagement channels to

ensure that they are effective in supporting our

employees. We recognise that line manager

relationships are essential, so we provide

training, especially for new managers, on how

to be visible, trustworthy, and supportive of

employee feedback. We also place emphasis

on the importance of local team meetings, and

our monthly Team Talks provide a consistent

and structured forum for open dialogue.

To provide another method of localised

engagement, during the year we launched our

new Ask HR roadshows. The roadshows

include visits to our more remote and smaller

sites to help colleagues get their questions

answered in a more convenient way and can

often help resolve queries quicker. The

sessions allow us to listen and give employees

and teams an opportunity to air any issues or

concerns they have. We have received lots of

positive feedback from colleagues, including

many requests for revisits.

In May 2023, we held our Ask Our Board

session which gave colleagues the opportunity

to meet virtually with our Board members, to

get to know them better and put forward

questions. During the year, the Ask Our Board

sessions evolved into our first ever Meet Our

Board event, where graduates and apprentices

from across the business were invited to

engage informally with Board members in

person. Read more about how the Board

engages with colleagues on page 132.

For questions or ideas to improve the business

we have the Ask Liv intranet site which allows

employees to submit questions to the Chief

Executive and Senior Management Team,

encouraging open dialogue at all levels of

theorganisation.

Yammer continues to be a popular

communication tool used across the business,

especially in operational areas, where

employees showcase work and start

discussions on work-related topics. In addition

to two-way communication channels, we also

provide top-down communications through our

OnTap intranet news and Friday News Splash

magazine-style round-up of key news articles.

In person engagement

We know that coming together and taking time

to connect to our strategy and ambitions is

important to our colleagues and drives

engagement and curiosity amongst our

teams. We take pride in delivering engaging

collaborative leadership events year on year,

bringing our leaders together to build

networks and make links to our performance

opportunities. This year’s leadership event was

held in October 2023 and was focused on PR24.

It brought together all our leaders over three

days from right across the business to

understand the plans and begin the

preparation for the delivery of our PR24

Business Plan.

In March 2024, we held our annual Business

Leadership Event hosting 350 of the Company’s

most senior leaders to focus on strategic aims

and operational targets. This year, our event

was focused on delivery of the final year of our

AMP7 Business Plan and ensuring a cohesive

and proactive approach for AMP8.

Every two or three years, Liv hosts extensive

all-people roadshows to share how we are

doing as a business, talk about future plans

and what we need from each other. This year,

Liv hosted 59 events over 13 locations in 10

weeks and met nearly 5,000 of our people.

Engagement sessions of this scale are

something that very few companies do and we

know from our engagement scores that our

employees truly value these sessions.

Our employee engagement survey

Our annual employee engagement survey

helps us to understand what is going well

and where we can improve. The survey is

conducted by an independent research

company to ensure the results are anonymous.

In 2023, our overall engagement score across

the whole Group was 8.6 out of a possible 10

points. This was our highest-ever engagement

score and placed us in the top 3% of energy

and utility businesses globally.

As important as the range of opportunities

provided is how our colleagues feel about

them. We continue to ask colleagues questions

relating to their feelings about learning,

careers and growth at Severn Trent. We are

really pleased that all topics scored above

benchmark, recognising our delivery and focus

in these areas.

On career paths, employees scored the

question ‘I see a path for me to advance my

career in our organisation’ as 8.0 out of 10, 1.4

above benchmark. When asked whether their

job enables them to develop and learn new

skills, our people agreed, scoring us 8.6.

Reporting wrongdoing

andspeakingup

It is important that we have the right processes

in place for our colleagues to raise concerns

should they need to. We are proud of our

approach that allows all colleagues and our

supply chain to speak up and we do this

by providing an open and transparent

environment which fosters a culture

where everyone has the confidence to

speak out about issues that concern them.

Whistleblowing procedures are in place for all

Group companies and our suppliers to deal

with any allegations of breaches of our Code of

Conduct, Doing the Right Thing.

All employees have access to independent

psychological support and legal advice

through our confidential Employee Assistance

Programme, and we regularly communicate

and increase awareness of all whistleblowing

routes, including our confidential Safecall

‘Speak Up’ line.

October 2023 Leadership Event

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 113

STRATEGIC REPORT

Stakeholder Engagement – Engagement in Action continued

OUR COMMUNITIES

We know what we do really matters to the families, businesses

and communities we serve– which is why our purpose is to take

careof one of life’s essentials. We work hardto provide our

essential services to our millions ofcustomers 24 hours a day,

365 days ayear. But there is more to Severn Trent thanthat.

Highlights of our

engagement activities

throughout the year

We think it is important to give back to the

communities where our customers and people

live – not because we have to, but because we

think it’s the right thing to do. Whether that

means caring for the environment, supporting

the next generation or just making our region a

better place to live, we want to make a positive

difference in our communities. Our

engagement sessions provide us with an

opportunity to hear directly the issues that

matter most to our communities.

2023

2024

July

– Big Boost for

Brum, showcasing

our Societal

Strategy

– Strongford local

residentsevent

October

– Telford

community

pop-up

– Coventry Societal

Strategy launch

– Redditch

community

pop-up

– Coventry

community

pop-up

December

– Stoke community

pop-up

March

– Telford community

pop-up

September

– Chester community

pop-up

– Shrewsbury

community pop-up

– Worcester community

pop-up

– Big Boost for Brum

stakeholder breakfast

event, showcasing our

Societal Strategy

June

– Stoke/Staffordshire

stakeholder roadshow

– Farming for

Waterevent

November

– Worcester

stakeholder

roadshow and

customer drop-in

– Big Boost for Derby,

showcasing our

Societal Strategy

– Warwickshire and

West Midlands

Association of

LocalCouncils

– rivers engagement

February

– Shrewsbury

community pop-up

– Big Boost for Brum,

showcasing our

Societal Strategy

What matters to them

– Operational impact and disruption

– Local employment

– Economic contribution

– Protection of the environment

– Cost of living pressures

How we engage across the Company

– Our employability scheme inspires our

people and makes a real difference to

people’s lives.

– Regular engagement with Government

officials and elected representatives on

water and environment-related issues.

– Our people volunteer through our

Community Champions programme,

working toimprove our communities

andenvironment.

– Regular community workshops and

drop-in sessions held across our region.

How we delivered on feedback

this year

– Societal Strategy Pop-up events held.

– Developed our Customer Vulnerability

Strategy.

– Welcomed 110 new apprentices.

– Welcomed four new Hereford and

Derwen College interns.

– Work experience opportunities offered.

– Employee volunteering days organised.

– New Care Leavers Scheme launched.

– Improved the biodiversity of 5,000

hectares of land, four years early,

– Severn Trent Community Fund.

Outcomes from engagement

– Financial support was given

tocareleavers through our

BigDifference Scheme.

– Over £2 million awarded to 103

projects through our Community Fund

this year.

– 7,727 hectares of land improved

– Met our target to deliver our 100,000

employability hours.

– Over £256,000 donated to projects to

help protect river health, this year.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024114

Warwickshire Search and Rescue

A new incident support vehicle tohelp vulnerable

people – Awarded £54,900

Severn Rivers Trust

Black Country River Schools– Awarded £199,500

Warwickshire Search and Rescue has a simple aim:

to help members of the community when they are

missing and return them to loved ones. Covering all

of Warwickshire, plus Coventry, Solihull and parts of

Birmingham, Warwickshire Search and Rescue are

called into action by the local police, fire service and

sometimes other Lowland Rescue teams.

Warwickshire Search and Rescue operational volunteers have

specialist roles and are trained in search techniques, first aid,

radio communications and navigation. 100% run by volunteers, the

group relies on fundraising to generate its operating income.

With the large number of rivers, canals and bodies of water across

our region, the team has found itself increasingly carrying out

water-based searches. The Incident Support Unit vehicle supports

this activity, carrying four kayaks and kit such as dry suits,

buoyancy devices and throw lines.

The previous Incident Support Unit vehicle was 18 years old and

becoming unreliable. With the help of our Community Fund grant,

Warwickshire Search and Rescue has replaced its vehicle, leading

to an even more reliable service for the people it supports, for

years to come.

The Severn Rivers Trust is a charity established in

2008, made up of localriver experts, which covers the

whole of the UK’s longest river from source to sea.

The Trust’s vision is:

A healthy, resilient River Severn for everyone.

Our grant will support the Trust in running an education and

physical infrastructure programme to help local young people

from urban areas in the Black Country discover theirrivers and

take action to protect them. With assemblies, classroom-based

workshops, riverside visits and community celebrations, children

will not only gain skills, they will boost their physical, mental and

emotional wellbeing too.

This project will also reduce the risk of surface water flooding at

the selected schools. Withfeatures such as rain gardens, water

butts, attenuation ponds, green-roof structures, hedgerows and

mini-woodlands, these schools – and their pupils – will be

river-friendly inmore ways than one.

Read more: Our Community Fund Annual Review for 2023/24 is available to

view online (stwater.co.uk/about-us/severn-trent-community-fund) and

includes inspiring stories of people from all walks of life coming together to

support others and make the most of the places they live.

Our £10 million Community Fund

In February 2020, we announced we would invest 1% of

our profits, equating to £10 million over AMP7, to support

projects with local charities and community groups in our

region – helping to make a real and tangible difference.

Since our Community Fund was launched, we have made awards of

almost £10 million to support the places where our customers live,

including our £1 million Emergency Fund donated to communities to

help them deal with the impact of the COVID-19 pandemic. At the same

time, we provided a further £212,000 in core funding to help local

community organisations facing rising operating costs. In the last

year, our Community Fund has awarded over £2 million, helping over

103 organisations.

£10m

almost £10m awarded since 2020, to support

projects in the communities

£212,000

provided in core funding to help local community

organisations facing rising operating costs

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 115

STRATEGIC REPORT

Stakeholder Engagement – Engagement in Action continued

SHAREHOLDERS AND INVESTORS

Our intention is to drive value for all of our stakeholders,

delivering a high-quality, sustainable service for the long term.

Engagement with our investors is critical to ensuring that

continued investment can be made to deliver improved outcomes

for our customers now and over the long term.

to the market on the morning of the event, and

published content on our corporate website.

The day prior to the Capital Markets Day we

also took seven of our largest shareholders to

Strongford for a site visit of our Net Zero Hub.

Bob Stear, our Chief Engineer and an Executive

Committee member, presented information on

our net zero strategy and the innovations that

will be crucial to our Strongford Net Zero Hub.

All presentations from our Capital Markets Day

are available to watch online at stwater.co.uk/

investors/capital-markets-day-23.

Annual Report

Our Annual Report is available to all

shareholders, and we aim to make it as

accessible as possible. Shareholders can opt

to receive a hard copy in the post or a PDF copy

via email, or download a copy from our

website. Please contact the Group Company

Secretary to request a copy.

Annual General Meeting

Our 2023 AGM was held on 6 July 2023, at

which 79.59% of the issued share capital voted.

We were delighted to receive in excess of 92%

votes in favour for all of our resolutions. The

AGM was held as a hybrid meeting, meaning

that shareholders were able to follow the

business of the meeting virtually as well as in

person. Shareholders were invited to submit

questions to a dedicated AGM mailbox and a

process was put in place for the Board to

respond to any questions directly and publish

responses on the Company’s website.

This year’s AGM is to be held on Thursday,

11 July 2024 at 10.00am. Shareholders are able

to submit questions in writing through our

website in advance of the AGM. The physical

location of the AGM will be the Severn Trent

Academy, Hawksley Park, St Martins Road,

Finham, Coventry, CV3 6PR.

In addition to the AGM, the Group Company

Secretary communicates with individual

investors, making sure we respond promptly to

questions in relation to their shareholding. Our

share registrar, Equiniti, also has a team to

take care of our shareholders’ needs.

Corporate website

We continually monitor our website to ensure it

is user-friendly for our stakeholders. It has a

dedicated investors section which includes an

overview of Severn Trent Plc and our history,

our company information and results, our

Annual Reports, results presentations

(including webcasts) and an investor news

section containing information which may be

of interest to our shareholders.

During the year, we held around 180 investor

meetings and met with nearly 140 existing and

potential investors, representing 70% of our

share register. The meetings focused on

the Group’s financial performance, our

commitment to the environment, our outlook

on AMP8 and our approach to helping

customers in the current climate.

Investor meetings are primarily attended by

our CEO, CFO and Head of Investor Relations,

although other Executive Committee members

also attend. The Chair, individual Directors and

the Group Company Secretary regularly

engage with major shareholders to understand

their views on governance and performance

against our strategy.

The Board attended shareholder events

throughout the year, including the recent

2024 Governance Roadshow, which involved

Christine Hodgson meeting with 18 of

our shareholders.

The Chair of the Remuneration Committee and

Group Company Secretary met with 10 of the

Company’s top 30 shareholders and proxy

agencies during January – February 2024, as

part of our Remuneration Policy consultation.

These discussions have been largely positive

innature.

Capital Markets Day

2023

On 12 October 2023, we held our Capital

Markets Day which focused on four key areas

of our recently submitted PR24 Business Plan:

1. Outcome Delivery Incentives (‘ODIs’)

forAMP8

2. Delivering value for customers

3. Unmodelled expenditures (‘UMEs’)

– ourbiginvestments for AMP8

4. Deliverability of our PR24 Business Plan

In total, we were joined by around 120 external

attendees, with representation from a range of

investors and analysts as well as from wider

stakeholders including Ofwat and the

Consumer Council for Water. For those unable

to attend, we issued a detailed announcement

What matters to them

– Strategy and business model

– Financial performance and returns

– Reputation

– ESG performance

– Financial and climate-related

riskmanagement

– Strong leadership

– Company culture

– Energy pricing risk management

– Executive remuneration

How we engage across the Company

– We have a comprehensive programme

of investor engagement including

investor site visits, so that

shareholders can experience our

operations and culture first hand.

– Regular dialogue with shareholders to

support them in their investments.

– Q&A sessions held with the Executive

Committee bi-annually.

How we delivered on feedback

this year

– Interim dividend for 2023/24 of 46.74

pence.

– Final dividend for 2023/24 of70.10

pence.

– Published our second EU

Taxonomydisclosure.

– Delivered against our Get River

Positive river pledges, societal

strategies and affordability strategies.

– Submitted our AMP8 Business Plan

toOfwat.

– Launched ODI Centre of Excellence.

Outcomes from engagement

– Total Shareholder Return.

– AMP7 Dividend Policy with a growth

rate ofat least CPIH – 2023/24 final

dividend of70.10 pence.

– £1.2 billion capital spend this year.

– All resolutions received over 92% of

votes in favour at our 2023 AGM.

– Investment into our Green Recovery

Programme.

– AMP8 Business Plan submitted

toOfwat.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024116

Engagement with our Debt Investors

Our principal operating subsidiary, Severn Trent Water Limited,

is a long-term business characterised by multi-year investment

programmes. Our key sources of borrowing include bond and

European Medium Term Note issues, private placements, bank

loans and finance leases. We have continued an active programme

of debt investor engagement throughout 2023/24 insupport of our

funding strategy.

This has included the following activities:

– Regular meetings with relationship banks throughout the year,

providing updates on business and sector activities and

discussion of bank product offerings.

– Presentation to our relationship banks at Capital Markets Day,

setting out how our Business Plan could impact our

treasuryactivities.

– Regular meetings with investors to discuss business

performance and provide sector updates.

– Attendance at an Australian roadshow meeting debt and

equity investors.

– Attendance by the Group Treasurer at the US Private Placement

Conference, meeting existing and new US investors and hosting a

roundtable event discussing the water sector. Over the course of

three days we met 21 investors, and many of our banks USPP

teams and a number of Treasurers from other utility companies.

– Virtual deal roadshow in February 2024 ahead of our €500 million

EUR debt issue, meeting with over 40 investors over the course of

three days with over 100 investors accessing our investor

presentation and voiceover.

2024 Governance Roadshow

The key themes of the Roadshow included:

– Our PR24 Business Plan

– Succession planning and talent management

– Regulator engagement

– Remuneration Policy changes

Feedback from the Roadshow was positive and investors indicated

their support for the Board, our approach to Governance, the

robustness of succession planning and the Company’s performance

in the sector.

PARIS NETHERLANDS

LONDON

FRANKFURT

SWITZERLAND AUSTRALIA

institutions

met

30%

of our share

91%

of meetings

held in person

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 117

STRATEGIC REPORT

SUPPLIERS AND CONTRACTORS

Our investment plans require a resilient and highly engaged supply

chain. AMP8 will see a significant step-up in investments through a

large capital programme and fostering a positive relationship with

our supply chain is therefore essential to our plans to ensure we

have access to the knowledge and expertise to design and deliver

the right solutions for our customers and communities.

– Strong Supplier Relationship Management

strategy for ongoing monitoring and

feedback – we have developed a category

bespoke Supplier Relationship Management

process and are in the process of recruiting

a dedicated manager to focus on enhancing

and developing our capability. For specific

work programmes and projects, we already

collaborate with our supply chain. Examples

of this work include: running joint

recruitment events; reviewing resource

availability in the market; and jointly

attracting resource to the industry either on

a client or contractor basis. We have also

implemented an automated process for

tracking workload and allocation, vital to

ensure we are neither overloading

nor underutilising.

– Regional preference – our central location is

attractive to the supply chain, providing easy

access to work from both North and South as

needed. We are also benefiting from the

completion and scaling back of other large

capital programmes such as HS2, the

Commonwealth Games and major highways

projects. This gives us access to a wide pool

of skilled labour and supply chain capacity.

There is a risk that scaling back our plans

may have a detrimental impact on the region,

and we would need to rebuild again once

capacity is lost from the region/industry.

Accelerating investment, with

confirmed supply chain capacity

We have collaborated with our supply chain

onour AMP8 plans to understand their risk

appetite and to reduce potential barriers to

programme delivery.

A diverse and experienced supply chain

Building on our approach from AMP6 and

AMP7, decisive action to diversify and deepen

our supply chain has proved beneficial, at a

time when others were consolidating. As a

result, we have grown from six delivery

partners to 60 today. We have also added a

further 12 contractors to an environmental

framework to support delivery of our novel and

nature-based solutions. This not only provides

extra resilience, but also creates capacity to

support our delivery of at least £1 billion of

enhancement investment every year in AMP8.

Alongside this activity, we have developed local,

small suppliers and industry manufacturers with

specialist knowledge who are ready to support

the delivery of our complex programmes. This

gives us extra resilience, and more choice and

flexibility in our delivery strategy. We have

extended our current frameworks, enabling us

to smoothly transition from AMP7 to AMP8

activity. We engaged our supply chain early,

giving them the visibility of our work for our

largest year of capital investment, spending

around £1 billion to improve service for our

customers, enhance our network and prepare

for the scale of delivery needed in AMP8.

In readiness for AMP8, we have also reviewed

our governance procedures to ensure they

are robust, supported by an effective

organisational structure and strong talent and

expertise within the Company and its supply

chain. We are supporting our supply chain

to deliver the increased investment

programme in the following ways:

– Providing visibility of the programme

– batching of work has been a core strategy

during AMP7 which will continue into AMP8,

aided by our in-house design capability. As

part of our AMP8 engagement, our Tier 1, 2

and 3 suppliers have shared with us details

of their design resources and profile,

resource and project geography, work type

and mix, and growth plans and aspirations.

This will allow us to improve our batching

approach, making efficient use of the

available capacity in the market.

– Balancing size of projects and risk profile

– the analysis allows us to review capacity by

preferred work type so we can deliver the

mix of work within our AMP8 Business Plan.

We can also balance the size of projects

across individual suppliers to help manage

their portfolio risk, allocating work to the

supplier best capable of delivering and

within current risk profile.

What matters to them

– Fair engagement and payment terms

– Collaboration

– Responsible supply chain

– Sustainable procurement

– Reputation

How we engage across the Company

– Meetings with suppliers at the outset of

the relationship to agree on

performance metrics and ensure

continual monitoring of performance;

supplier questionnaires and

satisfaction surveys/stakeholder

materiality surveys.

– Regular meetings with our suppliers,

including training on Modern Slavery,

and our Code of Conduct, Doing the

Right Thing.

– Audits and inspections of suppliers.

– Periodic performance and

commercialreviews.

– Supplier whistleblowing hotline.

How we delivered on feedback

this year

– Net zero engagement with supply chain.

– AMP8 Supplier Engagement event.

– Supply Chain Sustainability School.

– Net Zero Hub at Strongford.

– Capital Markets Day.

– Six Delivery Partners increased to 60.

Outcomes from engagement

– 115 suppliers assessed through

EcoVadis this year.

– CDP Supplier Engagement Leader 2023.

– CIPS Procurement Excellence.

Standard Accreditation.

– 14.7 score by Sustainalytics.

– Carbon Trust Accredited.

– Carbon Disclosure Project

AdvancedRating.

Stakeholder Engagement – Engagement in Action continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024118

Through detailed delivery modelling, we

haveidentified opportunities to accelerate

investment, and with £450 million of transition

spend planned for the last year of AMP7, to

provide improved outcomes for customers

now. Wehave also engaged with the supply

chain inrelation to their current and future

capacity in order to factor this into our

approach. The responses (which were

independently tested) show that supply chain

capacity is c.120% of our average AMP8

requirement and 103% of our expected peak. If

we allow for the growth our suppliers have

indicated, these figures would be 144% and

124% respectively. This gives us further

confidence that there is sufficient capacity

available to deliver on our plans, and if modest

capacity shrinkage were to occur, our

programme would be unaffected.

By insourcing our design capability, we have

been able to take a programme-wide view of

the critical assets required to deliver our

capital programme. To secure efficient

delivery in the face of rising prices, supply

constraints and market uncertainty, we took

the decision to approach the market early and

secure guaranteed delivery of c.£70 million of

key process assets. This approach has been

welcomed by contractors and asset suppliers,

leading to more efficient (and scale) planning

and production, as well as generating cost

efficiencies. This helped us to establish strong

direct relationships with SME organisations

operating in civil engineering, mechanical/

electrical/instrumentation and control,

environmental and manufacturing sectors.

Innovative procurement approaches

– Digitalisation of Design and

Contracting Strategy

We have a strong track record of innovation

and have been exploring new ways to drive

efficiency and reduce our demand on the

supply chain.

Working closely with the Manufacturing

Technology Centre and automotive supply chain,

we are developing innovative manufacturing

capability to either part or fully build assets in

controllable factory conditions. Plug and Play is

part of our unique capital plans, putting us in a

unique position for AMP8.

Capital projects typically take years to

complete, and each one is designed on a

bespoke, tailored basis. Our new Plug and Play

approach utilises standard parts that can be

connected in different ways and work together

to deliver the design solution more efficiently.

Common examples include dosing rigs and

tanks. This innovative approach enables us to

create a whole range of different products

providing wide-ranging benefits as follows:

Benefits

 Lower carbon footprint.

Schemes can be fully assembled off-site

and delivered ready made.

Faster production time.

Products are pre-tested and pre-

commissioned in the factory.

Safer construction.

Easier maintenance and repairs and less

downtime, meaning better for the

environment and better service for

our customers.

Skill and expertise resilience

We have instant access to our in-house

experts meaning we can be quicker and

more efficient.

We are able to respond quickly to

challenges, from global microchip

shortages, through to local flooding

or drought.

We are upskilling our teams on emerging

technology such as AI, and creating some

future proof roles such as automation

and mechatronics.

This innovative approach will be shared with

the wider sector, allowing others to benefit

from our investment and enhance their own

delivery routes for the benefit of multiple

stakeholders, particularly customers.

CDP Supplier

Engagement Leader

We were delighted to be recognised, for the

second consecutive year, as a Supplier

Engagement Leader in the 2023 Supplier

Engagement Rating conducted by CDP, an

international non-profit organisation focused

on environmental disclosure.

We were among the top organisations

assessed for supplier engagement on climate

change, based on our 2023 CDP disclosure.

CDP’s Supplier Engagement Rating assesses

how effectively companies are working with

suppliers to address climate change issues.

Specifically, it focuses on the key areas of

governance, targets, ambition, management

(Scope 3), supplier engagement and overall

CDP climate change performance.

We received a CDP A- rating and were

recognised as a Supplier Engagement Leader.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 119

STRATEGIC REPORT

REGULATORS AND GOVERNMENT

Our relationships with the Government, ourregulators and other agencies support

usin ensuring that we meet the highest customer service and environmental

standards, whilst providing value for moneyservices to customers.

What matters to them

– Outcomes for customers, the

environment and long-term operational

and financial resilience

– Performance against

regulatorytargets

– Trust and transparency

– Governance and compliance

– Environmental impact

– Sustainable procurement

How we engage across the Company

– Regular meetings with our regulators

atmanagement level including, the EA,

NRW, Natural England, Ofwat, the DWI

and Defra.

– Regular engagement with Government

officials and elected representatives on

water and environment-related issues.

How we delivered on feedback

this year

– Ensuring resilient supply chain.

– Sharing knowledge and expertise

tofind solutions and opportunities

forinnovation.

– Developing responsible business

strategies and achieving continuous

sustainable development.

– Meeting shared targets for growth

anddevelopment.

Outcomes from engagement

– Highly confident of achieving EPA 4*

status for the fifth consecutive year,

aunique accolade in the sector.

– Awarded London Stock Exchange’s

Green Economy mark.

– Submission of our AMP8 Business Plan.

Site visits for the Ofwat cost assessment team

In July 2023 we hosted two sites visits by the Ofwat cost assessment

team. On 3 July 2023 the team visited the Finham and Minworth

wastewater treatment works and on 12 July 2023, we visited the Witches

Oak water treatment works Green Recovery site.

The purpose of the visits was to show the Ofwat team in real life the assets we discuss in

our Green Recovery and PR24 Business Plan submission.

On the first visit the site managers explained to the Ofwat team how our wastewater

treatment process works and some of the challenges we face, for example with meeting a

tight phosphate consents at Finham reflecting the relatively small watercourse the site

discharges to.

On the second visit the site managers explained the innovations in the new Witches Oak

water treatment works we are building and the innovative water treatment processes we

are testing, such as floating reed beds to improve the quality of the raw water which will be

used by the works.

The Ofwat team welcomed the opportunity to see our sites close up and to ask questions to

the teams managing sites and carrying out construction works. This has given the Ofwat team

a better understanding of our assets when assessing our PR24 Business Plan proposals and

a chance for us to strengthen our positive relationship with our economic regulator.

Stakeholder Engagement – Engagement in Action continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024120

Highlights of our engagement activities throughout the year

June

– Tour of Strongford Net Zero Hub

withMP for Stoke on Trent

South.

– MP organised Rivers

Roundtable inDerbyshire.

– Bathing Rivers and River

Rangers site visit with the MP

forDerbyshireDales.

November

– Tour of our Net Zero Hub

atStrongford with

Government Minister.

March

– Annual House

ofCommons

Dinnerwith all

regional MPs.

– Flood Summit

event with the MP

for Tamworth.

July

– Mansfield Green Recovery

Project tour with CEO of the

Rivers Trust.

– Green Recovery tour and

STWsite visits at Finham

andDraycote with Ofwat

PR24Team.

August

– STW showcase tour at the

Academy and Draycote

with Water Minister.

September

– Operational site visits with

the Chair of Ofwat.

– Customer discussions

withthe MP for

SouthStaffordshire.

October

– CSOs visit at Dowdeswell with

the MP for Cheltenham.

December

– Minworth wastewater treatment

works tour with Defra Water

Minister.

2023 2024

Tour of Strongford Net Zero Hub

with MP for Stoke on Trent South

In June 2023, we invited Stoke-on-Trent South Conservative MP

Jack Brereton and the Councillor for Hanford, Trentham and

Newstead, Daniel Jellyman to meet with our project leaders to

hear about our £40 million scheme to create a ‘net zero hub’, which

for the first time, will integrate technologies from around the world

designed to reduce and remove carbon.

Mr Brereton said: “I was very pleased to visit the Strongford

wastewater treatment works to see the work Severn Trent are

doing to create their Net Zero Hub and better manage sewage from

across north Staffordshire. I was pleased to learn of the world-

leading work they are doing in Staffordshire to reduce the

environmental impact of the site and reduce emissions to achieve

net zero. It was also particularly useful to be able to discuss the

actions they are taking locally to improve water quality and

minimise the impact of storm overflows.

Read more about our Strongford

Net Zero Hub on page 70.

£40 million

Net Zero Hub

Tour of Finham with Taiwo Owatemi

MP for Coventry North West

In June 2023, we invited the Coventry North West Labour MP Taiwo

Owatemi to our training facility, the Academy, to learn more about

wastewater management and our ongoing investment to improve

river health, before taking a tour of the Finham sewage treatment

works. During her tour, Ms Owatemi was shown a virtual river,

complete with CSOs as well as a virtual home to see first-hand the

process of wastewater management.

Ms Owatemi was given an overview of our Get River Positive

programme – our commitments to make rivers the healthiest they

can be. Severn Trent is moving faster, with the Get River Positive

pledges already having a positive impact across Coventry and

Warwickshire.

In the programme’s first year, the impact of our operations on

rivers has reduced and monitors have been installed on all storm

overflows, providing more than 300 million data records over the

course of a year.

Ms Owatemi said: “I am grateful to Severn Trent for inviting me to

their Academy and Finham sewage treatment works to hear more

about their work, including the Get River Positive programme

which aims to improve the health of rivers across our region. It was

fascinating to hear about the other work they do across Coventry

with their Community Fund, apprentice schemes and their work on

water efficiency with free water saving devices available through

their website.”

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 121

STRATEGIC REPORT

SECTION 172

STATEMENT

Stakeholder engagement is central to the formulation and execution of

our strategy and is critical in achieving long-term sustainable success.

The needs of our different stakeholders, as well as the consequences of

any decision in the long term, are considered in depth by the Board.

Principal decisions in 2023/24

Some of the principal decisions taken by the Board in the year are detailed on the

next pages. Our approach below sets out how the Board is supported in carefully

considering all the relevant factors that lead to its selection of the best course of

action to ensure the long-term success of the Company:

Board strategic discussionBoard information

Board

decision

s.172 factors are considered

in the Board’s discussions on

strategy, including how they

underpin long-term value

creation and the implications

for business resilience.

The Chair ensures decision

making is sufficiently

informed by s.172 factors.

Board papers include

atablesetting out

s.172factorsand

relevantinformation

relatingto them.

The Group’s culture

ensures that there is

proper consideration of

the potential impacts of

decisions on stakeholders

both now and over time.

The Board performs

duediligence in relation

tothe quality of the

information presented

andreceives assurance

where appropriate.

Leadership and management

receive training on Directors’

duties to ensure awareness of

the Board’s responsibilities.

Stakeholder engagement

activities recorded and detail

included in Board papers

where applicable.

Engagement

and dialogue with

stakeholders

Follow-up

actions with

Board oversight

Our stakeholder engagement processes

enable our Board to understand what matters

to stakeholders and consider carefully all the

relevant factors to select the course of action

that best leads to high standards of business

conduct and the success of Severn Trent in the

long term. The principles underpinning s.172

are not only considered at Board level, they are

part of our culture. They are embedded in all

that we do as a company. The differing

interests of stakeholders are considered in the

business decisions we make across the

Company, at all levels, and are reinforced by

our Board setting the right tone from the top.

All of the Board’s significant decisions are

subject to a s.172 evaluation to identify the

likely consequences of any decision in the long

term and the impact of the decision on our

stakeholders. It is not always possible to

provide positive outcomes for all stakeholders

and the Board sometimes has to make

decisions based on balancing the competing

priorities of stakeholders.

In performing their duties during 2023/24, the

Directors have had regard to the matters set

out in s.172 of the Companies Act 2006. You can

read more on how the Board had regard to

each matter, during the year, as follows:

S.172 factor Relevant disclosure Page

The likely consequences of any

decision in the long term

Corporate Strategy

Our Business Model

Performance Review

Dividend Policy

Sustainability

2 to 3

8 to 9

16 to 83

130

42 to 81

The interests of the

Company’s employees

Corporate Strategy

Performance Review

Caring for Our People

Diversity and Inclusion

Employee Engagement

Whistleblowing

Company Culture

2 to 3

16 to 83

25 to 32

27 to 28

112 to 113

157

132 to 133

The need to foster business

relationships with suppliers,

customers and others

Corporate Strategy

Responsible Payment Practices

Performance Review

Modern Slavery

Sustainability

Our Business Model

Whistleblowing

2 to 3

16 to 83

168

42 to 81

8 to 9

157

The impact of the Company’s

operations on the community

andthe environment

Corporate Strategy

Sustainability

Corporate Sustainability Committee

Sustainability Report available on our website

2 to 3

42 to 81

165 to 168

The desirability of the Company

maintaining a reputation for high

standards of business conduct

Corporate Strategy

Market and Industry Overview

Whistleblowing

Internal Controls and Risk Management

Sustainability

2 to 3

4 to 5

157

42 to 81

The need to act fairly as between

members of the Company

Corporate Strategy

Stakeholder Engagement

Annual General Meeting

Dividend Policy

Sustainability

2 to 3

108 to 121

116

130

42 to 81

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024122

How the Board engages with our stakeholders

Our customers

– Our Board met with customers throughout

the development of our PR24 Business Plan.

– ‘Your water, your say’ events held in April

and November 2023.

– Service delivery for customers is discussed

at every Board meeting.

– Customer perceptions of value for money

arereported to our Corporate

SustainabilityCommittee.

– Customer-shareholders engage with the

Board and submit questions in advance of,

or in person at, our AGM.

Our people

– An in-person employee engagement event,

‘Meet Our Board’, held in November 2023.

– The Chair, Non-Executive and Executive

Directors attend Company Forum sessions

and D&I Advisory Group meetings and

provide feedback at Board meetings.

– The Board considers employee

engagement survey results and steps

taken to address feedback.

– The Remuneration Committee reviews

workforce policies and practices and makes

recommendations to the Board.

– Company purpose and culture, talent

developmentand our people strategy are

discussed at Board meetings.

– Employee-shareholders have the

opportunity to meet the Board and submit

questions at the AGM.

Our communities

– Members of the Board attend community

events to engage with the communities

weserve.

– Employees who live and work in our

communities ‘meet’ the Board at the

Employee Forum, AGM, and through Board

site visits.

– Employees who live and work in our

communities also engage with the Board

through dedicated employee engagement

events: ‘Ask Our Board’, held in May 2023;

and ‘Meet Our Board’, held in

November2023.

– Environmental matters, including progress

on our Get River Positive River pledges, are

considered by the Board at every meeting.

– Corporate responsibility, community

activities and volunteering programmes are

discussed at Board meetings.

Shareholders and investors

– The Chair hosts a governance roadshow

annually to meet with shareholders, hear

views and answerquestions.

– The Chair of the Remuneration Committee

met with the majority of the Company’s top

30 shareholders through the 2024

Remuneration Policy consultation.

– The Chair, SID, CEO, CFO and Non-Executive

Directors attend investor meetings and

feedback is reported to the Board.

– Regular meetings take place between

Investor Relations andthe Chair to discuss

feedback from investors and strategy.

– The Head of Investor Relations gives an

update to the Board on a regular basis and

the Investor Relations Strategy is discussed

by the Board.

– The Board receives quarterly tradingupdates.

Suppliers and contractors

– The Board receives updates on the Group’s

capital programme at every meeting and

participated in an AMP8 Deliverability deep

dive as part of the development and

oversight of our PR24 Business Plan.

Updates include engagement activity with

the supply chain.

– Supplier representatives attend the Capital

Markets Day and the Company Forum

alongside Executive Directors.

– Commercial performance is discussed at

every Board meeting, including an update

on relationships with suppliers.

– Our Corporate Sustainability Committee

regularly monitors progress on

sustainability in our supplychain.

Regulators and government

– Regulatory matters are considered

regularly by the Board, including Business

Plans, the Water Resources Management

Plan and Scheme of Wholesale Charges.

– To deepen Board-level understanding of our

regulators, our Chair and Non-Executive

Directors met with regulators including

Ofwat and the EA during the year.

– Regulatory stakeholders attend Board

meetings and undertake site visits with the

Board, including from Ofwat, the DWI, CCW

and the EA.

– Regulatory consultation updates are

considered by the Board.

Severn Trent PR24 Business Plan

Context

On 2 October 2023, we submitted our AMP8 Business Plan for 2025-30, setting

out the progress we will make over the next five years towards the 2050 aims

set out in our Long-Term Delivery Strategy.

The Board invested a significant amount of time preparing for PR24, including

understanding the way in which the Company can deliver positive customer

outcomes and greater environmental and social value, drive improvements

through efficiency and innovation, and increase focus on the long term.

To inform this activity, individual Directors, and the Board as a whole,

determined that the Board should spend time engaging with customers to

understand their views and priorities, and inform the development of the

Business Plan. This should be facilitated by the Company, the Board as a

whole and individual Directors spending time engaging with all of its

stakeholders, including customers, shareholders, Ofwat, CCW and local

communities to listen to and understand their views and potential impacts of

the Company’s Business Plan on them. The Company’s Business Plan was

then developed in full consideration of these discussions.

Consideration of s.172 impacts by the Board in its decision making

Customers: Potential impacts on customers were central to Board discussions

in view of its existing commitment to keep bills affordable for all customers

whilst also delivering improved resilience, sustainability and enhanced customer

outcomes. To inform Board discussions, individual Directors, and the Board as a

whole, spent time engaging with customers, attending community events –

including affordability workshops – and having discussions with the Chair of the

Expert Challenge Panel, Bernard Crump. The views of over 68,000 customers

were factored into the Plan’s development. Insights gathered from customer

feedback were considered to produce a plan that the Board is confident will

deliver the outcomes our customers want, both now and over time.

Communities: With the potential to create 7,000 jobs in our region, the

Board is confident that our investment will have an important regional

impact over the next decade, helping a much more diverse range of

people benefit from these opportunities. To inform Board discussions,

individual Directors spent time engaging with customers at community

events. For example, Sharmila Nebhrajani provided an overview of her

observations from the PR24 Affordability Workshop in Ward End, noting

that the session had brought to life the difficulties faced by those in

poverty and the way in which the Company’s approach would improve the

life experiences of communities.

Engagement in action

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 123

STRATEGIC REPORT

Section 172 Statement continued

Consideration of s.172 impacts by the Board in its decision making continued

Shareholders and investors: The Board recognised the importance of having

a fully funded equity plan for 2025-30, to provide capacity to accelerate

investment and improve service and customer outcomes sooner. The Board’s

decision to undertake a £1 billion equity raise during the year supported the

enhancement investment business cases totalling c.£5 billion in the Business

Plan, and the desire to accelerate £450 million of investment over the next

18 months.

Regulators: The Board held frequent meetings with its regulators

throughout the Business Plan’s development to ensure that their

perceptions of our performance were factored into development of the

Business Plan. Our Business Plan will be reviewed by Ofwat, our economic

regulator, who will assess it under the framework set out in its methodology

released in December 2022. We expect to receive our Final Determination in

December 2024.

Supply chain: A successful price review will allow Severn Trent to deliver

significant investments through a large capital programme in AMP8, which

will require the support of the supply chain. The Board participated in an

AMP8 Deliverability deep dive as part of the development and oversight of the

PR24 Business Plan, which included ensuring that robust governance

procedures were in place, supported by an effective organisational structure

and strong talent and expertise within the Company and its supply chain. This

builds on the work undertaken over AMP7 to diversify our supply chain and

foster excellent working relationships, putting us on a trajectory to deliver at

least £1 billion of enhancement investment every year in AMP8.

Outcomes and impact on the long-term sustainable success of the Company

In developing our Business Plan, the Board considered carefully the

Company’s Long-Term Delivery Strategy, with a 25-year time horizon. As part

of this activity, the Board considered the impact of the Business Plan on every

aspect of our strategic planning frameworks, statutory environment

programmes and planned enhancement activities, accounting for potential

future uncertainty to test the PR24 proposition. This process gave the Board

confidence that the PR24 Plan aligned with the Company’s long-term strategy

and, as such, supported the long-term sustainable success of Severn Trent for

the wider benefits of its stakeholders, both now and over time.

Our Plans 2025 – 30 | About Us | Severn Trent Water

(stwater.co.uk)

Read more on pages 6 and 7.

PR24 engagement pages 110 to 111.

Read more on our £1 billion equity raise on page 164.

Remuneration Policy

Context

Our Remuneration Policy is designed to deliver balanced outcomes for our

stakeholders, driving long-term sustainable performance for the benefit of

all stakeholders. As part of developing the new Directors’ Remuneration

Policy (the ‘Policy’), the Company engaged with various stakeholders

including customers, shareholders, regulators and employees to understand

their views of the proposed Policy and the alignment of remuneration to our

strategy and priorities in supporting improved outcomes for customers and

theenvironment both now and over time.

Stakeholder views were shared with the Board and Remuneration Committee

alongside information on the wider workforce remuneration structure, external

market practice, corporate governance regulations and institutional guidelines.

Consideration of s.172 impacts by the Board in its decision making

Customers and communities: The Board recognised the importance of

ensuring the Policy was designed to deliver balanced outcomes and drive

long-term performance for the benefit of all of our stakeholders, particularly

customers and the environment. To achieve this, the Policy increases the

weighting of customer and environmental-focused measures within the

Long-Term Incentive Plan and proposes the inclusion of a long-term river

health measure, in addition to environmental measures included within the

annual bonus. The weighting of our storm overflow spill reduction target will

be increased within the bonus as will our EPA for 2024. This element of the

bonus will only pay out if 4* EPA status is achieved, with a nil payout for any

lesser status.

The Company engaged with customers to ensure their views were considered

in the development of performance-related pay structures.

The Board remains committed to tackling the underlying causes of poverty

and improving the lives of people in our communities as announced within its

10-year Societal Strategy. The Committee therefore determined to incorporate

a new Social Value metric into the Company’s long-term incentives.

Shareholder and investors: Our 2021 Remuneration Policy received

overwhelming support from our shareholders at the 2021 AGM, with 99.66%

approval. We have enjoyed consistently strong shareholder support for our

Directors’ Remuneration Report, evidenced most recently by a 95.40% vote in

favour at the 2023 AGM.

During the year, the Remuneration Committee conducted a comprehensive

review of the current Remuneration Policy following which the Committee

Chair consulted extensively with our largest shareholders and their

representative bodies on the proposed changes for the new Policy. The

Committee was briefed well on shareholder views and feedback from the

consultation, which informed the Committee’s review and development of the

new Policy. The Committee recommended the Policy to the Board for

approval, which will be subject to a binding shareholder vote at the 2024 AGM.

Regulators: The Board recognises the unique responsibility that comes from

being a private monopoly provider of an essential public service and strives to

deliver excellent performance that leads the sector and that is recognised by

our regulators. The Policy changes ensure that we incentivise the delivery of

exceptional, sector-leading performance for the benefit of our broader

stakeholders, whilst aligning to Ofwat’s latest performance-related pay

guidance. The Chair and Remuneration Committee Chair attended a sector

roundtable in relation to performance-related pay and engaged directly with

Ofwat on the proposed changes for the new Policy. The Committee received a

detailed brief on the regulator’s views and feedback from this engagement.

Employees: The Board is committed to ensuring that all of our people share in

our success and ensuring all employees are aligned with the same measures

and rewarded for achieving our key objectives and delivering improved

outcomes for customers and the environment, both now and over time.

The impact of remuneration of employees was also a key determinant in

retaining the health and safety element of the annual bonus to support the

Company’s commitment to keeping our employees safe and well at all levels

of the organisation.

Read our Remuneration Policy

on pages 195 to 204.

Outcomes and impact on the long-term sustainable success of the Company

Changes to our Remuneration Policy demonstrate our commitment to setting, and implementing, a Policy that reflects the Company’s strategic objectives,

delivers value for all stakeholders and provides a substantial link to delivery for customers and the environment, both now and over time.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024124

Customer Vulnerability Strategy

Context

The Company’s regulator, Ofwat, defines vulnerability as “a customer who,

due to personal characteristics, their overall life situation or due to broader

market and economic factors, is not having reasonable opportunity to access

and receive an inclusive service which may have a detrimental impact on their

health, wellbeing or finances”. In February 2024, the new customer-focused

licence condition ‘G’ came into effect, which outlined service expectations

which included the ‘service for all’ vulnerability guidance.

In developing our Customer Vulnerability Strategy, the Company engaged with

key stakeholders, including Ofwat, CCW, local community stakeholders and

local authorities, to listen to and understand their views and the challenges

they face. The Customer Vulnerability Strategy was then developed in full

consideration of these discussions, with the objective of addressing

vulnerability in our region.

Consideration of s.172 impacts by the Board in its decision making

Customers: The Board has a continual focus on customer service, through

standing agenda items at every Board meeting complemented by deep dives

into customer topics throughout the year. As such, the Board approaches all

the decisions that it takes with a firm understanding of the customer lens and

potential consequences of strategic decisions on customers. In developing

the Company’s Customer Vulnerability Strategy, the Board applied particular

focus to changing customer needs as a consequence of life challenges, life

changes and our services. In shaping the Strategy, the Board considered:

– the support that customers needed now, and in the future – such as

financial assistance schemes and smart metering to make bills more

affordable;

– services that the Company currently provided to meet customer needs –

and where services could be enhanced in the future – such as further

growth of the Priority Services Register, ensuring the Company was

accessible to vulnerable customers;

– the accessibility of the Company’s services – including the critical role of

data to identify customers, and ensuring that customers had simple

experiences when they needed the Company’s support; and

– holistic support for our communities through the Company’s continued

investment in our communities – through the Societal Strategy – to create

employability opportunities and give life skills to boost customer incomes.

Board discussions were supported by real-life case studies of vulnerable

customers, who had shared their direct experiences with the Board.

Theseconsiderations are reflected in the Customer VulnerabilityStrategy.

Regulators: The Board seeks to foster a positive relationship with its

regulators, including Ofwat. In developing and agreeing the Company’s

approach, the Board considered carefully regulator expectations in relation

to customer vulnerability, with a particular focus on the new customer-

focused licence condition, which sets out five key objectives: Provide a high

standard of service and support; Develop services that are inclusive by

design; Identify customers who need extra help; Record their needs; and

Develop and implement vulnerability strategies. Alongside the standing

‘Customer’ Board agenda item, the Board scheduled two dedicated working

sessions on the Customer Vulnerability Strategy to scrutinise

management’s approach to meeting regulatory expectations. As outlined

above, notwithstanding the regulatory requirements, the Board’s activity

was primarily focused on improving the support for customers who need

extra help accessing our services.

Communities: In developing our Customer Vulnerability Strategy, the

Company engaged with a range of community stakeholders, including

community groups, local authorities, schools and councillors, to listen to and

understand their views and the challenges they face. The Customer

Vulnerability Strategy was then developed in full consideration of these

discussions, with the objective of addressing vulnerability in our region.

Investors: Alongside development of the proposals through a customer

lens, the Board considered carefully the need to deliver value for the

Company’s shareholders. The proposed Customer Vulnerability Strategy

aligns with our ESG ambitions and particularly our Societal Strategy

commitments, which contribute to the long-term success of Severn Trent

and investor returns. The Strategy also aids customer affordability, which

supports future investment programmes and RCV growth, whilst ensuring

our bills remain amongst the lowest in the sector.

Outcomes and impact on the long-term sustainable success of the Company

Our Customer Vulnerability Strategy seeks to outline the support and services

offered to customers in vulnerable situations, particularly those who need

extra help accessing our services.

The Strategy sets out our approach to tackling holistic vulnerabilities,

ensuring that our services are accessible for all – particularly those who need

help – and we continue to push forward with our commitments to improve our

offering within our region through associated programmes such as our

Societal Strategy.

The Customer Vulnerability Strategy will be

published on our website in the summer of 2024.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 125

STRATEGIC REPORT

NONFINANCIAL AND SUSTAINABILITY

INFORMATIONSTATEMENT

This section of the Strategic Report constitutes the Non-Financial and Sustainability Information

Statement of Severn Trent Plc, produced to comply with sections 414SA and 414CB of the

Companies Act 2006. The information listed in the table below is incorporated by cross reference.

Reporting

requirement

Policies and standards which

govern our approach

Additional information

and risk management

Stakeholders

– Our Customer Policy outlines how our people are responsible for ensuring we keep

our promises to our customers and deliver great customer service.

– Our Group Data Protection Policy supports our people in taking responsibility for

protecting our employee and customer data whilst considering and implementing

the commitments made within the Policy when performing their work and

making decisions.

– Our Group Commercial Policy outlines what is expected of all those involved in

procurement activities, enabling them to uphold our values of acting with integrity

and putting our customers first. Complying with this policy enables employees to

maintain proper standards of fairness and integrity in business relationships with

colleagues and suppliers.

Stakeholder Engagement, pages 108 to 121

s.172 Statement, pages 122 to 125

Board Activities, pages 140 to 141

Environmental

Matters

– Our Group Environment Policy supports our environmental plans and our

commitment to environmental leadership. It sets out guiding principles of how we as

a Group operate to protect the environment and the commitments our people need to

consider when performing work activities and when making decisions.

TCFD and Net Zero Transition Plan, pages

42 to 81

Corporate Sustainability Committee Report,

pages 165 to 168

Sustainability Report, severntrent.co.uk

Stakeholder Engagement, pages 108 to 121

s.172 Statement, pages 122 to 125

Employees

– Our Group Health, Safety and Wellbeing Policy outlines what is expected of

employees as regards health, safety and wellbeing, ensuring that no one gets hurt or

is made unwell by what we do. This policy extends to anyone employed by, or who

carries out work on behalf of, Severn Trent Plc and its Group companies,

contractors, temporary staff and agency workers.

– Our Group Speak Up Policy – we truly believe that our values are an essential and

vital part of the life and culture of Severn Trent, and that is why we take seriously any

reports about illegal practices or inappropriate conducts within our company. We

hold ourselves to the highest ethical standards and encourage our colleagues to

Speak Up if they are worried about wrongdoing affecting our company, customers,

colleagues or suppliers.

– Our Group HR Policy outlines our commitment to maintaining a work culture that is

diverse and inclusive, that is supportive and nurturing, which makes the most of

everyone’s growth potential. We will also protect the human rights of all of

our colleagues.

Caring for our people, pages 25 to 32

Stakeholder Engagement, pages 108 to 121

Gender and Ethnicity Pay Gap, page 28

Culture, pages 132 to 133

Governance Report, pages 128 to 204

Audit and Risk Committee Report, pages

153 to 161

Directors’ Remuneration Report, pages

169to 194

Respect for

HumanRights

– Anti-Slavery and Human Trafficking Statement

– Diversity within our workforce

Anti-Slavery and Human Trafficking,

page168

Governance Report, pages 128 to 204

Corporate Sustainability Committee Report,

pages 165 to 168

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024126

Reporting

requirement

Policies and standards which

govern our approach

Additional information

and risk management

Anti-Corruption

andBribery

– Our Group Financial Crime and Anti-Bribery and Anti-Corruption Policy outlines

acceptable and non-acceptable behaviours to ensure compliance with anti-bribery

and anti-fraud laws and includes improper payments, gifts or inducements of any

kind to and from persons including officials in private or public office, customers and

suppliers. This policy also covers our approach to Insider Dealing, Political

Donations, Conflicts of Interest and Continuous Disclosure.

– Our Group Conflicts of Interest Policy provides guidance around managing conflicts

of interests arising from obligations pursuant to the Companies Act 2006, UK

Corporate Governance Code and associated rules and guidance issued by the

Financial Conduct Authority (‘FCA’).

– Our Group Security Policy aims to minimise the likelihood of a threat being realised

through the use of appropriate security solutions that reduce the impact of these

threats through the deployment of robust response and recovery measures.

– Our Group Competition and Competitive Information Policy – competition law

applies to all parts of our Company, and we take our position within the market, and

our compliance with competition and antitrust laws, seriously. For us though, it is not

enough just to comply with the law. In everything we do, we strive to do it with

openness, fairness and honesty, which is supported by our values and the stringent

rules we have in place.

Governance Report, pages 128 to 204

Audit and Risk Committee Report, pages

153 to 161

Social Matters

– Doing the Right Thing, our Code of Conduct, helps us put our values into practice.

Our values and Code of Conduct embody the principles by which the Group operates

and provide a consistent framework for responsible business practices.

– Group Environment Policy

– Customer Policy

TCFD and Net Zero Transition Plan, pages

42 to 81

Corporate Sustainability Committee Report,

pages 165 to 168

Directors’ Report, pages 205 to 207

Sustainability Report, severntrent.co.uk

Stakeholder Engagement, pages 108 to 121

Description of

Principal Risks

andImpact of

Business Activity

Our Approach to Risk, pages 92 to 94

Principal Risks, pages 95 to 101

Emerging Risks, page 102

Our Business Model, pages 8 to 9

Description of the

Business Model

Our Business Model, pages 8 to 9

Non-Financial Key

Performance

Indicators

Strategic Report, pages 2 to 127

Key Performance Indicators, pages 16to 17

Climate-Related

Financial

Disclosures

TCFD Report pages 42 to 67

The policies mentioned above form part of Severn Trent’s Group policies, which act as the strategic link between our purpose and values and

howwe manage our day-to-day business. During the year, the Board determined that the policies remain appropriate, are consistent with the

Company’s values and support its long-term sustainable success.

Approval

This Strategic Report was approved by the Board.

By order of the Board.

Hannah Woodall-Pagan

Group Company Secretary

21 May 2024

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 127

STRATEGIC REPORT

CHAIR’S INTRODUCTION

TOGOVERNANCE

Dear Shareholder

I am delighted to introduce our

Governance Report for 2023/24, on behalf

of your Board and in accordance with the

2018 UK Corporate Governance Code (the

‘2018 Code’). This report outlines how we

have ensured that best practice and

effective corporate governance

procedures are in place to support the

creation of long-term value for the mutual

benefit of all of our stakeholders. As

highlighted in my Chair’s Statement, on

pages 10 to 12, this has been an

exceptionally busy period for the Board,

and particularly the Audit and Risk

Committee, with a significant amount of

time being spent finalising our PR24

Business Plan. I would like to convey the

Board’s thanks to John Coghlan for his

dedication and support to the Board as

Chair of the Audit and Risk Committee

during this time and throughout his

tenure. My report, and the pages that

follow, set out a summary of the important

work that the Board, and its Committees,

have conducted during the year in

discharging its oversight over the Group’s

strategy, performance and supporting the

long-term sustainable success of the

Company, generating value for our

shareholders, customers and employees,

and contributing to wider society.

With our experienced leadership team, I’m confident that we

are well positioned to deliver exceptional outcomes for our

stakeholders over the next five years. Our ambitious Business

Plan will drive transformative change, through delivering

improvements and investment where our customers tell us

it matters most. All of this will be underpinned by our robust

governance approach, to ensure we give our customers,

regulators and other stakeholders confidence that we will

deliver in line with their expectations for AMP8 and beyond.

Christine Hodgson

Chair

My governance highlights from 2023/24

– Submission of our PR24 Business Plan

– with the Board investing a significant

amount of time overseeing its

preparation, with a particular focus on

customer engagement, financeability and

deliverability. The Board also oversaw the

Group’s £1 billion equity placing to ensure

a fully funded equity plan for 2025-30 –

Read more on page 166.

– Focus on culture and colleague

engagement, through a programme of site

visits and dedicated activities, and

scrutiny of our employee engagement

survey results, to satisfy ourselves that

the Group’s culture supports delivery of

our AMP8 plans – read more on pages 132

to 133.

– Commissioning a rigorous and

independent evaluation of the Board, its

Committees and individual Directors to

ensure the Board remains effective in its

oversight of the Group’s purpose and

strategy – read more on pages 146

to 147.

– Continued evolution of our corporate

governance arrangements, including

reviewing our preparedness for the 2024

UK Corporate Governance Code (the ‘2024

Code’), which will apply to us from the

2025/26 financial year.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024128

Your Board

As announced during the year, Gillian Sheldon

retired from the Board on 14 May 2024, having

served on the Board for almost three years, to

focus on her recent Executive appointment. On

behalf of the Board, I would like to thank Gillian

for her valuable contribution to the Board’s

work. We welcomed Richard Taylor to the

Board on 1 April 2024 and his extensive

induction programme is now underway.

Richard has already visited a number of our

operational sites to meet our teams in person.

Further detail can be found on page 145.

During the year, we bade farewell to two

longstanding members of the Board: James

Bowling stepped down as Chief Financial Officer

at the conclusion of the AGM in July 2023, ahead

of his planned retirement from the Company;

and John Coghlan, Independent Non-Executive

Director and Chair of the Audit and Risk

Committee, retired from the Board in December

2023, having served just over nine years. On

behalf of the Board, I would like to thank them

both for their significant contribution to the

Company during their tenures.

Succession planning is a priority for the

Boardand a key activity of the Nominations

Committee and Board. As such, we were

positioned well to manage these changes at

Board and Executive Committee level. The

Board was delighted that, following rigorous

internal and external search and selection

processes, Helen Miles was appointed as Chief

Financial Officer, demonstrating the talent we

nurture within our business. Sarah Legg, who

joined the Board as an Independent Non-

Executive Director on 1 November 2022, has

taken on the role of Audit and Risk Committee

Chair. The considered succession planning

process enabled a thorough and detailed

handover between John and Sarah, who

introduces her first Audit and Risk Committee

Report to shareholders on page 153.

PR24 – a Business Plan developed

with our stakeholders

To ensure the long-term success of our

business, the Board and individual Directors

need to build and maintain successful

relationships with a wide range of stakeholders,

taking account of and responding to their views.

These relationships will only be successful and

enduring if they are based on respect, trust and

mutual benefit. Accordingly, we want to promote

a culture of integrity and openness, which

values diversity and is responsive to the views

of shareholders and wider stakeholders. The

Board values feedback from our stakeholders

and seeks to maintain close relationships with

them and respond to their views.

A good example of how our stakeholder-

focused approach operates in practice was the

development of our PR24 Business Plan. As

outlined in my report last year, a key area of

focus for 2023/24 has been to position the

business for success during the next

regulatory period. The Board invested a

significant amount of time preparing for PR24,

including understanding the way in which the

Company can deliver positive customer

outcomes, greater environmental and social

value, drive improvements through efficiency

and innovation, and increase focus on the long

term. To inform this activity, individual

Directors, and the Board as a whole, spent

time engaging with customers, attending

community events and having discussions with

the Chair of the Expert Challenge Panel,

Professor Bernard Crump, a former Regional

Chair of the Consumer Council for Water. The

views of over 68,000 customers were factored

into the Business Plan’s development – our

most extensive customer engagement activity

in our history.

The Board also engaged with colleagues and

suppliers to ensure our ambitious AMP8

investment programme was deliverable, with

adequate supply chain capacity in place,

supported by robust governance procedures,

effective organisational structure and strong

talent and expertise, to position the Company

to achieve a run rate of c.£1 billion every year

in AMP8. The Board participated in a dedicated

AMP8 Deliverability deep dive as part of the

development and oversight of the Business

Plan, and you can read more about our

approach to deliverability on page 11.

As outlined at the outset of my report, the

Board recognised the importance of having

awell funded equity plan for 2025-30, to

providecapacity to accelerate investment and

improve our services for customers and the

environment as quickly as possible. As such,

the Board engaged with shareholders and

investors to gain financial support for our plan

and undertook a £1 billion equity raise during

the year to support investment business cases

totalling c.£5 billion in the Business Plan,

enabling us to accelerate over £450 million of

investment over the next 18 months.

This insight and stakeholder feedback gave

theBoard a solid foundation on which to create

a comprehensive, detailed Business Plan –

co-created with stakeholders and built around

their priorities, both now and for the long term.

You can read more about how the Board has

engaged with our stakeholders on pages 108 to

121, and our Section 172 Statement can be

found on pages 122 to 125.

Environmental performance

Another area of significant customer and wider

stakeholder focus is environmental

performance, an area where our long-term

investment continues to deliver performance

improvements. However, we are not at all

complacent and this year has highlighted that,

despite the performance improvements made

in some areas, we know there is more we can

do to improve. We have invested £1.2 billion in

2023/24, a 63% increase year on year, bringing

our total investment this AMP to over

£3 billion. It is pleasing to see this investment

reflected in our EPA performance; we achieved

EPA 4* for the fourth consecutive year in 2023,

and have had no serious pollutions this year.

We are highly confident that we will achieve

EPA 4* for a fifth consecutive year this year. We

have also reduced the Severn Trent Water

share of RNAGS to 14% as our Get River

Positive programme drives long-term

improvement in river quality. You can read

more on pages 36 to 37.

Whilst there have been good areas of

performance, we want to deliver faster

improvements on areas such as CSOs and

pollutions, where we have set bold targets to

drive performance improvements. The Board

considered the Company’s targets to deliver

the Government’s targets early and the

investment plans for 2024/25 which include a

record investment at our CSO sites. You can

read more about this activity on page 39. This

investment has driven a number of

improvements, which makes the Barlaston

pollution, outlined in my Chair’s Statement and

detailed on pages 23 to 24, particularly

disappointing. There was Board-level

oversight of the incident and you can read

more about our environmental performance

and, in particular, our response to the

Barlaston pollution and action taken to

implement lessons learned to bolster our

preparedness for similar events in the future

on page 24.

Our people

One of the most valued and enjoyable aspects

for our Board is the opportunity to meet and

spend time with colleagues across the Group.

The conversations that take place inform our

direct understanding of the sentiment of our

workforce and their views on the Group’s

operations, risks, successes and challenges.

We each enjoy attending the Company Forum,

our chosen workforce engagement

mechanism, to hear directly from employees

and members of the Trade Unions, but also to

share the topics on the Board’s agenda and

answer any questions on these. During the

year, we held a ‘Meet Our Board’ event, which

was attended by apprentices and graduates

from across the Group. I would like to thank

those who took the time to attend and share

their experiences with us.

As set out on pages 132 to 133, these

interactions assist the Board in assessing and

monitoring the Group’s culture, beyond the

scores and feedback from employee

engagement surveys. The Board has

concluded that our desired culture is

embedded across the Group and we observe it

being demonstrated consistently at all levels.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 129

GOVERNANCE REPORT

UK Corporate Governance Code

The version of the Corporate Governance

Code applicable to this Annual Report is the

2018 Code. The Board is pleased to confirm

that Severn Trent Plc was compliant with all

of the principles and provisions set out in the

2018 Codefor the financial year ended

31 March 2024.

The year saw continued evolution of our

corporate governance arrangements, with

time spent refining our processes and

procedures in readiness for implementation of

the 2024 Code, which will apply to us from the

2025/26 financial year. The Board welcomed

the Financial Reporting Council’s publication

of the 2024 Code and we have undertaken a full

review of our Governance Framework and

arrangements in light of the updated 2024

Code to ensure that any recommendations can

be addressed in a timely manner to ensure full

compliance ahead of it coming into force.

Dividend

Whilst this report sets out the matters

considered in relation to the Severn Trent Plc

dividend (the ‘Group dividend’), in response

toincreased stakeholder focus on regulated

company dividends within the water sector,

theBoard applied particular focus to the

proposed Group dividend during the year,

inconsideration of:

– our regulated company performance in the

round and over time, particularly service

delivery for customers and the environment;

– the Company’s long-term investment

needs; and

– financial resilience.

Detailed disclosures on the Severn Trent Water

Limited dividend can be found within that

company’s Annual Report and Accounts and

Annual Performance Report. A link to where

these reports can be found when they are

published on 15 July 2024 is provided opposite.

To provide transparency for our shareholders

and wider stakeholders, we have summarised

the process that the Board undertook to

assess the Company’s performance in the

round and stakeholder impacts, ahead of

determining whether a Group dividend should

be paid. Further detail can be found in the

schematic on the next page.

Following this assessment, in line with our

formal dividend policy, the Board determined

that the proposed Group dividend would not

impact the financial health of the regulated

company, nor its credit ratings. The Board also

considered that the proposed dividend was

supported by the regulated company

performance in the round for customers and

the environment, both now and over time. The

Board is therefore proposing a final dividend of

70.10 pence per share, to be paid on 17 July

2024, taking the total dividend for the year to

116.84 pence per share.

Given that many small retail shareholders,

including Severn Trent pensioners, rely on our

dividend payments, we are pleased to be able

to sustain our dividend commitments against

a backdrop of increased costs, which has

resulted in a challenging year for so many

shareholders. I had the pleasure of meeting

many shareholders again this year to discuss

our performance. Our consistent results

emphasise that we are well placed to uphold

our high standards of service delivery for

customers and provide a sustainable platform

for investment and performance

improvements in areas that are important

toour stakeholders.

Board evaluation

My focus continues to be on maintaining a

strong, value-adding Board, with a diverse

range of professional backgrounds, skills and

perspectives. Succession planning has been a

key priority for the Nominations Committee

and, to inform this work, the Committee

commissioned an externally facilitated Board

Effectiveness evaluation during the year,

conducted by Ffion Hague of Independent

Board Evaluation (‘IBE’), in line with the

requirements of the 2018 Code.

The review assessed the Board’s progress

since the last external review in 2021, which

was also undertaken by IBE, and provided an

opportunity to consider the Board’s overall

effectiveness. The review concluded that the

Board operates very effectively and it was

evident that the Board places a strong

emphasis on ensuring that it considered the

views of stakeholders in its discussions and

decision making. I would like to thank Ffion for

her rigorous review and assessment of the

Board and its Committees. You can read more

about the process and outcomes of the Board

Effectiveness evaluation on pages 146 to 147

ofthis report.

Looking forward

Overseeing the development of my first

Business Plan as Chair of your Board, I have

spent time reflecting on everything that I have

learned about Severn Trent since I joined – the

talent and commitment of our employees, the

focus on operational excellence and resilience,

our contribution to society and our

environmental achievements. Building our

Business Plan has reinforced that we are in a

strong position for the challenges and

opportunities ahead – with ambitious plans

formulated to deliver benefits for our

customers, the environment, our communities,

the region and our shareholders. Whilst we

still await Ofwat’s determination, we have

already started on our investments to deliver

improvements in areas that our stakeholders

have told us are important to them.

The final year of AMP7 will provide an

opportunity to reflect on activity that we can

take forward into AMP8, and identify and

embrace new and innovative ways todeliver

our services more effectively andefficiently.

I want to thank everyone involved this year

– our customers, communities, investors,

regulators and suppliers. But above all, thank

you to our colleagues, for their commitment to

end this AMP strongly, ready to take on the

next five years of providing a high-quality,

essential public service.

Christine Hodgson

Chair

21 May 2024

Quick facts

– Christine Hodgson was considered

independent upon appointment to the

Board on 1 January 2020.

– The Board considers that all Non-

Executive Directors remain independent.

– The biographies of individual Directors

are set out on pages 134 to 135 and

include details of the skills and

experience each brings to the Board to

contribute to the Company’s long-term

sustainable success.

– All Directors are subject to election at the

Annual General Meeting (‘AGM’) which will

be held on 11 July 2024. Following the

completion of this year’s evaluation, the

Board concluded that each Director

standing for appointment or reappointment

continues to contribute effectively. The

Board recommends that shareholders vote

in favour of those Directors standing for

appointment or reappointment at the AGM,

as they will be doing in respect of their

individual shareholdings.

– This report explains how we have applied

the principles of the 2018 Code and

confirms our compliance with its

provisions. Read more on page 137.

Chair’s Introduction toGovernance continued

The Severn Trent Water

Annual Report and

Accounts and Annual

Performance Report will

be available in the

Regulatory Library from

15 July 2024.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024130

All areas of performance, and stakeholder impacts, are considered in the Board’s decision in determining whether a dividend should be paid.

Inform Future Activity

Plan

Measure

Improve

Review

Monitor

Robust assessment of

the Company’s commitment to its

employees, supported by deep dives

and consideration of impacts on

employees as follows:

– Assessment of employee benefits

– including talent management,

career development and

broaderincentives.

– Health and Safety performance –

including our people, supply chain

and the customers and

communities we serve.

In its assessment, the Board also

considered the impact of the

proposed dividend on employee

shareholders, including the

overwhelming majority of our

employees who own Severn Trent

shares, either directly or through our

share plans, such as Sharesave –

which over 72% of our employees

participate in.

Robust assessment of long-term

value creation for the mutual benefit

of our customers and communities,

shareholders in our communities,

the environment and our people,

supported by deep dives into the

following key areas:

– Affordability – read more on

page7.

– Societal Strategy – read more on

page 31.

– Health and Safety performance

– read more on page 26.

– Deep dives into River Health and

Bathing Rivers progress – read

Read more on page 125.

– Deep dive on the Company’s

Societal Strategy. Read more on

page 31.

Assessment and scrutiny of the

proposed dividend in the context of

Ofwat’s PR19 methodology,

subsequent guidance and Companies

Act 2006 requirements, in particular

that dividends may only be paid out

ofprofits available for the purpose.

This process included an assessment

of the proposed dividend, and historic

dividends paid, in the context of

theCompany’s:

– Ongoing liquidity and solvency to

ensure the Company’s ongoing

financial resilience.

– Performance against its

determination.

– Scrutiny of the various scenarios

and sensitivities underpinning

theCompany’s viability

assessment, financial

performance and resilience.

The assessment also considered the

impact of the proposed dividend on

the strength of Severn Trent Water’s

covenant as the sponsor of its

defined benefit pension schemes.

PERFORMANCE IN THE ROUND

Performance

for customers

Performance for

theenvironment

Interests of the

Company’semployees

Performance for

communitieswe serve

Legal and regulatory

requirements

Financial performance

andresilience

To provide transparency for our shareholders and wider stakeholders, the below schematic sets out a summary of the performance in the round

process undertaken by the Board in relation to the Group dividend to support the Board in assessing all areas of the Company’s performance, and

stakeholder impacts, both now and over time, ahead of determining whether a Group dividend should be paid. Detailed disclosures on the Severn

Trent Water Limited dividend can be found within that company’s Annual Report and Accounts and Annual PerformanceReport, to be published

on15 July 2024.

To make the investment needed,

companies need committed long-term

investors to fund the significant

investment for AMP8 andbeyond,

improve service delivery for

customers and the environment over

time, whilst promoting

intergenerational fairness. The

Board’s assessment included

consideration of:

– Gearing impacts, in particular that

dividends should support

appropriate gearing to maintain

the balance of risk between

existing equity and debt investors.

– Attracting investment in the sector,

recognising that dividends are a

key factor in investment decisions

for shareholders, which represent

the main return to equity both now

and to promote long-term

investment into the sector.

– Investor expectations to earn a fair

return on their investment and the

higher risk taken by equity

investors relative to debt investors.

Interests of shareholders and

debt investors, and the need to

act fairly between members of

the Company

Following this assessment, in line

with our formal dividend policy, the

Board determined that the proposed

dividend would not impact the

financial health of the regulated

company, nor its credit ratings. The

Board also considered that the

proposed dividend was supported by

the regulated company performance

in the round for customers and the

environment, both now and over

time. The Board therefore proposing

a final dividend of 70.10 pence per

share, to be paid on 17 July 2024.

Decision in determining

whether a dividend should

bepaid

The Board considered the proportion of measures where targets were achieved,

where targets were not achieved and assessed the Company’s performance

across its performance commitments relative to other companies.

The Board undertook deep dives into challenging areas, which included

investment plans for how performance could be improved – for example, the

Board instigated specific reviews as follows:

– Deep dive on the Company’s

performance and plans on

riverhealth. Read more on page 36.

– Deep dive on the Company’s

performance and use of CSOs. You

can read more about the Company’s

dedicated spills improvement

programme on page 38.

– Deep dive on the Barlaston

pollution. Read more on page 23.

The Board considered an assessment

against the EA’s overall framework,

including EPA and how the Company

performed both in year and over time,

and opportunities to improve the

Company’s performance through

investment or operational

improvements.

This reporting-based approach is supported by site visits to bring operational

challenges to life and enable the Board to meet employees involved first hand.

Read more on pages 132 and 133.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 131

GOVERNANCE REPORT

OUR

CULTURE

Why is culture

important to the

Board?

Culture drives effective

thinking, behaviour and

action. As such, it is

crucial that we have

the necessary culture in

place inorder to achieve

the Company’s purpose of

‘taking care of one of

life’sessentials’.

Severn Trent’s culture, underpinned by

our Code of Conduct “Doing the Right

Thing”, ensures that the Group’s values

are embodied by our people and teams

when they make decisions and elect to

take a certain course of action. This builds

trust and fosters an environment of

transparency, open communication

andcollaboration.

The Board recognises the need for the

Group’s culture to be inclusive, so that all

colleagues are able to bring their whole

selves to work, fulfil their potential and

perform at their best so, as an organisation,

we can deliver our strategy. Culture is also

a key ingredient in attracting and retaining

the talent we need in the workforce to

deliver for our customers and other

stakeholders, both now and in the future.

Itis also inextricably linked to our

succession planning processes.

The Board is cognisant that each Director

must act with integrity and lead by example

in order to promote the desired culture,

which is why Board members complete the

same mandatory e-learning modules as

colleagues, covering topics including Doing

the Right Thing, Anti-Bribery and Anti-

Fraud, and Modern Slavery Awareness.

Our values

How does the Board satisfy itself that our culture

is aligned with our purpose, values and strategy,

and is embedded throughout the Group?

The Board spends a significant amount of time engaged in activities that provide insight into

Severn Trent’s culture. Through this engagement with our people, the Board can observe

howthe culture is established throughout the Group, aligned across directorates and

demonstrated by each and every colleague. More detail is provided below.

Company Forum

Our chosen workforce engagement mechanism, the Company

Forum, provides an opportunity for employee and Trade Union

representatives to meet with Board members on a regular basis,

helping them to stay connected to the direction of the Company

and be involved in business decisions.

Members of the Board and Executive Committee attend the

Company Forum on a rotational basis, so each Director has the

opportunity to listen directly to what employees have to say and

for our employees to hear about the matters that the Board is

reviewing and considering. Agendas are comprehensive and

varied, so attendance at the Company Forum

affords Board members a better

understanding of day-to-day operations, the

practical execution of strategy and the cultural

context in which employees work. It ensures

that views from a diverse cross section of the

workforce – in terms of seniority, gender,

ethnicity, tenure of employment and job types

– are considered in Board discussions and

decision making, and each meeting generates

wide-ranging exchanges of opinion and insight.

Feedback from the Company Forum

consistently indicates the great value placed

on the attendance of Board members.

Through attendance at the Company Forum,

Directors can observe whether the Board’s

chosen workforce engagement mechanism

remains effective. Directors provide feedback

to the Board as a whole through reports tabled

at subsequent Board meetings.

Read more about our values on

pages 2 and 3.

132 SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

Site visits

Board members frequently undertake site visits to gain further insight into our culture

bymeeting colleagues whilst observing the Group’s operations in action. Our values are

truly brought to life in the way colleagues behave in carrying out their roles, and this is

really seen during site visits. Board members use these opportunities to observe the

commitment and dedication of our people, who work tirelessly to supply our essential

services to customers and communities, whilst also increasing their understanding of how

the systems and processes we have in place support our workforce to deliver consistent

operational performance.

Board members are invited

to attend leadership events

that are held during the

year, to hear directly the

key messages we are

sharing with our managers

about our company’s

strategy, current

performance and future

plans. The events also

bring our leaders together

to build networks and

provide opportunities for

collaboration and

development of solutions

for the challenges we face

as a business.

What does the Board

do to assess culture?

The Board holds the CEO and the Executive

Committee to account for creating and

fostering a positive culture, and therefore

continually assesses that the necessary

culture exists to deliver our strategic

goals. This is facilitated through dedicated

agenda updates at Board and Committee

meetings and Directors are able to draw

on their experiences observed first hand

as part of their discussions on culture.

Employee engagement survey

The Board reviews the results of the

annual employee engagement survey. The

Board receives data on how engaged our

workforce is compared to our peers and

how Severn Trent’s values link to our

purpose and affect colleague behaviours.

The Board places great importance on

understanding the strengths and

opportunities identified by colleagues

and actions are monitored through to

completion. The Board also considers

regular agenda topics structured around

our people. Read more on pages 112 to 113.

Workforce policies and practices

The Remuneration Committee and Board

review, at least annually, the wider

workforce policies and practices to

ensure they remain consistent with the

Company’s values and support its

long-term sustainable success in light of

its obligations under the 2018 Code. Read

more about how we invest in and reward

our people on pages 26 to 30 and in the

Directors’ Remuneration Report from

page 169.

Employee voice and engagement

The Board receives feedback from the

workforce on the various company-wide

initiatives in place to enable two-way

inclusive dialogue and facilitate open and

effective communication. The Board uses

this information to satisfy itself that these

well-established communication and

engagement mechanisms, including the

Company Forum, remain effective and

well-utilised, and cover the full breadth of

the organisation. Read more on pages 112

to 113.

Board members visited our Witches Oak water treatment works construction site and Church Wilne

laboratories during November 2023

Sarah Legg

Chair of the Audit and

Risk Committee

Kevin Beeston

Senior Independent

Director

Board members attend

meetings of the four

employee advisory groups

– LQBTQ+, Ethnicity,

Disability, and Women in

STEM and Ops – to hear

about the progress made

against our diversity and

inclusion plans across the

business. Outputs from

these sessions are used

toshape future Board

agenda topics and

employee updates.

Leadership events

Employee advisory groups

People from all backgrounds

want to knowtheir voice

and contribution matter.

Thework of our employee

advisory groups shines

a light on D&I activity

acrossour business,

attracting and fostering

talent from all backgrounds

to ensure our company

reflects the customers

andcommunities we serve.

Our leadership events

connect the dots between

individual managers and the

goals of our organisation.

Seeing first hand the

strengthof that connection,

and the energy managers

get from their work, further

promotes our culture of

autonomy and trust.

133SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024

GOVERNANCE REPORT

BOARD OF DIRECTORS

We have a strong, experienced Board, with a

diverse range of professional backgrounds,

skillsand perspectives.

The collective experience of the Directors and the diverse skills and

experience they possess enable the Board to reach decisions in a

focused and balanced way, supported by independent thought and

constructive debate, which is crucial to ensuring the continued

long-term success of the Company. Integrity and mutual respect are

the cornerstones of relationships between our Directors, with a Board

dynamic that supports open and honest conversations to ensure

decisions are taken for the long-term success of Severn Trent in full

consideration of the impact on all stakeholders.

Effective succession and contingency planning has enabled thesmooth

transition of recent Board appointments during the year, including the

Chief Financial Officer, the effective handover of the Audit and Risk

Committee Chair position and recruitment of Richard Taylor, who joined

the Board as an Independent Non-Executive Director on 1 April 2024.

Christine Hodgson CBE

BSc (Hons), FCA

Chair

Appointed:

Independent Non-Executive

Director on 1 January 2020, Chair

on 1 April 2020.

Career and experience:

Until her appointment as Chair of

the Severn Trent Board, Christine

was the Executive Chair of

Capgemini UK Plc, one of the

world’s largest technology and

professional services groups.

Christine joined Capgemini in 1997

and built her career in a variety of

roles including CFO for Capgemini

UK Plc and for the Global

Outsourcing business, CEO of

Technology Services North West

Europe and the Global Head of

Corporate Social Responsibility.

Christine was previously an

Independent Non-Executive

Director of Ladbrokes Coral Group

Plc and Senior Independent

Director and Chair of the

Remuneration Committee at

Standard Chartered Plc.

In January 2020, Christine was

appointed Commander of the Order

of the British Empire in the Queen’s

New Year Honours for services

toeducation.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Christine has extensive Board and

governance experience, as well as

a deep understanding of business,

finance, technology and leadership.

She is a committed advocate of the

need for companies to serve all of

their stakeholders effectively and

deliver their social purpose.

Christine is a Fellow of the Institute

of Chartered Accountants in

England and Wales.

Key external appointments:

– Chair of Newton Group

Holdings Limited

– Non-Executive Director of

Spencer Stuart

– Senior Pro-Chancellor and

Chair of Loughborough

University Council

Liv Garfield CBE

BA (Hons)

Chief Executive

Appointed:

Chief Executive on 11 April 2014.

Career and experience:

Before joining Severn Trent, Liv

was Chief Executive Officer of

Openreach, part of the BT Group,

where she spearheaded and

oversaw the commercial roll-out of

fibre broadband to two-thirds of the

country. She joined BT in 2002 and

held the pivotal roles of Group

Director of Strategy and

Regulation, Managing Director

Commercial and Brands, Global

Services and UK Customer

Services Director. From 1998 to

2002, Liv worked for Accenture as a

consultant in the Communications

and High-Tech Market Unit,

designing and implementing

business change solutions across a

number of industry sectors.

In October 2020, Liv was appointed

Commander of the Order of the

British Empire in the Queen’s

Birthday Honours for services to

the water industry.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Liv brings to the Board a wealth of

experience managing customer

service delivery and complex

infrastructure and organisations in

a regulated environment. She has

vast knowledge of developing and

implementing strategy, and is

passionate about ensuring

businesses operate sustainably.

Key external appointments:

– Non-Executive Director of

Water UK

– Non-Executive Director of

Brookfield Asset Management

Limited

– Director of Water Plus Limited

– joint venture with United

Utilities

– Chair of the Council for

Sustainable Business

– Member of the Takeover Panel,

and its Hearings Committee and

Nomination Committee

– Member of the Government Net

Zero Council

– Member of the UK Investment

Council

– Member of The 30% Club

Kevin Beeston

FCMA

Senior Independent

Non-Executive Director

Appointed:

Independent Non-Executive

Director on 1 June 2016, Senior

Independent Non-Executive

Director on 20 July 2016.

Career and experience:

Kevin spent 25 years at Serco Plc,

where he held the roles of Finance

Director, Chief Executive and finally

Chairman until 2010.

Kevin was previously Chairman

of Domestic & General Limited,

Partnerships in Care Limited,

Equiniti Group Plc and Elysium

Limited and was also a

Non-Executive Director of IMI Plc,

Marston Corporate Limited and The

Premier League.

Until February 2020, Kevin was

Chairman of Taylor Wimpey Plc,

where he had been on the Board

since 2010.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Kevin has a wealth of commercial,

financial and high-level

management experience.

Kevin has recent and relevant

financial experience as a Fellow

of the Chartered Institute of

Management Accountants.

Key external appointments:

– Senior Non-Executive Director

of Turnstone Equityco 1 Limited

(trading as Integrated

DentalHoldings)

Helen Miles

ACMA

Chief Financial Officer

Appointed:

Chief Financial Officer Designate on

1 April 2023, Chief Financial Officer

on 6 July 2023.

Career and experience:

Helen joined Severn Trent in

November 2014 as the Chief

Commercial Officer, and in 2020

became the Capital and

Commercial Services Director,

before being appointed as Chief

Financial Officer Designate in April

2023 and formally taking on the

role of Chief Financial Officer in

July 2023.

Helen was previously Chief

Financial Officer for Openreach,

part of the BT Group. Prior to the

BT Group, Helen worked in a variety

of organisations including Bass

Taverns, Barclays Bank and

Compass Group.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

An experienced finance

professional, Helen has delivered

major business transformation and

infrastructure projects within the

Group and across a variety of

sectors including telecoms, leisure

and banking.

Helen brings a breadth of

operational and commercial

knowledge to the Board, having

worked within a range of

regulated businesses.

Helen has recent and relevant

financial experience as a member

of the Chartered Institute of

Management Accountants.

Key external appointments:

– Non-Executive Director of

Breedon Group Plc

Tom Delay CBE

BSc (Hons), MBA, CEng,

MIMechE

Independent Non-

Executive Director

Appointed:

Independent Non-Executive

Director on 1 January 2022.

Career and experience:

Tom was Chief Executive of the

Carbon Trust from 2001 until March

2024. During that time, he grew the

company to become a world leader,

advising businesses and

governments on carbon emissions

reduction and the development of

low-carbon technologies, markets

and businesses. More recently, he

took the company’s unique

capabilities further afield,

extending its mission to accelerate

the move to a sustainable,

low-carbon future.

A chartered engineer with

extensive experience of the energy

sector, Tom worked for Shell for 16

years in a variety of commercial

and operational roles before

moving into management

consultancy with McKinsey and

Company and then as a Principal

with the Global Energy Practice of

AT Kearney.

Tom is a member of the advisory

boards of the Centre for Climate

Finance and Investment at

ImperialCollege London and the

Global CO

Initiative at the

University of Michigan.

In 2018, Tom was appointed

Commander of the Order of the

British Empire by the Queen

forservices to sustainability

inbusiness.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Tom brings extensive strategy,

sustainability, energy and

engineering experience to

the Board.

Key external appointments:

– Member of the advisory board of

the Centre for Climate Finance

and Investment at Imperial

College London

– Member of the advisory board of

the Global CO

Initiative at the

University of Michigan

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024134

Board composition at a glance

Key

A Audit and Risk Committee

Corporate Sustainability

Committee

N Nominations Committee

Remuneration Committee

Treasur y Committee

Disclosure Committee

E Executive Committee

Denotes Committee Chair

Gender

representation

as at 21 May 2024

Minority ethnic

representation

as at 21 May 2024

Board independence

as at 21 May 2024

Chair

(Independent on appointment)

Executive Directors

Senior Independent Director

Independent Non-Executive Directors

Chair and Non-Executive Director tenure

as at 21 May 2024

Male: 3

Female: 5

Richard Taylor 1 month

Christine Hodgson 4 years 4 months

Tom Delay 2 years 4 months

Sharmila Nebhrajani 4 years

Sarah Legg 1 year 6 months

White British: 6

Minority ethnic: 2

7 years 11 monthsKevin Beeston

Sarah Legg

MA, MSc, FCMA, FCT

Independent Non-

Executive Director

Appointed:

Independent Non-Executive

Director on 1 November 2022.

Career and experience:

Sarah has spent her entire career

in financial services with HSBC in

various finance leadership roles.

She has been the Group Financial

Controller, a Group General Manager,

and also Chief Financial Officer for

HSBC’s Asia Pacific region.

Sarah is currently a Non-Executive

Director at Lloyds Banking Group

Plc, Chair of its Audit Committee

and a member of its Risk and

Responsible Business Committees,

and a Non-Executive Director of

Man Group Plc where she also

serves on its Audit and Risk

Committee and Nominations and

Governance Committee.

Sarah is also Chair of the Campaign

Advisory Board at King’s College,

Cambridge University, Board

Member of the Audit Committee

Chairs’ Independent Forum and

Trustee of the Lloyds Bank

Foundation for England and Wales.

Sarah also spent eight years as a

Non-Executive Director on the

board of Hang Seng Bank Limited,

a Hong Kong listed bank.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Sarah brings to the Board

wide-ranging corporate finance

and significant audit and risk

experience gained in the financial

services sector.

Sarah has recent and relevant

financial experience as a Fellow of

both the Chartered Institute of

Management Accountants and the

Association of Corporate Treasurers.

Sarah is the Group’s designated

Non-Executive Director in respect

of Cyber Security.

Key external appointments:

– Non-Executive Director of

Lloyds Banking Group Plc

– Non-Executive Director of Man

Group Plc

– Trustee of Lloyds Bank

Foundation for England and

Wales

– Chair of the Campaign Advisory

Board at King’s College,

Cambridge

– Board Member of the Audit

Committee Chairs’ Independent

Forum

Sharmila Nebhrajani OBE

MA (Hons), ACA

Independent Non-

Executive Director

Appointed:

Independent Non-Executive

Director on 1 May 2020.

Career and experience:

In her executive career, Sharmila

spent 15 years at the BBC, latterly

as Chief Operating Officer for BBC

Future Media and Technology, and

was most recently Chief Executive at

Wilton Park, an executive agency of

the UK Foreign and Commonwealth

Office convening international

dialogues for senior policy makers

from around the world with a special

focus on global health.

Sharmila is Chairman of the

National Institute for Health and

Care Excellence, the organisation

responsible for assessing the

clinical and cost effectiveness of

medical innovations in the NHS, and

is a Non-Executive Director at

Oxford University, Halma Plc, ITV

Plc and Coutts Bank.

Previous Non-Executive roles

include Deputy Chair of the Human

Fertilisation and Embryology

Authority and Chairman of the

Human Tissue Authority, and she

also has served on the board of the

Pension Protection Fund.

Sharmila was appointed Officer of

the Order of the British Empire in

2014 for services to medical

research.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Sharmila has vast Board and

governance experience, gained in a

variety of roles spanning the private

sector, public sector and NGOs. A

chartered accountant, she brings

insight from a wide range of

regulated sectors, including

medicine, bioethics, financial

services and the media.

Key external appointments:

– Chairman of the National

Institute for Health and Care

Excellence

– Non-Executive Director of ITV Plc

– Non-Executive Director of

Halma Plc

– Non-Executive Director of

Coutts & Company

– Member of Council of University

of Oxford

– Trustee of the Thomson Reuters

Founders Share Company

Gillian Sheldon

BSc (Hons)

Independent Non-

Executive Director

Appointed:

Independent Non-Executive

Director on 1 November 2021.

Retired:

14 May 2024.

Career and experience:

Gillian is Managing Director and

Vice-Chair of the UK Investment

Banking Division of Morgan Stanley

where she provides advice on a

broad range of complex

transactions to clients across

multiple industries. Gillian is also a

member of the Salesforce Europe,

Middle East and Africa Advisory

Board, providing strategic guidance

and supporting the company’s

growth into international markets.

Gillian was previously a Senior

Advisor at Credit Suisse within the

Investment Banking Division. Her

previous experience includes roles

at N M Rothschild & Sons and as a

Trustee and Chair of the Investment

Committee of BBC Children in

Need. Until February 2021, she was

the Senior Independent Director at

Capita Plc. Gillian is also a

Corporate Board member of the

Royal Academy.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Gillian brings to the Board

extensive strategy, corporate

finance, risk management and

M&A experience.

Gillian has recent and relevant

financial experience gained

through her roles in the banking

and finance sectors.

Key external appointments:

– Member of the Salesforce

European Advisory Board

– Managing Director and

Vice-Chair of UK

InvestmentBanking Division

ofMorgan Stanley

– Corporate Board Member of

the Royal Academy

– Board Member of Business LDN

Gillian stepped down from the

Board on 14 May 2024 to focus on

her recent Executive appointment,

having served as a Director since

1 November 2021.

Richard Taylor

BSc (Hons), FCA

Independent Non-

Executive Director

Appointed:

Independent Non-Executive

Director on 1 April 2024.

Career and experience:

Richard is Chair of Greenhill & Co

International, an investment bank

focused on providing financial

advice globally on significant

mergers and acquisitions,

restructuring, financing and capital

advisory to companies and other

organisations. Greenhill was

acquired by, and became part of,

Mizuho Financial Group in 2023.

Prior to joining Greenhill in 2020,

Richard was Chairman of Global

Corporate and Investment Banking

at Barclays Plc, where he had been

since 2011. Prior to joining

Barclays, Richard spent nearly 11

years at Bank of America Merrill

Lynch, where he was Head of UK

and Ireland Corporate and

Investment Banking.

Richard holds a degree in civil

engineering and is a great advocate

for organisations which

demonstrate strong social purpose.

Skills and attributes which

support our strategy and deliver

long-term sustainable success:

Richard brings to the Board

extensive strategy, corporate

finance, risk management and

M&A experience. He also has vast

experience of organisations with

strong social purpose, in particular

through his roles as Trustee of

Teach First and as a Board member

of The Sutton Trust.

Richard has recent and relevant

financial experience gained

through his roles in the banking

and finance sectors and as a Fellow

of the Institute of Chartered

Accountants in England and Wales.

Key external appointments:

– Chair of Greenhill &

CoInternational

– Trustee of Teach First Limited

– Board member of The

SuttonTrust

John Coghlan

BCom, ACA

Independent Non-

Executive Director

John stepped down from the Board

on 31 December 2023, having served

as a Director since 23 May 2014.

James Bowling

BA (Hons) Econ, ACA

Chief Financial Officer

James stepped down from the

Board on 6 July 2023, having served

as a Director since 1 April 2015.

Hannah Woodall-Pagan

BSc (Hons), FCG

Group Company

Secretary

Appointed:

2 December 2022.

Hannah joined Severn Trent in

October 2015 and became Group

Company Secretary on 2 December

2022. She has extensive experience

of operating in listed companies and

regulated sectors, gained in a

number of senior leadership roles

spanning the FTSE100 and FTSE250

and is responsible for providing

governance advice and guidance to

the Board and senior management,

as well as leading the Company

Secretariat function. Hannah is a

Chartered Company Secretary,

being a Fellow of the Chartered

Governance Institute, and she also

attended INSEAD Business School.

In addition to her role at Severn

Trent, Hannah is a Trustee of

University Hospitals

BirminghamCharity.

Directors serving for

part of the year

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 135

GOVERNANCE REPORT

BOARD SKILLS

An effective Board requires the right mix of skills and experience,

complemented by individual approaches and thinking styles reflective of

Directors’ varied backgrounds. As demonstrated by their biographies on

pages 134 to 135, our Board members together form a diverse and effective

team focused on promoting the long-term sustainable success of the Group.

The skills matrix below details some of the key

skills and experience that our Board has

identified as particularly valuable for the

effective oversight of the Company and

execution of our strategy, and indicates which

Directors bring those particular skills to the

boardroom from their roles both within and

outside Severn Trent.

The skills matrix is reviewed at least annually

to make sure it continues to meet business

needs, today and in the future. It is aligned

with our strategic priorities, to ensure the

Board remains fully equipped to deliver our

strategy and purpose, and provide challenge

to the experienced and knowledgeable

Executive Committee.

Liv Garfield CBE

BA (Hons)

Chief Executive

Helen Miles

ACMA

Chief Financial Officer

Shane Anderson

BA (Hons) Econ

Director of Strategy

and Regulation

Jude Burditt

BA (Hons)

Director of Customer

Solutions

Steph Cawley

BA (Hons), MSc

Director of Customer

Operations

Executive

Committee

Full biographies are

available on the

Severn Trent Plc

Website.

As at 21 May 2024

E E

Skills – mapped to strategic outcomes

Strategy

Customer

Utility sector

M&A

Corporate finance/Treasury

Accounting

Brands

Regulation

Technology/Innovation/Cyber

Science and engineering

Sustainability, including

climate change

Commercial procurement

Construction/

Infrastructure delivery

Large capital programmes

People management

Political affairs

Societal

Kevin

Beeston

Tom Delay

Liv Garfield

Christine

Hodgson

Sarah Legg

Helen Miles

Sharmila

Nebhrajani

Richard

Taylor

Skills to support our strategy and deliver

long-term sustainable success

Our Corporate Strategy

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024136

COMPLIANCE WITH THE UK

CORPORATE GOVERNANCE CODE 2018

The Group’s long-term sustainable success is

contingent on our commitment to exceptional

corporate governance standards and the

Board continues to be guided in its approach

through the application of the UK Corporate

Governance Code 2018 (the ‘2018 Code’).

We believe good corporate governance is about

effective oversight, including how we provide

confidence both in the delivery of our

performance to our stakeholders and in how

we report on our performance. With this in

mind, we welcome the proposed

enhancements to the UK Corporate

Governance Code announced by the Financial

Reporting Council in January 2024, against

which we will report our compliance in our

2026 Annual Report.

Through their work, the Board and

Committees uphold the provisions of the 2018

Code and during the year ended 31 March

2024, we have fully applied the principles of

good governance and have been compliant

with the 2018 Code, which is the version of the

UK Corporate Governance Code applicable to

the 2023/24 reporting period.

The Board remains dedicated to open and

transparent reporting, and the table below

sets out where shareholders can evaluate how

the Company has applied the principles of the

2018 Code and where key content can be found

in this report.

The full wording of the 2018 Code is available

on the Financial Reporting Council’s website.

Board Leadership and

Company Purpose

The role of the Board is set out in the

Governance Report from page 128.

The Chair’s Introduction to Governance

can be found on pages 128 to 130.

How the Board engages with stakeholders

is detailed on pages 108 to 121.

The Board’s Section 172 Statement is

included on pages 122 to 125.

An overview of our purpose and values,

including how these were established, is

set out on pages 2 to 3.

How the Board oversees the Company’s

strategy is detailed on pages 140 to 141.

A list of our Group policies and practices

can be found on pages 126 to 127.

How we assess risk and our Viability

Statement is set out on pages 92 to 107.

Our strategy, including performance

against our ODIs and KPIs, can be found

on pages 2 to 81.

Division of Responsibilities

The Governance Framework set out on

page 138 provides an overview of the

Board Committees in place at Severn

Trent. Further details of each Committee,

along with members’ attendance during

the year, are provided in the respective

Committee Reports.

The division of responsibilities between

the Chair and CEO is clearly defined (page

139) and set out in writing within our

Charter of Expectations. We fully support

the separation of these two roles.

Composition, Succession

and Evaluation

Details about the composition of the

Board, along with individual Board

members’ biographies and tenure,

are on pages 134 to 135.

The outputs of this year’s external Board

evaluation are set out on pages 146

to 147.

The Nominations Committee Report is on

pages 148 to 152 and provides information

on the Committee’s work this year,

including Board succession planning.

Audit, Risk and

Internal Control

Our approach to risk and our assessment

of our Principal Risks are outlined on

pages 92 to 102.

The Audit and Risk Committee Report, set

out on pages 153 to 161, provides details of

the Committee’s review of our risk and

control environment, our fair, balanced

and understandable process, and its

responsibilities relating to Internal and

External Audit.

Remuneration

The Remuneration Committee,

comprising only Non-Executive Directors,

is responsible for developing the

Remuneration Policy and determining

Executive and senior management

remuneration. The Directors’

Remuneration Report can be found

on pages 169 to 194. The proposed

Remuneration Policy, to be put to

shareholders at the 2024 AGM, can be

found on pages 195 to 204.

James Bowling

BA (Hons) Econ, ACA

Stepped down from the

role of Chief Financial

Officer at the AGM in

July2023 and retired

from the business in

December 2023

Didar Dhillon

BA (Hons), GLDP

Group General Counsel

James Jesic

BSc (Hons), PhD,

MIChemE, CEng

Director of Capital and

Commercial Services

Neil Morrison

BSc (Hons),

Chartered FCIPD,

FRSA

Director of Human

Resources

Bob Stear

MEng (Hons), PhD,

MCIWEM, CWEM,

FIWater

Chief Engineer

E E E

Key

Disclosure

Committee

Executive

Committee

Denotes Committee

Chair

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 137

GOVERNANCE REPORT

We pride ourselves on having a high-functioning, well-composed,

independent and diverse Board and being transparent in all that we do.

Maintaining the highest standards of governance is integral to the

successful delivery of our strategy.

Our Board-led Governance Framework ensures

that the Board remains effective in both making

decisions and maintaining oversight by mapping

where accountability sits in line with the Board’s

delegated authorities, whilst also adhering to our

well-established culture of Doing the Right Thing.

Informing

Reporting

The Chief Executive and the Severn Trent Executive Committee (‘STEC’)

Responsibility for the development and implementation of the Group’s strategy and overall commercial objectives rests with

the Chief Executive, who is supported by STEC.

STEC oversees the Steering Committees and Working Groups needed at an operational level to achieve delivery of the Group’s

strategy. The Chief Executive, Chief Financial Officer and other members of STEC are responsible for providing updates on

Executive matters at Board meetings through standing reports.

Disclosure Committee

An Executive Committee responsible for overseeing the Group’s compliance with its disclosure obligations, considering the

materiality, accuracy, reliability and timeliness of information disclosed and assessment of assurance received.

Board Committees

The Board delegates specific areas of focus to its Committees, which comprise Non-Executive Directors only. Committee

members have the requisite skills and experience to enable the Committee to deep dive into certain topics of importance on

behalf of the Board. The Chair of each Committee formally reports to the Board at every meeting, demonstrating

accountability for the recommendations made by the Committee to the Board and ensuring that the Board retains suitable

oversight of the matters delegated to its Committees.

Audit and Risk

Committee

Corporate

Sustainability

Committee

Nominations

Committee

Remuneration

Committee

Treasury

Committee

Assists the Board in discharging

its responsibilities for the

integrity of the Company’s

financial statements, risk

management, assessment of

the effectiveness of the system

of internal control and the

effectiveness of Internal and

External Auditors.

Provides guidance and direction

to the Company’s sustainability

strategy and sustainability

matters linked to policies,

pledges and commitments,

including River Health,

Anti-Slavery and Human

Trafficking, our Community

Fund, Societal Strategy and the

Triple Carbon Pledge.

Assists the Board by keeping

Board composition under review

and makes recommendations in

relation to Board appointments.

The Committee also assists the

Board on issues of Executive

Director succession and

contingency planning, conflicts

of interest and independence.

Determines the Company’s

policy on the remuneration of

Executive Directors, other

members of the Executive

Committee and the Chair of the

Board. The Committee also

reviews workforce policies

and practices.

Provides oversight of treasury

activities in implementing the

Group’s Funding and Treasury

Risk Management plans

approved by the Board. The

Committee also reviews and

approves the Group Treasury

Policy Statements and

ensuresthat these are

appliedconsistently.

Read more on

pages 153 to 161.

Read more on

pages 165 to 168.

Read more on

pages 148 to 152.

Read more on

pages 169 to 194.

Read more on

pages 162 to 164.

Informing

Reporting

Informing

Reporting

GOVERNANCE FRAMEWORK

The Board

The Board’s role is to ensure the long-term sustainable success of Severn Trent by setting our strategy through which value

can be created and preserved for the mutual benefit of our customers, employees, shareholders and the communities we

serve. In making its decisions, the Board considers the Group’s purpose, strategy and culture, and discusses stakeholders’

wide-ranging views and priorities. The Board also provides rigorous challenge to management and ensures the Group

maintains an effective risk management and internal control systems.

Stakeholder Engagement

See pages 108 to 121.

Section 172 Statement

See pages 122 to 125.

Roles and Responsibilities

See page 139.

Board Activities

See pages 140 to 141.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024138

DIVISION OF RESPONSIBILITIES

As at the date of this report, our Board comprised

the Chair, five Independent Non-Executive Directors

and two Executive Directors. Thereare clear

divisions between Executiveand Non-Executive

responsibilities, which ensure accountability and

oversight.

The roles of Chair and Chief Executive are separately

held and their responsibilities are well defined, set out

in writing in the Charter of Expectations, and regularly

reviewed by the Board. The Chair and the other

Non-Executive Directors meet routinely without the

Executive Directors, and individual Directors meet

outside formal Board meetings in order to gain

first-hand experience of our operations and engage

with our workforce. The Executive Directors meet

weekly as part of the Executive Committee to attend to

the ongoing management of the Group. Any significant

operational and market matters are communicated to

the Non-Executive Directors on a timely basis outside

of Board meetings. The Board is supported by the

Group Company Secretary, to whom all Directors have

access for advice and corporate governance services.

Chair

Christine Hodgson

– Leads our unified Board and is responsible for its effectiveness

and governance.

– Fosters a culture of inclusivity and transparency by demonstrating

the Company’s values, establishing the right ‘tone from the top’.

– Guides the Board in shaping long-term strategy, ensuring alignment

with the Company’s purpose.

– Sets agendas and ensures timely dissemination of information to

the Board, to support sound decision making and allow for

constructive discussion, challenge and debate, in consultation with

the CEO, CFO and Group Company Secretary.

– Responsible for scrutinising the performance of the Executive

Committee and overseeing the annual Board Effectiveness

evaluation process, including identifying required actions.

– Facilitates contribution from all Directors and ensures that

effective relationships exist between them.

– Ensures that the views of all stakeholders are understood and

considered appropriately in Board discussion and decision making.

– Responsible for the composition and evolution of the Board,

together with the Nominations Committee and SID.

Senior Independent Non-

Executive Director (‘SID’)

Kevin Beeston

In addition to his responsibilities as a

Non-Executive Director, the SID also carries

out the following duties:

– Supports the Chair in the delivery of

their objectives.

– Acts as an alternative contact for

shareholders should they have a concern

that is unresolved by the Chair, CEO or CFO.

– Leads the appraisal of the Chair’s

performance with the Non-Executive

Directors.

– Undertakes a key role in succession

planning for the Board, together with the

Board Committees, Chair and Non-

Executive Directors.

Independent Non-Executive Directors

Tom Delay, Sarah Legg, Sharmila

Nebhrajani, Richard Taylor

– Promote high standards of integrity and

corporategovernance.

– Uphold the cultural tone of the Company and monitor

actions to support inclusion and diversity.

– Constructively challenge and assist in the development of

long-term strategy by providing independent insight and

support based on relevant experience.

– Monitor the delivery of strategy by the Executive

Committee and measure the performance of management

within the risk and control framework set by the Board.

– Satisfy themselves that internal controls are robust and

that the external audit is undertaken properly.

– Engage with internal and external stakeholders and feed

back insights to the Board, including in relation to

employees and the culture of the Company.

– Have a key role in succession planning for the Board,

together with the Board Committees, Chair and SID.

– Serve on and chair various Committees of the Board.

Non-Executive Directors

Chief Executive (‘CEO’)

Liv Garfield

– Represents Severn Trent externally to all stakeholders, including the Government,

regulators, customers, suppliers and the communities we serve.

– Sets the cultural tone of the organisation and ensures that the Group operates in a way

that is consistent with its purpose and values.

– Facilitates a strong link between the business and the Board to support effective

communication.

– Develops and implements the Group’s long-term strategy, as approved by the Board,

through leadership of the Executive Committee.

– Responsible for overall delivery of all strategic objectives, ensuring that decisions made

and actions taken support the Group’s long-term sustainable purpose.

– Promotes and conducts Group affairs with the highest standards of integrity, probity and

corporate governance, in line with our strategic framework and values. The CEO’s Review

can be found on pages 13 to 15.

Chief Financial Officer (‘CFO’)

Helen Miles

– Manages the Group’s financial affairs and proposes policies to support sound financial

decision making. The CFO’s Review can be found on pages 84 to 91.

– Supports the CEO in the implementation and achievement of the Group’s strategic

objectives.

– Oversees Severn Trent’s relationships with the investment community.

– Represents Severn Trent externally to all stakeholders, including the Government and

regulators, customers, Pension Trustees for the Company’s defined benefit pension

schemes, lenders, suppliers and the communities we serve.

Executive Directors

Group Company Secretary

Hannah Woodall-Pagan

– Ensures sound information flows to the Board in order for

the Board to function effectively and efficiently, in support of

balanced decision making.

– Advises and keeps the Board updated on Listing and

Transparency Rule requirements and on best practice

corporate governance developments.

– Facilitates a comprehensive induction for newly appointed

Directors, tailored to their individual requirements, and

oversees the Board’s professional development programme.

– Ensures compliance with Board procedures and provides

support to the Chair.

– Co-ordinates the effectiveness evaluation of the Board in

conjunction with the Chair.

– Facilitates the Board’s ongoing engagement with employees.

– Provides advice and services to the Board.

Board and Committee Meeting Attendance 2023/24

Director Role

Board (inc.

Strategy Day)

Audit and Risk

Committee

Corporate

Sustainability

Committee

Nominations

Committee

Remuneration

Committee

Treasury

Committee

Christine Hodgson Chair 10/10 – 4/4 5/5 5/5 –

Liv Garfield Chief Executive 10/10 – – – – –

James Bowling Chief Financial Officer (until 6 July 2023) 4/4 – – – – –

Helen Miles Chief Financial Officer (from 6 July 2023) 10/10 – – – – –

Kevin Beeston Senior Independent Non-Executive Director 10/10 4/4 – 5/5 5/5 5/5

John Coghlan Independent Non-Executive Director

(until31 December 2023)

8/8 3/3 – 3/3 – 3/3

Tom Delay Independent Non-Executive Director 10/10 – 4/4 5/5 – –

Sarah Legg Independent Non-Executive Director 10/10 4/4 4/4 5/5 – 5/5

Sharmila Nebhrajani Independent Non-Executive Director 10/10 – 4/4 5/5 5/5 –

Gillian Sheldon Independent Non-Executive Director

(until 14 May 2024)

10/10 4/4 – 4/4 5/5 5/5

Group General Counsel

Didar Dhillon

– Ensures monthly reporting to the Board on regulatory

and legal risks, including potential claims and/or

prosecutions to ensure that the Board is fully sighted on

such matters and the resulting risks.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 139

GOVERNANCE REPORT

BOARD ACTIVITIES

The Board is committed to

maintaining a comprehensive

schedule of meetings and a forward

agenda to ensure its time is used

most effectively and efficiently, and it

is supported by the Group Company

Secretary to facilitate this. Flexibility

in the programme is important to

permit key items to be added to any

agenda, so that the Board can focus

on evolving and important matters at

the most appropriate time.

Board meeting discussions are structured using a

carefully tailored agenda that is agreed in advance by

the Chair, in conjunction with the CEO and Group

Company Secretary.

A typical Board meeting will comprise the

followingelements:

– Written reports from the Chairs of our Board

Committees on the proceedings of those meetings,

including the key discussion points and particular

matters to bring to the Board’s attention.

– Following every Company Forum, a report on the

topics discussed is circulated and the Directors

who attended that particular session add further

context at the Board meeting.

– Performance reports, including: CEO Overview;

CFO Review; and Operational Performance Reports.

– Deep dive reports into areas of particular strategic

importance, opportunities and risks, to evaluate

progress, provide insight and, where necessary,

decide on appropriate action. Details on some of the

key topics considered during 2023/24 can be found

in our Section 172 Statement on pages 122 to 125.

– Legal and governance updates, including: approval

of arrangements for delegated financial authority

across the Group; review of adequacy of

Whistleblowing Procedures; and approval of the

Anti-Slavery and Human Trafficking Statement.

Time is set aside at the end of every Board meeting

for the Chair to hold a private meeting with

Non-Executive Directors, where it is considered

appropriate, which provides the opportunity for

discussion on key agenda items and other

matterswithout the Executive Directors and

management present.

On the evening before most scheduled Board

meetings, all the Non-Executive Directors meet either

by themselves, or together with the entire Board and

the Group Company Secretary, or with STEC. This time

is usefully spent enabling Board members to build a

rapport with each other and a relationship on a

personal level, share external views and consider

issues impacting the Company, resulting in better

Board dynamics and decision making.

The information on these pages aims to bring the

Board’s rich programme to life.

Key: Strategic objectives

Outcomes Nature People Change

During 2023/24, Board meetings, sessions and site visits were held in the following months:

2023 2024

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Performance and standing items

The Board oversees and challenges

management on performance.

Standing items considered by the Board at its

meetings: CEO’s Overview – CFO’s Review –

Performance Reports – Reportsfrom the Board

Committees – Reports from the Company Forum

– Legal and Governance Updates.

Read more about our PR24 Business Plan on

pages 6 to 7.

Internal controls, risk management

and governance

The Board sets the approach to risk

management and oversees that we have an

effective system of internal controls in place,

whilst promoting responsible leadership and

adherence to our governance framework.

Topics considered by the Board during the

year included: Enterprise Risk Management

Update – Cyber Update – Year End Governance

Matters – Board Objectives – Health, Safety and

Wellbeing – Environment and Zero Pollutions –

Effectiveness of Whistleblowing Procedures

– Anti-Slavery and Human Trafficking

Statement – Annual Insurance Update – Doing

the Right Thing Annual Review – Annual Report

on Reservoir Safety – External Audit Tender –

Annual Review of the Group Authorisation

Arrangements – UK Corporate Governance

Code 2024 – Annual Review of Matters

Reserved to the Board, Charter of Expectations

and Committee Terms of Reference.

Read more about the effectiveness of our

internal controls and risk management

processes on pages 156 to 157.

Strategic and regulatory

The Board sets our strategy through which

value can be created for our stakeholders,

including ourregulators.

Topics considered by the Board during the

year included: PR24 – AMP8 Deliverability

Update – Societal Strategy – Strategic Resource

Option Update – Board Strategy Day Proposal

– Indicative Wholesale Charges – C-MeX –

Cleanest Rivers – Customer Vulnerability

Strategy – Innovation Update.

Read more about our 2023/24 performance on

pages 16 to 17.

Financial

The Board monitors financial performance

and sets parameters for financial

management and strategy within the Group.

Topics considered by the Board during the

year included: Viability and Going Concern

Statements – Group Budget – Final and Interim

Dividends – Annual Report and Accounts –

Performance Update – Defence Readiness

Review – Pension Scheme Update – Post

Investment Appraisal – EU Taxonomy

Disclosure – Annual Tax Update – Treasury

Policy Statement Annual Review – Annual

Funding and Treasury Risk Management Plan

– Investor Relations Strategy.

Read more in the Chief Financial Officer’s Review

on pages 84 to 91.

Our people and culture

The Board seeks to understand employee

views and assesses the culture to ensure it

is nurtured.

Topics considered by the Board during the

year included: Organisation Wide Talent Review

– Diversity and Inclusion Update – Employee

Voice and Engagement – Annual Employee

Engagement Survey Results – Review of

Workforce Policies and Practices – Diversity

and Inclusion Strategy – Gender and Ethnicity

Pay Gap Report.

Read more about Our People on

pages 25 to 30.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024140

PR24 Business Plan

The Board invested a significant amount of time

preparing for PR24, including: understanding the

way in which the Company can deliver positive

customer outcomes and greater environmental

and social value; driving improvements through

efficiency and innovation; and increasing focus on

the long term. To inform this activity, individual

Directors, and the Board as a whole, spent time

engaging with customers, attending community

events and having discussions with the Chair of

the Expert Challenge Panel, Professor Bernard

Crump. The views of over 68,000 customers were

factored into our Business Plan’s development.

PR24 was discussed at every Board meeting

through its development and two additional

Board PR24 strategy sessions were scheduled, in

June 2023 and August 2023, to discuss the

detailed aspects of our Business Plan prior to its

submission. Our Business Plan was submitted to

Ofwat on 2 October 2023.

Read more about our PR24 Business Plan on

pages 6 to 7.

Strategy Day

Every year, the Board holds a dedicated Strategy Day

with the Executive Committee to help consider the

strategic direction of the Company for the short,

medium and long term.

This year’s Strategy Day covered the following topics:

– Being a Purposeful Business – discussing what it

means to be purposeful, our journey to date and

the ongoing direction of travel.

– Fit for a Data-Driven Future – taking stock of our

plans to build capability to derive value from data

and artificial intelligence and exploring what a

data-driven future might look like across our

operational and customer environments.

– A Circular Economy of People – including how we

retain and retrain our people by understanding our

future organisational capabilities.

Company Forum

The Company Forum was convened four times during

2023/24, with Board member attendance as follows:

– 21 June 2023 – Christine Hodgson.

– 27 September 2023 – Tom Delay and Liv Garfield.

– 6 December 2023 – Sarah Legg.

– 13 March 2024 – Liv Garfield.

Other company events

– Severn Trent Plc AGM on 6 July 2023 – attended by

all Directors.

– Leadership Events in October 2023 – attended by

Christine Hodgson and Kevin Beeston.

– Governance Roadshows during January and

February 2024 – hosted by Christine Hodgson.

– Remuneration Policy Consultation Sessions

during January and February 2024 – hosted by

Sharmila Nebhrajani.

Stakeholder engagement

The Board listens to the wide-ranging

views of itsstakeholders to ensure these

are considered inits decision making.

The following stakeholders attending Board

sessions during the year: CEO of Ofwat – Chair

of Ofwat – Chair of the Environment Agency –

Chief Inspector of the Drinking Water

Inspectorate – Chief Executive of Water UK.

Read more about how the Board engages with its

stakeholders on pages 108 to 121.

Site visits

The Board engages with the workforce,

whilst also deepening its understanding

and knowledge of ouroperations.

Green Recovery, Mansfield – inspecting the

progress made on the £76 million (2017/18

prices) scheme to reduce pressure on the local

sewers through the utilisation of nature-based

solutions.

Manufacturing Technology Centre, Coventry

– exploring innovative manufacturing-led

approaches to design and construction,

alongside other future innovation opportunities.

Aarhus Vand, Denmark – visiting the Aarhus

Vand water company, part of the Net Zero

Partnership, to explore areas of innovation and

share learnings. Read more on page 166.

Witches Oak, Derby – observing firsthand the

work undertaken as part of the Green Recovery

Decarbonising Water Resources project.

Read more about the Board’s site visits on

page133.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 141

GOVERNANCE REPORT

BOARD LEADERSHIP

AND COMPANY PURPOSE

The Board’s role is to be effective in

securing the long-term success of

Severn Trent by ensuring the delivery

of our strategy and that its

overarching objectives remain

aligned with the Company’s purpose

and values. Maintaining the highest

standards of governance is integral

to this, together with ensuring that

the Board takes decisions that create

sustainable long-term value for the

mutual benefit of our shareholders,

customers, employees and the

communities we serve.

An effective Board

The operation of our Board is supported by the

collective experience of the Directors and the

diverse skills and experience they possess.

This enables the Board to reach decisions in a

focused and balanced way, supported by

independent thought and constructive debate

between the Directors. Trust and mutual

respect are the cornerstones of relationships

between our Directors, with a Board dynamic

that supports open and honest conversations to

ensure decisions are taken for the long-term

success of Severn Trent in full consideration of

the impact upon all stakeholders.

As outlined on page 139, there is a clear

division of responsibilities between the roles

of Chair and Chief Executive. To allow these

responsibilities to be discharged effectively,

the Chair and Chief Executive maintain regular

dialogue outside the boardroom, to ensure an

effective flow of information.

In order to build relationships, the Non-

Executive Directors have direct and unfettered

access to senior management at all times.

Informal as well as formal contact with the

wider business is encouraged to develop a

deeper understanding of Severn Trent’s

operations and broaden the Non-Executive

Directors’ sources of information. This

engagement provides Non-Executive Directors

with the context to challenge management

effectively and assists with their consideration

of the wider impact of any Board decisions on

stakeholders more broadly. The effectiveness

of the Board is reviewed at least annually and

conducted according to the guidance set out in

the 2018 Code and the Financial Reporting

Council (‘FRC’) Guidance on Board

Effectiveness. You can read more about this

year’s externally facilitated Board

Effectiveness evaluation, which fully adhered

to the Corporate Governance Institute (‘CGI’)

Principles of Good Practice for listed

companies using external board reviewers, on

pages 146 to 147.

Board independence

The independence of the Board is a matter of

utmost importance given the vital role

Non-Executive Directors play in scrutinising

the performance of management and holding

individual Executive Directors to account

against agreed performance objectives. The

Chair regularly holds meetings with Non-

Executive Directors without the Executive

Directors or any management present, and

Non-Executive Directors can obtain

independent professional advice, at the

Company’s expense, in the performance of

their duties. All Directors have access to the

advice and services of the Group Company

Secretary, whose appointment and removal

are matters reserved for the Board.

The independence of our Non-Executive

Directors is formally reviewed by the

Nominations Committee on an annual basis,

and as part of the Board Effectiveness

evaluation. Particular focus is applied to

Directors who have served over six years on the

Board, to ensure that these Directors continue

to demonstrate independent character,

judgment and objectivity. This is assessed by

considering a number of factors including, but

not limited to, the Director’s:

– ability and willingness to make objective

decisions and hold management to account;

– demonstration of independence through

participation at meetings with management

and interactions with stakeholders;

– arm’s-length approach to dealing with

Executive Directors and continued challenge

of management where appropriate; and

– external directorship appointments and

whether these conflict, or have the potential

to cause a conflict, with the Company.

The Nominations Committee and Board

consider that there are no business or other

circumstances that are likely to affect the

independence of any Non-Executive Director

and that all Non-Executive Directors continue

to demonstrate independence. Read more in

the Nominations Committee Report on pages

148 to 152.

All of the Non-Executive Directors who served

during 2023/24 were considered by the Board

to be independent for the purposes of the 2018

Code and the Chair was considered to be

independent upon her appointment.

In accordance with the 2018 Code, all Directors

will retire at this year’s AGM and submit

themselves for reappointment or, in the case of

Richard Taylor, for appointment by

shareholders. Each of the Non-Executive

Directors seeking appointment or

reappointment are considered to be

independent in judgment and character.

Conflicts of interest

Severn Trent Plc has a Conflicts of Interest

Policy in place for all Group companies. Our

Board and its Committees consider potential

conflicts at the outset of every meeting and the

Board formally reviews the authorisation of

any potential conflicts of interest every six

months, with any conflicts being recorded in

the Conflicts of Interest Register. The Conflicts

of Interest Register sets out any actual or

potential conflict of interest situations which a

Director has disclosed to the Board in line with

their statutory duties and the practical steps

that are to be taken to avoid conflict situations.

When reviewing conflict authorisations, the

Board considers any other appointments held

by the Director as well as the findings of the

Board Effectiveness evaluation.

Board members hold external directorships

and other outside business interests and we

recognise the significant benefits that greater

boardroom exposure provides for our

Directors. However, we closely monitor the

nature and number of external directorships

our Directors hold in order to satisfy ourselves

that any additional appointments will not

adversely impact the time commitment to their

role at Severn Trent, and to ensure that all of

our Board members remain compliant with

applicable shareholder advisory groups’

individual guidance on ‘overboarding’. These

requirements specify a limit on the number

of directorships both Executive and

Non-Executive Directors are permitted to

hold and the resultant position is believed to

be consistent with the current guidelines on

overboarding, with no Directors exceeding

these guidelines, as outlined in the AGM Notice

of Meeting. Our Non-Executive Directors

commit sufficient time to discharging their

responsibilities as Directors of Severn Trent

in line with the requirements set out in our

Charter of Expectations. Details of the

Directors’ external directorships can be found

in their biographies on pages 134 to 135.

Directors are required to obtain formal approval

from the Board ahead of undertaking any new

external appointments and before accepting an

additional role, Directors must: declare the

existence of any potential or actual conflicts;

confirm that the role will not breach the

Company’s overboarding limit; and provide the

necessary assurance that the appointment will

not adversely impact their ability to continue to

fulfil their role as a Director. In each case before

granting its consent, the Board considers

carefully whether there would be any impact

on the time commitment required for each

Director, or on the independence and objectivity

required to discharge the agreed

responsibilities of each role.

Approvals were sought from the Board during

the year for Directors’ additional roles and due

consideration was given to any potential

conflicts of interest and ability to devote

sufficient time to the Company before consent

was granted. In each case, the Board

determined that there would be no impact on the

time commitment required for each Director,

nor on the independence and objectivity required

to discharge the agreed responsibilities of each

role. The resultant position is believed to be

consistent with applicable shareholder advisory

groups’ guidelines on overboarding.

The Conflicts of Interest Policy continues to be

applied practically throughout the year, such

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024142

as considering the potential conflict

presentedby Directors having roles on

the Boards of other Group companies.

Schedule of Matters Reserved to

theBoard

To ensure the Board maintains oversight of the

areas material to the delivery of the Group’s

strategy and purpose, the Board undertakes an

annual review of the Matters Reserved to the

Board. The latest review took place in March

2024 and the Board agreed that the Schedule

contained areas appropriate to require Board

involvement, including in relation to strategy,

structure and capital, financial reporting,

controls and communication with stakeholders.

The Board also regularly reviews its skills

matrix to determine whether any additional

skills or development opportunities are needed

in order for the Board to discharge its duties

effectively. The Schedule of Matters Reserved

to the Board is available on the Severn Trent

Plc website.

Strategy

Appropriately evaluated strategic decisions

are crucial to help us to deliver our strategy

and achieve our purpose of ‘taking care of one

of life’s essentials’. Responsibility to all of our

stakeholders for the approval and delivery of

the Group’s strategy and for creating and

overseeing the framework to support its

delivery sits with the Board. During the year,

the Board monitored the implementation of the

Group’s corporate strategy, which was

introduced during 2022/23. As well as standing

strategic items at every Board meeting, the

Board also holds a dedicated Strategy Day with

the Executive Committee to help consider the

strategic direction of the Company for the

short, medium and long term.

Responsibility for the development and

implementation of the Group’s strategy and

overall commercial objectives rests with the

Chief Executive who is supported by the

Executive Committee.

The Directors present their report and the

audited financial statements for the year ended

31 March 2024. The performance review of the

Company can be found within the Strategic

Report. This provides detailed information

relating to the Group, its business model and

strategy, the operation of its businesses, future

developments, and the results and financial

position for the year ended 31 March 2024.

Stakeholder engagement

Stakeholder engagement is central to our

strategy and, as such, a detailed disclosure

setting out stakeholder engagement activity

conducted during the year is included in our

Strategic Report on pages 108 to 121. The

Board ensures that the Company engages

effectively with its stakeholders and

encourages a two-way dialogue in order

that the decisions made by the Board take into

account the views of, and potential impacts on,

stakeholders. Our dedicated Section 172

Statement on pages 122 to 125 sets outhow

the Board has considered and contemplated

the interests of stakeholders. Adetailed

overview of the Board’s engagement with our

workforce is set out on pages 132 to133.

Annual General Meeting (‘AGM’)

Our 2023 AGM was held on 6 July 2023, at

which 79.59% of our shareholders (by voting

capital) voted either in person, through the

Chair of the AGM as their proxy, or by

submitting their proxy forms electronically or

by post. We were delighted to receive in excess

of 92% votes in favour for all of our resolutions,

including in relation to the Directors’

Remuneration Report. Shareholders were

invited to submit questions to a dedicated

AGM mailbox in advance of the AGM and

shareholders could also raise questions

during the AGM via the virtual platform, or in

the room if attending in person. No questions

were posed to the Board in advance of the

AGM, but six questions were asked and

responded to during the AGM.

This year’s AGM is to be held on Thursday,

11 July 2024 at 10.00am and will be

convened as a physical meeting. There

will not be a virtual facility at the 2024

AGM given low utilisation since its

implementation. Shareholders are

encouraged to attend in person in

order to pose their questions to the

Board and take the opportunity to

engage with individual Board

members directly, although

shareholders are also able to

submit questions in writing

through our website in advance

of the AGM. The AGM will be

held at the Severn Trent

Academy, Hawksley Park,

St. Martins Road, Finham,

Coventry, CV3 6PR.

Full details of the

resolutions being

tabledfor

shareholder

approval can be

found in the

Notice of

Meeting on the

Severn Trent

Plc website.

Scan the QR code

toaccess these

documents on

ourwebsite.

Board governance

The requirements of the Board are

clearly documented in the Severn

Trent Plc Articles of Association,

Charter of Expectations and

Schedule of Matters Reserved to the

Board. All of these documents are

available on the Severn Trent Plc

website, along with Terms of

Reference for each of the Board

Committees, the biographies of

individual Board members and their

letters of appointment.

Scan the QR code

toaccess the

Investors section

of ourwebsite.

Corporate website

We continually monitor our website,

severntrent.com, to ensure it is

accessible for our stakeholders.

Thewebsite has a dedicated Investors

section, which includes an overview

of Severn Trent Plc, our history,

company details, results and reports,

along with an investor news section

containing information which may be

of interest to our shareholders.

Annual Report

Our Annual Report is available to all shareholders, who can opt to

receive a hard copy in the post or a PDF copy via email, or download a

copy from our website. We aim to make the document as accessible

as possible and welcome feedback on all of our reports. Scan the QR

code above to access electronic copies of our Annual Reports, past

and present, via our website, or contact the Group Company

Secretary to request a hard copy of this year’s Annual Report.

Scan the QR code to access

our published Annual

Reports on our website.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 143

GOVERNANCE REPORT

COMPOSITION, SUCCESSION

AND EVALUATION

As at the date of this report, our Board comprised the Chair

(who was independent on appointment), five Independent

Non-Executive Directors and two Executive Directors.

The details of their career backgrounds, relevant skills,

Committee membership, tenure and external appointments

canbe found within their individual biographies on pages 134

to 135. Further detail on the role of the Chair and members

ofthe Board can be found on page 139.

Board composition

The Chair, Senior Independent Director and

Non-Executive Directors are each appointed

for a three-year term, subject to annual

re-election by shareholders following

consideration of the annual Board

Effectiveness evaluation outputs. Directors

serving over six years on the Board are subject

to a particularly rigorous review. The current

Letters of Appointment are available on the

Severn Trent Plc website.

The composition and effectiveness of the Board

are subject to regular review by the Nominations

Committee which, in particular, considers the

balance of skills, tenure, experience and

independence of the Board, inaccordance with

the Board Diversity Policy, which is available

on the Severn Trent Plc website.

Any new appointments to the Board result

from a formal, rigorous and transparent

procedure, responsibility for which is

delegated to the Nominations Committee

(although decisions on appointments are

matters reserved for the Board).

The Board and the Nominations Committee

have spent a significant amount of time

considering Board composition during the

course of the year to ensure that the Board has

the right mix of skills and experience, as well

as the capability to provide effective challenge

and promote diversity. This activity was a key

contributor in developing the specification for

Board recruitment activity during the year.

Further information on the work of the

Nominations Committee can be found on

pages 148 to 152.

Directors’ skills and experiences

An effective Board requires the right mix of

skills and experience and, as can be seen from

the individual biographies on pages 134 to 135

and the Board skills matrix on page 136, our

Board members contribute a diverse range of

backgrounds, skill sets and experiences that,

combined together, produce an effective team,

focused on promoting the long-term success

of the Group.

The skills matrix is reviewed at least annually

to ensure that the right balance of skills and

experience is in place to enable the effective

oversight of the Company and execution of

ourstrategy.

Diversity

A diverse organisation benefits from

differences in skills, regional and industry

experience, background, ethnicity, gender,

sexual orientation, religion, belief and age, as

well as culture and personality. The Board is

pleased that Severn Trent is recognised as a

leader in this area and remains focused on

promoting broader diversity and creating an

inclusive culture across the organisation,

including on the Board itself. More details

about the Board Diversity Policy and how the

Company has performed against its Board

Diversity Targets in relation to membership of

the Board and its Committees can be found in

the Nominations Committee Report, on pages

151 to 152.

Development, training and resources

The environment in which we operate is

continually changing. It is therefore important

that our Executive and Non-Executive

Directors remain aware of recent, and

upcoming, developments and keep their

knowledge and skills up to date, so the

composition of the Board continues to operate

effectively and support delivery of our

long-term strategy.

The Board as a whole, and Board members

individually, regularly discuss training topics

with the Group Company Secretary and, as

required, we invite professional advisers and

subject matter experts to provide in-depth

updates. These updates are not solely

reserved for legislative developments but aim

to cover a range of strategic issues including,

but not limited to, environmental deep dives,

the economic and political environment,

sustainability, technology and innovation. Our

Group Company Secretary also provides

regular updates to the Board and its

Committees on regulatory and corporate

governance matters.

The aim of the training sessions is to refresh

and expand the Board’s knowledge and skills.

In doing so, the Directors can contribute to

discussions on technical and regulatory

matters more effectively. The sessions also

serve as an opportunity for the Board to

discuss strategy, performance and risks with

management below Executive Committee level

and gain further direct insight into our

businesses and management capability.

The Board visited our

Green Power site in

Derby during April 2024

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024144

During the year, the Board took part in a number

of training and deep dive sessions, including in

relation to PR24, environmental performance,

customer affordability and vulnerability,

exceptional weather preparedness, innovation

and diversity and inclusion.

Directors also have access to our online

resource library, which is continually reviewed

and updated. The library includes a Corporate

Governance Manual, tailored training and

development content, a Results Centre and

Investor Relations section, and briefings on

regulatory topics. It also contains a further

reading section which covers updates and

guidance on changes to legislation and

corporate governance best practice.

Board succession

Along with ensuring an appropriate mix of

skills and experiences on the Board as a

whole for the effective oversight of the

Company’s strategy and operations, the

composition of the Board is also informed by

the need for orderly succession across key

Board and Committee roles.

The Nominations Committee and Board have

once again applied focus to this important

area over the last 12 months. Following the

announcement on 1 December 2023 that Gillian

Sheldon intended to retire from the Board to

focus on her recent Executive appointment, the

Committee commenced a process to recruit a

successor. Richard Taylor was appointed as an

Independent Non-Executive Director of the

Board from 1 April 2024. Further detail can be

found in the Nominations Committee Report

from page 148.

Induction

We develop a detailed, tailored induction for

each new Non-Executive Director. This

includes one-to-one meetings with the Chair

and each of the existing Non-Executive

Directors. One-to-one meetings are also

arranged with the CEO, CFO and the Group

Company Secretary, along with other

members of the Executive Committee and

Senior Management Team. New Directors also

meet members of the operational teams and

visit our key sites and capital projects to

ensure they gain a detailed understanding of

the water and wastewater businesses, and the

legal and regulatory framework applicable to

the sector, and have a chance to experience

our unique culture first hand. We provide

briefings on the key duties of being a Director

of a regulated water company and proposed

appointees meet with Ofwat ahead of their

formal appointment. Richard Taylor met with

Ofwat during March 2024, ahead of his

appointment to the Board.

We enhance the Board’s induction programme

in light of feedback from new Directors and the

Board Effectiveness evaluation; for example, in

2022, we introduced the Board buddy scheme.

Understanding through

Introductory

meetings

Sessions held in the

first few days and

weeks to ensure that

new Directors are

ableto gain a real

understanding of our

purpose and strategy,

the regulatory

regimeand our core

businessactivities.

Complemented with

Specific deep

divesessions

Deep dive sessions

enable Directors to

explore in detail the

areas of focus for the

Group over the short,

medium and long term,

and deepen their

understanding of

theGroup.

Knowledge reinforced by

Site visits

Site visits allow

Directors to observe

the Group’s operations

in action and meet

colleagues to gain

further insight into our

culture and enhance

their understanding

ofthe organisation

asawhole.

Richard Taylor’s Induction

Chair of: Treasury Committee

Member of: Audit and Risk Committee;

Nominations Committee; and Remuneration

Committee

We welcomed Richard to the Board on 1 April

2024, and his extensive induction programme

is ongoing, covering a range of areas across

the business.

Along with a detailed overview of the water

sector and the regulatory requirements we

operate under, Richard has already attended

a number of sessions covering topics

including governance, stakeholder

engagement and the environment. The

sessions were a mix of virtual and physical

meetings, including visits to a range of

operational sites.

Additional areas of focus for Richard’s

induction have been on matters pertinent to

his roles on the Board Committees.

For his role on the Treasury Committee,

Richard received a detailed overview of the

AMP7 funding strategy and the treasury

policies we have in place, as well as an

introduction to the Group’s Sustainable Finance

Framework and approach to EU Taxonomy.

Richard’s induction for his role on the Audit

and Risk Committee included sessions on the

current risks faced by the Group and risk

management framework, regulatory finance

model, Internal Audit programme and

internal control processes.

In advance of his first Remuneration

Committee meeting, Richard considered the

remuneration structure across the Group, for

both the Executive and wider workforce, and

the Committee’s essential role in assessing

performance in the round.

Richard’s ‘Board Buddy’ is Sarah Legg, who is

the Chair of the Audit and Risk Committee

and is also a member of the Treasury

Committee and Nominations Committee.

I have been enormously impressed with the induction programme we

have in place at Severn Trent, which has enabled me to meet and discuss

a wide variety ofissues with many colleagues and experience at first

hand the focus on being performance driven and sustainability led.

Richard Taylor

Chair of the Treasury Committee

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 145

GOVERNANCE REPORT

YEAR 1

External

YEAR 2

Internal

YEAR 3

Internal

Composition, Succession and Evaluation continued

EVALUATION

Our annual Board evaluation provides the Board, and its

Committees, with an opportunity to consider and reflect on the

quality and effectiveness of its decision making, and the range

and level of discussion, and for each member to consider their

own contribution and performance.

Progress made on evaluation recommendations from 2022/23

The table below sets out the recommendations from the internally facilitated Board Effectiveness evaluation that took place during 2022/23 and

the resultant action taken to address each of them.

Board evaluation review cycle

In consideration of the FRC’s Guidance on Board Effectiveness and the CGI’s

Principles of Good Practice relating to external reviews, the Board has adopted a

three-year assessment cycle, designed to build on momentum in prior years, whilst

also ensuring a rigorous and balanced approach to implementing

incrementalimprovements.

The cycle is set out below. 2023/24 was the first year of a new three-year cycle, and

took the form of an externally facilitated evaluation exercise conducted by

Independent Board Evaluation.

Year 1 – 2023/24

Externally led comprehensive

evaluation: A detailed,

independent assessment of

the Board, Committees and

individualDirectors.

Year 2 – 2024/25

Internally led intermediate

levelevaluation: With a focus

onBoarddynamics, Board

composition and succession.

Year 3 – 2025/26

Internally led lighter touch

evaluation: With a focus on

stakeholder engagement and

Board contribution to strategy

andorganisational culture.

2023/24 Board

evaluation

The Nominations Committee appointed Ffion Hague of

Independent Board Evaluation (‘IBE’) who, having carried

out the previous externally facilitated review during

2020/21, was well placed to observe, and comment on, the

progress made over the last three years. Neither Ffion

Hague nor IBE have any other connection with the Company

or individual Directors.

Ffion held individual interviews with each Director during

March, April and May 2024, and meetings of the Board and

Board Committees were also observed during this time.

The key themes were shared with the Board and

Nominations Committee in May 2024, along with a 2024

action plan. More detail on the evaluation process and the

findings from the review are set out on the next page. In

line with the CGI’s Principles of Good Practice relating to

external reviews and guidance on reporting on board

performance reviews, IBE has reviewed the disclosures

relating to the evaluation set out within the Annual Report

and has agreed that they reflect accurately both the

process followed and the findings of the review.

In line with our Board evaluation review cycle, the next

externally facilitated evaluation will be scheduled for

2026/27 in accordance with the 2018 Code provision that

the Company should undertake an externally facilitated

Board Effectiveness evaluation at least every three years.

Recommendation Action taken

Succession planning and Board composition

Ensure process to enable the smooth succession of Non-Executive

Directors, including the Senior Independent Director, commences

well in advance of scheduled retirements.

Succession planning continues to be a key focus of the Board and a

standing item on the agenda for Nominations Committee meetings.

Robust succession and contingency plans are in place for all roles.

Board agenda

Notwithstanding the well-structured agendas which comprise an

optimal mix of strategic and operational items, consideration

should be given to:

– scheduling key strategic and complex regulatory topics earlier

on the Board agenda to ensure sufficient time for discussion and

debate; and

– allocating more time on the Board agenda to discuss strategic

developments and opportunities, as well as innovation

initiatives, both within and outside of the utilities sector.

The Board’s forward agenda is regularly reviewed to ensure that:

– all matters are appropriately scheduled for discussion at future

Board meetings; and

– sufficient time is devoted to the discussion of strategic and

innovative topics.

The Board also visited Aarhus Vand in Denmark during the year to

observe innovative approaches being adopted in waste and water

networks to inform future discussion on this topic.

Board reports

Notwithstanding the high quality of Board reporting, there was

anopportunity to enhance executive summaries and articulate

keytakeaways within Board reports to facilitate focus of

Boarddiscussions.

The Board’s feedback on reporting has been incorporated into the

Group’s report writing training and used to formulate a new suite

ofreport templates which highlight key information for discussion

atmeetings.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024146

December

2023:

Selection and

appointment

The Nominations Committee appointed IBE, led by Ffion Hague, as the independent external facilitator for the Board Effectiveness evaluation.

IBE is a standalone consultancy of independent practitioners, working solely on board effectiveness reviews. IBE does not provide other services

to the Company and has no connections with any of the Directors, other than the fact that IBE undertook the externally facilitated Board

Effectiveness evaluation in 2020/21.

Terms of engagement were established ahead of the review commencing and, through this process, it was agreed that the Senior Independent

Director would be Ffion’s key contact should there be any concerns about the way the process was being managed.

January 2024: Evaluation scope

The scope for the evaluation was agreed to cover a formal and rigorous evaluation of the performance of:

The Board The Board

Committees

The Chair Individual Directors

– Shareholders – oversight and relationship

– Strategy – oversight and implementation

– Board focus, priorities and use oftime

– Governance and risk management

– Succession planning for key Board and management roles

– Composition of Board – skills, diversity and experience

– Employee engagement

– Selection and induction of newmembers

– Meetings (frequency, quality andduration) and quality of

papers and presentations

– Membership – skills,

experience,

competence and

induction

– Meetings – frequency,

quality and duration

– Chairship

– Clarity of objectives

and Terms of

Reference

– Quality of contribution

– Board leadership

– Independence and

objectivity

– Understanding of

own/others’ roles

– Chairing skills

– Agenda setting

– Time commitment

– Quality of contribution

– Skills, experience and

competence

– Time commitment

– Quality of perspective

brought to Board

discussions

March – May 2024:

Evaluation activity

Structured one-to-one interviews by

Ffion Hague including:

– The Chair

– The Chief Executive

– The Chief Financial Officer

– The Senior Independent Director

– Non-Executive Directors

– Executive Committee members

– The Group Company Secretary

Meetings observed by Ffion Hague during March and

May 2024:

– Board

– Audit and Risk Committee

– Corporate Sustainability Committee

– Nominations Committee

– Remuneration Committee

– Treasur y Committee

IBE provided data points and benchmarking

information relating to the FTSE100 and the

Company’s key markets. The Group Company

Secretary also provided IBE with the necessary

documents, access and support required to

enable a thorough review of Board-related

governance materials.

May 2024:

Evaluationfindings

A comprehensive report evaluating the Board’s performance was produced by IBE and provided in advance of the Board meeting on 17 May 2024.

Ffion Hague attended the Board meeting to present the principal findings from the evaluation and recommendations detailed in the report. The

Board discussed the areas covered by the evaluation and the resulting findings and recommendations, before agreeing an action plan for

2024/25 (read more below).

Reports were also provided to each of the Committees on relevant findings from the evaluation.

The Chair provided feedback from the evaluation to each individual Director.

The Senior Independent Director met with all the Non-Executive Directors to discuss the aspects of IBE’s report relating to the Chair, and

provided feedback to the Chair on her own performance.

Action plan for 2024/25

The Board’s action plan has been formulated based on the recommendations from IBE’s report.

Below is an overview of the initial progress made to address each recommendation.

Recommendation Initial progress

Board agenda and papers

Continue to improve the Board Objectives process by scheduling a dedicated

Board session to enable the Board to debate and agree its objectives for the

year ahead, ahead of tabling them for discussion at the Board.

Dedicated sessions to enable the Board to debate and agree its objectives for

the next year, in addition to reviewing progress made against the current

year’s objectives, have been scheduled on the Board’s forward plan.

Enhance the flow of constructive feedback to management in relation to

Board papers in order to build on improvements made on reports tabled at

the Board and its Committees and ensure Directors continue to be presented

with high-quality and relevant information to inform decision making.

Board members are encouraged to provide feedback at meetings, and when

unable to do so, will use the Group Company Secretary as a conduit for

facilitating any feedback to report writers and presenters.

Mentoring and development

Consider bolstering the Group’s induction and onboarding approach to

include mentoring for the first few months of Board membership for any

Director who has not previously served on a Board of a UK listed company.

Following the 2021 review, our Board Buddy scheme was introduced

following feedback from a Non-Executive Director on their induction

programme. It has been well received and this is something we continue to

offer new Non-Executive Directors. Following the success of this, we will

continue to keep under consideration the need for external mentoring.

Schedule annual feedback discussions between the Chair and

individualDirectors.

As the report notes, the Chair provides feedback to individual Directors

following meetings and informally throughout the year.

A programme of one-to-one sessions for the Chair to meet with individual

Directors has been implemented to enable more formal discussions on

performance and development.

Governance framework

Keep the Committee structure under review with regards to the division of

work between the Treasury Committee and Audit and Risk Committee.

The Committee structure is regularly reviewed including, but not limited to,

during the annual appraisal of the Terms of Reference and the assessment of

how each Committee has discharged its duties during the year.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 147

GOVERNANCE REPORT

NOMINATIONS

COMMITTEEREPORT

All members of the Committee are

Independent Non-Executive Directors

of the Board, with the exception of

Christine Hodgson (who was

independent on appointment). Only

members of the Committee have the

right to attend Committee meetings.

Other individuals, such as the Chief

Executive, the Director of Human

Resources and other senior

management and external advisers,

may be invited to attend meetings

asand when appropriate. None

ofthese attendees are members

ofthe Committee.

The Committee is authorised to seek external

legal or other independent professional advice

as it sees fit, but did not need to do so during

the year.

Committee meeting attendance 2023/24

Committee members Member since Meetings attended

Christine Hodgson

(Chair) January 2020 5/5

Kevin Beeston June 2016 5/5

John Coghlan May 2014 until December 2023 3/3

Tom Delay January 2022 5/5

Sarah Legg November 2022 5/5

Sharmila Nebhrajani May 2020 5/5

Gillian Sheldon January 2022 until May 2024 4/4

1 Gillian Sheldon did not attend the meeting where the Committee was considering her successor.

Documents available at

severntrent.com

Board Diversity Policy

‘Wonderfully You’, our Diversity and

Inclusion Strategy

Charter of Expectations

Committee Terms of Reference

Dear Shareholder

This report details the role of the

Nominations Committee and the important

work it has undertaken during the year.

It highlights the vital part played by the

Committee to ensure that the Board has the

appropriate balance of skills, experience,

knowledge and diversity to provide the

Company with the strong leadership

required to support its workforce and

deliver long-term sustainable success.

The Committee also ensures there is a

high-quality, stable Executive Committee

inplace, supported by credible succession

and contingency plans, to ensure we are

positioned to deliver for all of our

stakeholders, particularly our customers

and communities.

This year has seen a number of changes to

the composition of the Board following the

planned retirement of James Bowling,

former Chief Financial Officer, who stepped

down from the Board at the AGM in July

2023. The Committee also oversaw the

planned retirement of John Coghlan during

the year. I would like to convey my thanks to

both James and John for their significant

dedication and impactful contributions to the

Board and Committees during their

respective tenures, and to James for his

excellent management of the Group’s

financial affairs. Sarah Legg has assumed

the role of Audit and Risk Committee Chair

and Sarah will introduce her first Audit and

Risk Committee Report to shareholders this

year; see page 153 for further details.

Succession planning is a continual, evolving process

for the Committee, as demonstrated by the orderly and

seamless handover of key Board and Executive positions

during the year, with many appointed from our internal

talent pipeline.

Christine Hodgson

Chair

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024148

On 1 December 2023, we announced that Gillian

Sheldon, Chair of our Treasury Committee,

would retire from the Board in order to focus

on her Executive commitments, having recently

been appointed Managing Director and

Vice-Chair of the UK Investment Banking

division of Morgan Stanley. Following a robust

recruitment and selection process, we

announced the appointment of Richard Taylor

as an Independent Non-Executive Director of

the Board from 1 April 2024. Given Richard’s

strong financial background, he has joined our

Audit and Risk, Treasury and Remuneration

Committees, in addition to the Nominations

Committee, and succeeded Gillian Sheldon as

Chair of the Treasury Committee when she

stepped down from the Board on 14 May 2024.

Details of his ongoing induction programme

can be found on page 145.

Following the implementation of these

changes, the Committee has been focused on

planning for the transition of our longstanding

Non-Executive Directors, ensuring that the

Board remains well balanced, with a strong

pipeline of candidates with the appropriate

skill sets, experience and capabilities.

During the year, the Committee also considered

the Board Diversity Policy (the ‘Policy’) and

reviewed progress made against the agreed

objectives set out in the Policy. Theimportance

of the Policy aligning with the diversity of our

region, specifically in respect of gender, social

and ethnic backgrounds, skills and experience,

remains paramount. Iam pleased to report that

the Company continues to comply with the

targets outlined within the Listing Rules, with

62.5% of the current Board Directors being

women, three of the senior positions currently

held by women (Chair, Chief Executive and Chief

Financial Officer) and two members of our

Board from minority ethnic backgrounds.

As part of the Committee’s governance

oversight role, the Committee also assists the

Board in its consideration of conflicts of

interest and independence issues. As part of

its recommendation to the Board in respect

of the Continuing Office of Directors, the

Committee conducted its annual review of

individual Director conflict authorisations as

recorded in our Conflicts of Interest Register.

When reviewing conflict authorisations, the

Committee considered any other appointments

held by the Director, as well as the findings of

the Board Effectiveness evaluation.

Individual Directors’ external appointments were

also reviewed in order to satisfy the Board that

each member has sufficient time to commit to

their roles and also to demonstrate compliance

with the shareholder advisory groups’ individual

guidance on overboarding. More detail on this

can be found on pages 142 to 143.

Following the review, the Committee

recommended to the Board that each conflict

authorisation remained appropriate and that

there were no business or other circumstances

that were likely to affect the independence of

any Non-Executive Director, and no individual

was considered to be overboarded. As such,

the Committee determined that all Non-

Executive Directors continue to demonstrate

independence and commitment to discharging

their duties. I am pleased to report that the

Board concurred with our conclusion.

In accordance with the 2018 Code, all the

Directors will retire at this year’s AGM and

submit themselves for reappointment or, in the

case of Richard Taylor, appointment by

shareholders. Each of the Non-Executive

Directors seeking appointment or

reappointment is considered to be

independent in judgment and character.

Finally, in what has been a busy year for the

Committee, we also paid significant attention

to enhancing the effectiveness of the Board

and its Committees. In line with the 2018 Code

requirements, an externally facilitated Board

Effectiveness evaluation was undertaken this

year, which concluded that the Board continues

to operate effectively while also signalling

minor areas for improvement, details of which

can be found on pages 146 to 147.

I would like to thank the members of the

Committee for their continued commitment

throughout the year, for the open discussions

that take place at our meetings, and for the

contribution they all provide in support of

ourwork.

This report was approved by the Committee at

its meeting on 17 May 2024.

Christine Hodgson

Chair of the Nominations Committee

Board succession planning

The Committee is satisfied that all key roles

have credible succession and contingency

plans in place. Notwithstanding this, the

Committee considers succession and

contingency planning at each of its meetings

and will continue to make appropriate

recommendations to the Board as necessary.

An example of the Committee’s succession

planning activity in action is set out below.

During the year, Gillian Sheldon informed the Board that she would step down from the Board to focus on her recent

Executiveappointment.

The Committee reviewed the succession plans in place and commenced the process to recruit an additional Independent

Non-Executive Director, to ensure the optimum balance of skills and experience on the Board.

The Committee appointed an independent search firm, which is a signatory to the enhanced voluntary code of conduct

for executive search firms, to support with the recruitment of an Independent Non-Executive Director and Chair of the

Treasury Committee. As the appointment was for the Chair of the Treasury Committee, tailored recruitment criteria and

role specifications were developed to outline the appropriate skills and experience required to ensure theBoard

continued to comprise members who were qualified to carry out this vital role.

Changes

to theBoard

The Committee ensured that the recruitment process was conducted in line with the Board Diversity Policy,

inparticular that diverse candidates from a wide variety of backgrounds and those with non-listed company experience

were included within the respective shortlists. Read more about our Board Diversity Policy on pages 151 to 152.

Interviews were conducted by the Chair, Senior Independent Director and Chief Executive, with support from the Group

Company Secretary. Once a preferred candidate had been selected, a pre-appointment meeting with Ofwat was

arranged ahead of the proposed Non-Executive Director being formally appointed tothe Board of Severn Trent Plc and

Severn Trent Water Limited.

Shortlist

and selection

Richard Taylor was appointed on 1 April 2024. As set out in his biography on page 135, Richard has extensive financial

and treasury skills and experience. Richard succeeded Gillian Sheldon as Chair of the Treasury Committee when she

stepped down from the Board on 14 May 2024.

Appointment

and succession

All newly appointed Directors undertake comprehensive, tailored induction programmes, overseen by the Committee,

which include specific focus on key aspects of their roles on the Board Committees. Furtherdetails on Non-Executive

Director induction programmes can be found on page 145, along with an overview of Richard’s ongoing induction.

Induction

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 149

GOVERNANCE REPORT

The Nominations Committee’s agenda for 2023/24

The Committee has responsibility for keeping

the size, structure and composition of the

Board and its Committees under review and is

responsible for ensuring that there are formal

plans in place for an orderly succession to both

Board and senior leadership positions

supported by robust contingency plans. The

Committee also oversees the development

of adiverse pipeline for succession. The

composition of the Board is reviewed and

refreshed on a regular basis and there is a

rigorous and transparent procedure for the

appointment of Directors. The Committee

leads the process for Board and Board

Committee appointments and makes

recommendations to the Board. The

Committee reports to the Board on the

matters it has considered following each

Committee meeting, and makes

recommendations as appropriate.

The key areas of focus at the Committee’s

meetings during the year are set out below.

Key areas of focus

Consideration of the composition of the

Board and Committees, the succession

ofNon-Executive Directors, and the skills,

knowledge, experience, diversity and

attributes required of current and future

Non-Executive Directors. In considering

Board succession, the Committee took

intoaccount the tenure of the Non-Executive

Directors and the importanceof the

progressive refreshing ofBoard

membership.

Review of individual Director independence

through the established Conflicts of Interest

and Persons Closely Associated declaration

process and conclusion that there were no

concerns as regards the composition of the

Board, or the contribution or commitment of

any of the Directors, including in relation to

external appointments and overboarding

guidance.

Review of the search firm providers for the

next stage of the Board’s succession

planning and engagement of the executive

search firm, Spencer Stuart

Oversight of the succession and contingency

plans in place for the Executive Committee

and other members of senior management,

including consideration of the Group’s talent

development programmes to build technical

and leadership capability.

Oversight of the Board Effectiveness

evaluation and discussion of the feedback,

observations and recommendations from

thereview of the Board and Committees,

including a focused action plan for

approvalby the Board.

Review of the Board Diversity Policy to ensure

it remained aligned with the requirements of

the Listing Rules and incorporated any other

best practice, including Financial Conduct

Authority guidance.

Continued application of the Board Diversity

Policy and initiatives, and reviewed progress

made against the agreed objectives set out in

the Board Diversity Policy.

Discussion of the role of the Board

DiversityPolicy in advancing the

compositionand effectiveness of the

Boardand Committees.

Review and approval of the Committee’s

Terms of Reference during the year, prior to

making a recommendation to the Board. In

completing its review, the Committee

concluded that the Terms of Reference

remained appropriate and reflected the

manner in which the Committee was

discharging its duties.

1 Spencer Stuart is a signatory to the voluntary enhanced

code of conduct for executive search firms. Christine

Hodgson is a Non-Executive Director of Spencer Stuart.

This is the only connection between the two companies.

The decision to appoint Spencer Stuart was first discussed

with John Coghlan, the then Chair of the Audit and Risk

Committee, before the Boardconsidered the matter and

determined that theengagement of Spencer Stuart

would present noconflictof interest.

Nominations Committee Report continued

Enhanced review of independence

Whilst we see long service on the Board as a

positive characteristic, the Board is mindful

that the 2018 Code indicates that Non-

Executive Directors should not serve for more

than nine years and Non-Executive Directors

who have served over six years should be

subjected to a particularly rigorous review.

Such a review, in line with the requirements of

the 2018 Code, has been undertaken in relation

to the independence and commitment of Kevin

Beeston since reaching his six-year tenure. On

each occasion, the Board remained satisfied

that Kevin continued to act with the utmost

independence and considered that his

appointment remained in the long-term best

interests of stakeholders, particularly

customers and communities given his previous

experience throughout the business planning

process. Kevin’s length of service,

independence and potential for conflicts of

interest were also considered as part of our

externally facilitated Board Effectiveness

evaluation conducted this year, further details

of which are set out on pages 146 to 147.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024150

Diversity on our Board and Committees

The Committee and Board continue to drive the

agenda of diversity across the Group in setting

the right tone from the top and are proud of the

progress being made to date. Whilst Severn

Trent has long been an advocate of a diverse

workforce and the huge advantages that this

brings teams across the business, the

Committee acknowledges that there is more to

be done to encourage greater diversity, so that

all companies can experience the benefits of

wide-ranging experience and backgrounds.

The Nominations Committee reviews the

Board Diversity Policy (the ‘Policy’) on an

annual basis and makes recommendations to

the Board where it identifies changes that can

be made to further contribute to improving the

diversity of the Board, Board Committees and

Executive Committee.

The Annual Statement on Board Diversity

Targets can be found below.

The main objectives contained in the Policy,

along with an overview of the action taken to

implement the Policy, are set out overleaf.

The full Policy is available on the Severn Trent

Plc website.

Annual Statement on Board DiversityTargets

On behalf of the Board, the Nominations

Committee is pleased to confirm that, as at

31 March 2024, all three of the targets

contained within the Board Diversity Policy,

which align with the diversity and inclusion

targets set out in the Listing Rules, have been

met. A summary of the Board Diversity Targets

is set out in the table below.

Board Diversity Policy Target Target met? Board diversity as at 31 March 2024

At least 40% of the individuals on the Board of

Directors are women.

– 75% of the individuals on the Board of Directors

arewomen.

At least one of the senior positions (Chair, Chief

Executive, Senior Independent Director, Chief

Financial Officer) on the Board of Directors is held

bya woman.

– The Chair is a woman.

– The Chief Executive is a woman.

– The Chief Financial Officer is a woman.

At least one member of the Board of Directors is from

a minority ethnic background (defined by reference

tocategories recommended by the Office for

NationalStatistics (‘ONS’) excluding those listed, by

the ONS, as coming from a White ethnic background).

– Two members of the Board of Directors are from

minority ethnic backgrounds.

Detailed numerical information on the gender

and ethnicity representation on the Board and

Executive Committee is set out below.

Data concerning gender and ethnicity

representation is collected directly from all the

individual Board and Executive Committee

members through a Diversity and Inclusion

Monitoring Form (the ‘Form’) which is issued

for completion on an annual basis. The Form

asks individuals to disclose their gender and

ethnicity using the options included on the

Form, which align with the detail in the

left-hand columns of the tables below and

includes the option to not specify an answer.

This data is collated by Company Secretariat

and held securely and in accordance with the

Group’s data protection processing and

retention guidelines.

Gender representation as at 31 March 2024 Severn Trent Plc Board

Severn Trent Plc

Executive Committee

Number of

Board members

Percentage of

the Board

Number of

senior positions

on the Board

(CEO, CFO, SID

and Chair)

Number in

Executive

Management

Percentage

of Executive

Management

Men 2 25% 1 5 55.6%

Women 6 75% 3 4 44.4%

Not specified/prefer not to say – – – – –

Ethnicity representation as at 31 March 2024 Severn Trent Plc Board

Severn Trent Plc

Executive Committee

Number of

Board members

Percentage of

the Board

Number of

senior positions

on the Board

(CEO, CFO, SID

and Chair)

Number in

Executive

Management

Percentage

of Executive

Management

White British or Other White (includingminority-white groups) 6 75% 4 8 88.9%

Mixed/Multiple Ethnic Groups 1 12.5% – – –

Asian/Asian British 1 12.5% – 1 11.1%

Black/African/Caribbean/Black British – – – – –

Other Ethnic Group, including Arab – – – – –

Not specified/prefer not to say – – – – –

As discussed on page 145, since 31 March 2024, there have been changes to the membership of the Board. The Nominations Committee confirms

that the changes in composition have not impacted the attainment of any of the Board Diversity Targets and neither the Board nor the Committee

foresees any risks in not being able to continue to meet the Board Diversity Targets during the current financial year. There have been no changes

to the membership of the Executive Committee since 31 March 2024.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 151

GOVERNANCE REPORT

Additional Policy targets and objectives

Board Committee composition targets

In relation to the Committees included in the 2018 Code (the ‘Board Committees’), comprising

the Audit and Risk Committee, the Nominations Committee and the Remuneration Committee:

Policy objectives

Objective Implementation

Ensure that the Board and senior management comprise

individualswith a range of skills, experience, knowledge,

perspectivesand backgrounds.

Board and senior management succession planning arrangements are

regular items for discussion at Nominations Committee meetings.

In addition, during the year, the Board reviewed the internal talent

pipelines within the organisation and the activities undertaken to develop

and retain our people.

Focus on the development of a pipeline of diverse high-calibre

candidates for all senior management roles.

Only engage search firms who are signed up to the voluntary code

ofconduct for executive search firms.

Spencer Stuart, which was appointed to assist with the recruitment of an

additional Non-Executive Director during the year, is a signatory to the

enhanced code of conduct for executive search firms.

Ensure that Board and senior management candidate lists will be

inclusive according to the widest definition of diversity.

The Board and Nominations Committee recognise the importance and

benefits of greater diversity, including gender diversity, social and ethnic

background and cognitive and personal strengths, throughout the

organisation, including on the Board itself.

On instruction of an executive search firm, the specification will

ensurethat candidates with no listed company Board experience

arefully considered.

Richard Taylor was appointed to the Board on 1 April 2024. Richard’s

appointment was recommended by the Committee in full consideration

of the Policy, the 2018 Code and additional relevant guidance.

Consider candidates for Board and senior management appointments

from a wide pool, including those with no listed company experience.

Oversee plans for diversity and inclusion across the business and

receive regular updates in relation to these.

The Board receives a dedicated update on diversity and inclusion at least

annually, with interim updates forming part of regular reports from the

Director of Human Resources.

Board Diversity Policy Target Target met? Board Committee diversity as at 31 March 2024

Achieve and maintain the position where at least one

individual on each Board Committee is a woman.

– There is at least one member of each Board Committee

who is a woman.

Achieve and maintain the position where at least one

individual on each Board Committee is from a minority

ethnic background (defined by reference to categories

recommended by the ONS excluding those listed, by the

ONS, as coming from a White ethnic background).

– There is at least one member of each Board Committee

who is from a minority ethnic background.

Nominations Committee Report continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024152

AUDIT AND RISK

COMMITTEE REPORT

All members of the Committee are

Independent Non-Executive Directors

of the Board. The Board considers

that all members of the Committee

have recent and relevant financial

experience and competence relevant

to the sector, with the Chair and the

majority of the Committee members

being qualified accountants. Only

members of the Committee have the

right to attend Committee meetings.

Other regular attendees at meetings at the

invitation of the Committee include the Chair

of the Board, the Chief Executive, the Chief

Financial Officer (‘CFO’), the Group Company

Secretary, the Group General Counsel, the

Group Financial Controller, the Head of

Internal Audit, other members of senior

management, representatives from the

External Auditor, Deloitte, and non-financial

regulatory performance and data assurers,

Jacobs. None of these attendees are members

of the Committee.

The Committee regularly holds private

discussions with the Head of Internal Audit

and the External Auditor separately, without

management present. The Chair of the

Committee regularly holds separate

one-to-one meetings with the CFO, the Head

of Internal Audit, the External Auditor and with

Committee members outside of scheduled

meetings to better understand any issues or

areas for concern.

The Committee is authorised to seek external

legal or other independent professional advice

as it sees fit, but did not need to do so during

the year.

Committee meeting attendance 2023/24

Committee members Member since Meetings attended

Sarah Legg

(Chair from 1 January 2024) November 2022 5/5

Kevin Beeston September 2016 5/5

John Coghlan

(Chair until 31 December 2023) May 2014 until December 2023 4/4

Gillian Sheldon January 2022 until May 2024 5/5

Documents available at

severntrent.com

Non-Audit Services Policy

Explaining Our Tax Contribution

Our Tax Strategy

Group Financial Crime, Anti-Bribery

and Anti-Corruption Policy

Internal Audit Charter

Regulatory Reporting and

Assurance Approach

Charter of Expectations

Committee Terms of Reference

Dear Shareholder

I am delighted to introduce my first report as

Chair of the Audit and Risk Committee and

would like to convey my thanks to John

Coghlan for his leadership of the Committee

over the previous nine years and for the

significant time he has invested in ensuring a

smooth and effective handover to me.

This report aims to give shareholders a clear

insight into the work we have done as a

Committee to provide challenge and

assurance on the integrity of the 2023/24

Annual Report and Accounts and the Group’s

regulatory reporting requirements.

The Committee assists the Board by

establishing, reviewing and monitoring

the formal and transparent policies and

procedures to ensure the independence and

effectiveness of the Internal and External

Audit functions, the integrity of financial and

narrative reporting, the Company’s internal

control framework and the adequacy of the

process that enables the Board to assess the

extent of Principal Risks the Company is

willing to take to achieve its long-term

strategic objectives.

This has been an exceptionally busy period for the

Committee, with a significant amount of time spent

finalising our PR24 Business Plan, with the objective

of delivering positive outcomes for our customers

and communities, both now and for the future.

Sarah Legg

Chair

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 153

GOVERNANCE REPORT

Throughout the year, including whilst I was

Committee Chair Designate, I maintained

regular dialogue with other members of the

Committee, the CFO and other members of

management, including presenters of

upcoming agenda items prior to meetings, to

ensure the Committee was provided with the

necessary information to enable it to guide,

challenge and advise to ensure that any

decisions taken were done so on a fully

informed basis. I also met privately with the

Head of Internal Audit and representatives

from the External Auditor and External

Assurer, both to discuss their procedures,

including any issues that may have arisen,

and to inform my ongoing assessment of

their effectiveness.

Much of the Committee’s work relates to the

regulated activities of Severn Trent Water,

which represent over 91% of Group turnover.

The Committee’s vital contribution to our

purpose of ‘taking care of one of life’s

essentials’ ensures that the interests of

shareholders and other stakeholders,

particularly our customers and regulators,

are properly protected, by overseeing the

Group’s financial reporting and internal

control arrangements. The Committee uses

its collective expertise to provide challenge

to the approach and judgments made by

management in the treatment of financial

reporting matters and the resulting

disclosures within the financial statements.

Transparency and openness are fundamental

to the relationship between management and

the Committee, which is further reinforced

through our culture of Doing the Right Thing.

One of our key roles is to advise the Board that

we are satisfied that the Annual Report and

Accounts are fair, balanced and

understandable, and provide the information

necessary for shareholders to assess the

Company’s position, performance, business

model and strategy. In doing so, we ensure

that management’s disclosures reflect the

supporting detail, or challenge them to explain

and justify their interpretation and, if

necessary, re-present the information. The

Committee has spent considerable time

reviewing and scrutinising the Group’s financial

results, and details of the significant matters

we considered can be found on page 161.

The Committee, in consideration of the

growing focus of climate change and other

environmental issues, also plays a key role

in the governance of environmental and

climate-related reporting, including

overseeing, in conjunction with the Corporate

Sustainability Committee and supported by

independent third-line assurance by Jacobs,

the Group’s Task Force on Climate-related

Financial Disclosures (‘TCFD’) and EU

Taxonomy disclosures.

The External Auditor performs its statutory

audit by auditing the accounting records of the

Company against agreed accounting practices,

relevant laws and regulations. Deloitte’s audit

report can be found on pages 209 to 215.

Basedon consideration of the responses to our

internal effectiveness review, the Committee

remains satisfied with the efficiency and

effectiveness of the audit.

We were pleased to advise the Board that the

2023/24 Annual Report and Accounts are fair,

balanced and understandable, and that the

Directors have provided the necessary

information for our shareholders to assess the

Company’s position, prospects, business

model and strategy. The review process is

described in further detail on page 156.

During the year, the Committee reviewed and

agreed with management’s proposal for the

Company’s long-term Viability Statement to

continue to cover a seven-year period (see

pages 103 to 107). It was agreed that this

wasappropriate, given the nature of the

regulatory framework in the water sector

andOfwat’s statutory duty to ensure that

companies can finance the proper carrying

out of their functions.

The Committee has also spent a considerable

amount of time reviewing the Group’s

Enterprise Risk Management (‘ERM’)

processes and procedures, with rich

discussions taking place at our meetings about

both existing and emerging risks and how we

can continue to satisfy ourselves of the

effectiveness of our internal controls in

mitigating the impact of such risks. You can

read more about our approach to risk on pages

92 to 94 and our statement on internal controls

and risk management is on pages 156 to 157.

As outlined in last year’s report, in 2022/23 the

Committee invested a significant amount of

time reviewing the detailed assurance plan

and approach for the Severn Trent Water PR24

Business Plan. This focus has continued

throughout the year, to complete the

development and scrutiny of our Business Plan

– underpinned by robust governance and

assurance – to ensure we give our customers,

regulators and other stakeholders confidence

that we will deliver in line with their

expectations for AMP8 and beyond.

In accordance with the regulations that a

competitive tender be carried out every 10

years, the Committee led the tender of the

External Audit contract during the year and,

due to mandatory rotation requirements,

Deloitte was unable to participate. The tender

process resulted in a recommendation to the

Board to propose to shareholders the

appointment of PwC as External Auditor at the

Annual General Meeting (‘AGM’) scheduled for

July 2025 for the audit of the year ending

31 March 2026. The Board agreed the

recommendation and, as such, a resolution

will be included in the 2025 AGM Notice of

Meeting to this effect. Having undertaken a

review of Deloitte’s effectiveness and

concluded a satisfactory outcome, the

Committee also recommended to the Board

that, at the 2024 AGM, Deloitte be proposed as

the Group’s External Auditor for the year

ending 31 March 2025, which will be the final

year of the existing External Audit

appointment. Further details of our External

Audit tender process can be found on page 160.

I am pleased to confirm that the Committee

fully complied with the FRC’s ‘Audit

Committees and the External Audit: Minimum

Standard’ during the financial year, including in

relation to the tendering process undertaken

for the External Audit contract.

You will see that this report contains an

overview of the Company’s whistleblowing

arrangements. The Board has previously

agreed that the responsibility for oversight of

whistleblowing arrangements should continue

to be delegated to the Audit and Risk

Committee and not be a matter reserved solely

to the Board. However, the Board as a whole

monitors and reviews the effectiveness of the

Group’s whistleblowing arrangements

annually, to ensure that it has sufficient

oversight of whistleblowing to support its work

on culture, risk and stakeholder engagement.

The Audit and Risk Committee continues to

receive reports on investigations and all

significant whistleblowing matters are

reported directly to the Board. The Board has

reviewed these arrangements again this year

and is satisfied that they are effective,

facilitatethe proportionate and independent

investigation of reported matters and allow

appropriate follow-up action to be taken.

The annual Board Effectiveness evaluation,

which was conducted externally this year,

assessed our performance as a Committee,

and I am pleased that this concluded that we

operate effectively and that the Board takes

assurance from the quality of our work.

The Board is satisfied that the Committee

members bring a wide range of financial

experience across various industries and all

members have competence relevant to our

sector, with significant recent and relevant

financial experience. Further information

about each Committee member is contained

in their individual biographies, which can be

found on pages 134 to 135.

I would like to thank the members of the

Committee, the management team, Internal

Audit, Deloitte and Jacobs for their continued

commitment throughout the year, for the open

discussions that take place at our meetings

and for the contribution they all provide in

support of our work.

This report was approved by the Committee

atits meeting on 14 May 2024.

Sarah Legg

Chair of the Audit and Risk Committee

Audit and Risk Committee Report continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024154

The Audit and Risk Committee’s

agenda for 2023/24

The Committee has an extensive agenda

focusing on the audit, risk and assurance

processes within the business which it deals

with in conjunction with management, the

External Auditor, Internal Audit and the

Finance and Regulatory Compliance and

Assurance teams.

The Committee reports to the Board on the

matters it has considered following each

Committee meeting, and makes

recommendations as appropriate.

The key areas of focus at the Committee’s

meetings during the year are set out here.

Key areas of focus

Internal Audit and assurance

Consideration of Internal Audit reports

presented to the Committee in order to

satisfy itself that management had resolved,

or was in the process of resolving, any

outstanding issues or actions.

Review and approval of the Internal Audit

planand approach for the upcoming year.

Appraisal of the quality and effectiveness of

Internal Audit and the effectiveness of the

current co-source arrangements.

Review of the detailed assurance map and

consideration of the findings of the

assurance that had been undertaken as part

of regulatory submissions, including the

Severn Trent Water PR24 Business Plan.

Internal controls and risk management

Evaluation of the effectiveness of the

Group’s ERM processes and procedures and

internal control systems, and integration of

the components of the risk framework into

Board and Committee reporting, prior to

making a recommendation to the Board.

Review of updates on legal, regulatory,

corporate governance and ethical matters,

and monitoring of fraud reporting and

incidents of whistleblowing, including a

review of the adequacy of the Group’s

whistleblowing processes and procedures,

prior to reporting to the Board on this activity.

Oversight and monitoring of the Group’s

compliance with the Bribery Act 2010,

including a review of the adequacy of the

anti-bribery, corruption and fraud processes

and procedures (and associated policies).

External Audit

Management of the relationship for the

statutory audit, including the key audit risks

and level of materiality applied by Deloitte,

audit reports from Deloitte on the financial

statements and the areas of particular focus

for the audit.

Assessment of the effectiveness of the

External Auditor and the audit process in

order to make a recommendation to the

Board on the reappointment of Deloitte as

the ExternalAuditor.

Consideration and agreement of the

statutory audit fee for the year ended

31 March 2024.

Review and approval of the non-audit

services provided by the External Auditor

and related fees.

Oversight of the External Audit tender and

engagement throughout the process, which

resulted in a recommendation to the Board.

Financial and regulatory reporting

Review and discussion of reports from the

CFO on the financial statements, considering

management’s significant accounting

judgments and the policies being applied, and

assessment of the findings of the statutory

audit in respect of the integrity of the financial

reporting of full and half-year results.

Assessment of the integrity of the regulatory

reporting process relating to the Annual

Performance Report, PR24 Business Plan

and other regulatory submissions for

SevernTrent Water as required to be

submitted to Ofwat.

Review of the Annual Report and Accounts to

provide a recommendation to the Board that,

as a whole, they complied with the 2018 Code

principle to be ‘fair, balanced and

understandable, and provide the information

necessary for shareholders to assess the

Company’s position, performance, business

model and strategy’.

In-depth review of specific disclosures

whichrelate to areas under the remit of

theCommittee, including TCFD and the

EUTaxonomy.

Challenge and scrutiny of management’s

detailed assessment of the Group’s

long-term viability and its ability to

continue as a going concern. In doing so,

the Committee took into account the risks

facing the business, and its ability to

withstand a number of severe but plausible

scenarios in isolation and combination.

Having considered management’s

assessment, the Committee recommended

to the Board the long-term Viability

Statement set out on pages 103 to 107.

Review and approval of the Committee’s

Terms of Reference during the year, prior to

making a recommendation to the Board. In

completing its review, the Committee

concluded that the Terms of Reference

remained appropriate and reflected the

manner in which the Committee was

discharging its duties.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 155

GOVERNANCE REPORT

Audit and Risk Committee Report continued

Internal controls and risk management

Internal Audit

Our in-house Internal Audit function is an independent assurance function available to the Board, Audit and Risk Committee and all levels of

management, and is a key element of the Group’s corporate governance framework. Support has been provided by three main co-sourcing

partners: PwC, BDO and EY. Co-source arrangements are reviewed annually and we believe this structure adds value, through greater access to

specific areas of expertise, increased capacity to flex resources and the ability to challenge management independently. Co-source specialists

continue to bring expertise to support the team and the delivery of the audit plan where relevant. In view of its proposed appointment as

External Auditor for the year ending 31 March 2026 onwards, PwC will not be engaged as a co-sourcing partner after 31 March 2024.

Internal Audit plan and actions

The role of Internal Audit is to provide independent and objective

assurance that the Group’s risk management and internal control

systems are well designed and operate effectively, and that any

corrective action is taken in a timely manner.

A three-year strategic audit planning approach is applied, from which

Internal Audit develops an annual risk-based audit plan; this facilitates

an efficient deployment of resource in providing assurance coverage

over time across the whole business. The Committee’s role is to review

and challenge the plan, specifically whether the key risk areas

identified as part of our ERM process are being audited with

appropriate frequency and depth, whilst ensuring appropriate capacity

to alter the Internal Audit plan to focus on new or emerging areas

during the year. Individual Committee members also bring an external

view of risks the Company may be exposed to. Once approved by the

Committee, regular reporting enables the Committee to monitor

delivery of the audit plan and ensure that Internal Audit performs its

work in accordance with the mandatory aspects of the International

Professional Practices Framework of the Chartered Institute of

Internal Auditors (‘CIIA’), with integrity (honestly, diligently and

responsibly) and objectivity (without conflicts of interest).

Following the completion of each planned audit, Internal Audit seeks

feedback from management and reports to the Committee on the

findings of the audit, including any action that may be required. Where

any failings or weaknesses are identified in the course of the review of

internal control systems, management puts in place robust actions to

address these on a timely basis. No material weaknesses were

identified during the year. Closure of actions are reported to, and

monitored by, the Committee. The Committee was pleased to confirm

that the review established that management places a strong focus on

closing audit actions and ensuring timely completion.

The Internal Audit function also liaises with the External Auditor,

discussing relevant aspects of their respective activities which ultimately

supports the assurance provided to the Committee andBoard.

Effectiveness

We undertake an annual review of the effectiveness of the Internal Audit

function in line with the CIIA Internal Audit Code of Practice and the FRC

Guidance on audit committees. The CIIA guidance states that audit

committees should obtain an independent and objective external quality

assessment at least every five years. The last external review of the

effectiveness of the Internal Audit function was undertaken by BDO in

December 2021 and the next external effectiveness review is therefore

planned for no later than December 2026. The new Global Internal Audit

Standards will become effective in January 2025 and the Committee

determined that benefit would be gained from a review of effectiveness

based on these new Standards.

The last external review concluded that the Internal Audit function

remains fit for purpose, and is operating efficiently and effectively, and in

line with good practice. The External Quality Assessment report also

highlighted clear evidence that the Internal Audit function operated with

strategic alignment, a focus on risk and an emphasis on quality and

continuous improvement, all underpinned by objectivity and integrity.

The minor areas of improvement raised by BDO, including improving

documentation to support the Internal Audit process map and use of

benchmarking as part of the reporting framework, have been

incorporated into an action plan which was shared and agreed with the

Chair of the Audit and Risk Committee. All actions were completed in line

with the proposed timescales.

Taking all these elements into account, the Committee concluded that

the Internal Auditfunction was an effective provider of assurance over

the Group’s risks and controls, and appropriate resources were

available asrequired.

Regular Disclosure Committee review

The Disclosure Committee reviewed the ARA throughout

thedrafting process and undertook a detailed FBU

assessmentahead of tabling a detailed report at the Audit

andRisk Committee.

Regular Audit and Risk Committee review

The Audit and Risk Committee reviewed the ARA at an early

stage, and throughout the drafting process, to enable sufficient

time for review and comment, and to ensure overall balance

andconsistency between the narrative sections and the

financialstatements.

The Audit and Risk Committee was supported in its review by the

Disclosure Committee, whose appraisal of the ARA is

undertaken by members of the Executive Committee who are

not directly involved in drafting any content.

Internal Audit verification andoversight

Internal Audit reviewed the ARA, and oversaw the verification

process for all factual content and reported back to the Audit

and Risk Committee on its assessment findings.

FBU assessment

The Audit and Risk Committee reviewed and approved the

process in place to support the FBU assessment and evaluated

the findings of this process. The Audit and Risk Committee was

satisfied that all the key events and issues reported to the Board

by management (both positive and negative) had been adequately

referenced or reflected within the ARA.

External Auditor review

The External Auditor is required to consider whether there are any

material inconsistencies between information presented in

different sections of the ARA, taking into account the External

Auditor’s knowledge obtained during the audit and the External

Auditor’s understanding of the legal and regulatory requirements

applicable to the narrative.

The External Auditor presented the results of its audit work.

Thesignificant issues the Audit and Risk Committee considered

were consistent with those identified by the External Auditor in

its report (see pages 209 to 215 for more detail).

Recommendation to the Board

The Board approved the Audit and Risk Committee’s

recommendations that the FBU statement could be made in the

ARA. An associated Board declaration is included within the

Directors’ Responsibility Statement on page 208.

Fair, balanced and

understandable

reporting

At the request of the

Board, theCommittee has

considered whether, in its

opinion, this AnnualReport

and Accounts (‘ARA’), taken

as a whole, is ‘fair,

balanced and

understandable’ (‘FBU’)

and whether it provides the

‘information necessary for

shareholders to assess the

Company’s position,

performance, business

model and strategy’.

The following process was

followed by the Committee

in making its assessment.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024156

Internal controls and risk management

Internal controls

An internal control system can provide reasonable but not absolute

assurance against material misstatement or loss, as it is designed to

manage rather than eliminate the risk of failure to achieve business

objectives. The Committee reviews the Group’s internal control

systems and receives updates on the findings of Internal Audit’s

investigations at every meeting, prior to reporting any significant

matters to the Board, which retains overall responsibility for the

effectiveness of the full suite of internal controls across theGroup.

The Audit and Risk Committee has oversight of the Group’s

preparations to ensure compliance with the recommendations under

the refreshed UK Corporate Governance Code published in January

2024. We are fully committed to ensuring that the Group’s audit and

governance arrangements reflect best practice and address any new

requirements within the expected timeframes. As part of this, during

the year, a detailed review of the Group’s systems, processes and

procedures was undertaken by the Committee in order to provide

assurance to the Board that the Group’s internal control systems

(relating to operational, financial, compliance and reporting activities)

continue tooperate effectively.

Further to the reports received by the Committee, which set out the

Group’s processes, systems and assurance procedures, the Committee

has concluded that it has complied with its obligations under the 2018

Code in relation to the assessment of risk and monitoring and review of

the effectiveness of internal controls and risk management. The

Committee is pleased to confirm that based on its review and

monitoring activities, it has not been made aware of any material

control weaknesses in the Group’s internal controls systems and risk

management framework.

Risk management

The Group has an ERM process in place through which our Principal

Risks and related controls are identified and assessed. The Board has

overall responsibility for setting the Group’s risk appetite and ensuring

that there is an effective risk management framework in place and has

delegated responsibility for review of the risk management

methodology and effectiveness of internal controls to the Audit and

Risk Committee. The Committee reviews the processes for, and

outputs from, the Group’s ERM activity, and also reviews the

effectiveness of the risk management system on behalf of the Board

and keeps under review ways in which the control and assurance

arrangements can be enhanced. The Audit and Risk Committee is

complemented by a Strategic Risk Forum which adds value by assisting

the Committee in reviewing the risk management system and the

internal controls that mitigate risks, and undertaking reviews of

assurance risk reports prior to Audit and Risk Committee meetings.

The Central ERM Team also undertook a review of the integration of the

components of the risk framework into Board and Committee

reporting, prior to making a recommendation to the Board. This year,

the Committee spent considerable time reviewing the Group’s ERM

processes and procedures, with good progress made in enhancing its

effectiveness during the year. The Committee also keeps under review

the Group’s Risk Appetite Statement and recommends any changes to

this for consideration and approval by the Board. You can read more

about this important work on pages 92 to 94.

The Committee received half-yearly reports from the Head of Risk,

detailing the significant risks and uncertainties faced by the Group.

Each risk submitted for review includes an assessment of the overall

risk status, status of the control environment and a summary of the

risk mitigation plan to take the risk to the target risk position, which

needs to be in line with the risk appetite. The risk mitigation strategies

include action plans to improve controls where this has been assessed

as necessary and determines whether actions are on target and with

the correct prioritisation in place. Further details of the Group’s risk

management framework, controls and Principal Risks can be found in

the Strategic Report on pages 95 to 101.

Whistleblowing

At Severn Trent we foster a culture of trust, honesty and openness.

Weare proud of our approach to whistleblowing, which encompasses

the environment we create in our business to encourage reporting of

potential wrongdoing, the support we give to whistleblowers and our

thorough investigation of concerns.

The Group has established procedures by which all employees may, in

confidence, report any concerns. Our Whistleblowing Policy, ‘Speak

Up’, sets out the ethical standards expected of everyone who works for,

and with, us and includes the procedure for raising concerns in strict

confidence. Our workforce can raise concerns through their line

manager, senior management or HR Team, and through our

confidential and independent whistleblowing helpline and online

channel, ‘Safecall’. All investigations are carried out independently

with findings being reported directly to the Audit and Risk Committee.

We learn from every report of whistleblowing and share the lessons

across the business with a view to making improvements where

necessary. We subject our whistleblowing processes to regular

evaluation by both Internal Audit and external assurers, and the

findings from these reviews frequently cite many examples of good

practice within the Group’s approach. On an annual basis we also

undertake an external benchmarking exercise with Protect, the

whistleblowing charity.

We believe that good corporate governance is a key component of

creating the best culture and we set the right tone from the top. The

Audit and Risk Committee receives reports on investigations and all

significant whistleblowing matters are reported directly to the Board.

The Board as a whole monitors and reviews the effectiveness of the

Group’s whistleblowing arrangements annually, to ensure that it has

sufficient oversight to support its work on assessing culture, risk and

stakeholder engagement. The Board has reviewed these

arrangements again this year and is satisfied that they are effective,

facilitate the proportionate and independent investigation of reported

matters and allow appropriate follow-up action to be taken.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 157

GOVERNANCE REPORT

Audit and Risk Committee Report continued

External Auditor

The Committee has primary responsibility for

overseeing the relationship with the External

Auditor, including assessing its performance,

effectiveness and independence annually, and

making a recommendation to the Board in

respect of its reappointment or removal.

Tender and appointment

Following a formal tender process in 2015/16,

Deloitte LLP was reappointed as External

Auditor at the 2016 AGM. Following the rule

that the audit engagement partner must

change every five years, Jacqueline Holden

became the senior statutory auditor and has

overseen the audit of the Severn Trent Group

since 2020/21. Other senior audit staff also

rotate at regular intervals.

During the year, a competitive tender process

was undertaken in accordance with current

regulations that require a tender to be carried

out every 10 years. Due to mandatory rotation

requirements, Deloitte was unable to

participate in the tender. More details on the

Committee’s tender process are set out on

page 160.

The Board accepted the Committee’s

recommendation that Deloitte be appointed

asthe Group’s External Auditor for the year

ended 31 March 2024 as this was in the best

interests of both shareholders and the

Company, as Deloitte has a detailed knowledge

of our business and an understanding of our

industry, and continues to demonstrate that it

has the necessary expertise and capability to

undertake the audit. Shareholders passed the

proposed resolution to appoint Deloitte as

External Auditor at the 2023 AGM.

The Company has complied with the provisions

of the Competition and Markets Authority’s

Order for the financial year under review in

respect to audit tendering and the provision of

non-audit services.

Effectiveness and competence

The Committee considers audit quality to be

the principal requirement of the annual audit

process and, as such, a full effectiveness review

is conducted annually. This year, it involved

assessment of the External Auditor by the

Committee, key Executives and relevant senior

managers, including an evaluation of whether

the External Auditor met the minimum

standards of qualification, independence,

expertise, effectiveness and communication.

Allmembers of the Committee, as well as key

members of management and those who have

regular contact with the External Auditor,

completed a feedback questionnaire focusing

on the following areas:

– Robustness of the external audit process,

‘professional scepticism’ of the External

Auditor and degree of challenge to matters

of significant audit risk and areas of

management subjectivity.

– Appropriateness of the scope of the audit

and the planning process for the delivery of

an effective and efficient audit.

– Quality of the delivery of the audit, the

service provided by the External Auditor and

its knowledge and understanding of the

Group’s business.

– Expertise of the audit team conducting

theaudit.

– Independence demonstrated by the External

Auditor and that policies and procedures

were consistently applied.

– Views on the quality of the interaction

between the audit partner and senior

members of the audit team and

theCompany.

– Whether the statutory audit contributed

tothe integrity of the Group’s

financialreporting.

Feedback was collated and presented to

theCommittee in March 2024, without the

External Auditor present. The Committee

discussed the conclusions and any

opportunities for improvement, which were

brought to the attention of the External Auditor.

No significant issues were reported as part of

the internal review, and it was concluded that

the external audit process and services

provided by Deloitte were satisfactory

andeffective.

Independence

The Committee regards independence of

theExternal Auditor as absolutely crucial in

safeguarding the integrity of the audit process

and takes responsibility for ensuring the

three-way relationship between the

Committee, the External Auditor and

management remains appropriate.

The Committee recognises that independence

is also a key focus for the External Auditor, and

Deloitte has confirmed that it has complied

with its own ethics and independence policies,

which are consistent with the FRC’s Revised

Ethical Standard (2019). This includes the

External Auditor’s assurances that all of its

partners and staff involved with the audit are

independent of any links to the Group and that

none of its employees working on our audit

hold any shares in Severn Trent Plc.

Deloitte provides confirmation of

independence during the planning stage of

the audit, disclosing matters relating to its

independence and objectivity. There were no

independence issues raised in respect of the

2023/24 audit.

The Committee also develops and

recommends to the Board the Group’s policy

on non-audit services and associated fees paid

to Deloitte, to ensure the External Auditor is

not providing any additional services which

could impede its independence. You can read

more about this policy below.

Statutory Auditor reappointment for

the year ending 31 March 2025

The Committee has recommended to the

Board that Deloitte LLP be proposed for

reappointment for the year ending 31 March

2025 at the forthcoming AGM on 11 July 2024.

There are no contractual obligations that

restrict the Committee’s choice of auditor; the

recommendation is free from third-party

influence; and no auditor liability agreement

has been entered into.

Non-audit services

To preserve objectivity and independence, the

External Auditor is not asked to provide other

services unless it is in the best interests of

the Company that these are provided by

Deloitte rather than another supplier, in

accordance with our Non-Audit Services

Policy (the ‘Policy’).

We reviewed the Policy during the year to

reflect the FRC’s Revised Ethical Standard

that will become effective from 15 December

2024. No significant changes were required.

The Policy requires Committee approval for

all such non-audit services. The Policy also

prohibits aggregate fees for non-audit

services in excess of 70% of the average audit

fee for the previous three financial years.

Non-audit services for which the External

Auditor may be used include audit-related

services required by statute or regulation and

other audit or assurance services as set out in

the Ethical Standard.

During the year, Deloitte received £1.4 million

in fees for work relating to the audit services it

provides to the Group. Non-audit related work

undertaken by Deloitte amounted to fees of

£0.3 million this year, which is 21.4% of the

total audit fees paid to it (as shown in the chart

on page 159). The more significant non-audit

services provided by Deloitte were the audits

of the financial information contained within

the Severn Trent Water and Hafren Dyfrdwy

Annual Performance Reports and the

independent review of the Company’s

half-yearly financial report.

Audit and non-audit fees paid to Deloitte are

set out in note 7 to the financial statements.

Inapproving these non-audit fees, the

Committee considered the overall ratio of

non-audit fees to audit fees and, given the

scope of work, considered that Deloitte was

best placed to perform these services. Where

Deloitte was chosen, this was as a result of its

detailed knowledge of our business and

understanding of our industry, aswell as

demonstrating that it had the necessary

expertise and capability to undertake the work

cost effectively whilst maintaining its

objectivity and independence.

Details of audit and non-audit fees and the

significant non-audit work undertaken during

the year are set out on page 159.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024158

Audit and non-audit fees (£m)

Nature of service Reason for Deloitte’s appointment Fees (£’000)

Audit-related assurance services

Interim review This work is akin to an audit and is expected to

be performed by the External Auditor.

100

Assurance of regulatory returns Audit of sections 1 and 2 of the Severn Trent

Water and Hafren Dyfrdwy Annual Performance

Reports is closely related to the External

Auditor’s statutory audit work and the two

assignments are performed in parallel.

Sub-total 196

Other assurance services

Reporting under Group financing documents These documents require reports and it is

normal practice for the External Auditor to

provide these.

Other assurance This is assurance services performed as part of

the year end reporting process.

Sub-total 83

Total 2023/24 non-audit fees 279

£1.2m

2021/22

Statutory audit – the Company Audit-related assurance services

Statutory audit – subsidiaries Other assurance services

£1.3m

2022/23

£1.4m

2023/24

Total fees

0.3

0.2

0.1

0.7

Total fees

0.3

0.2

0.1

0.6

Total fees

0.3

0.2

0.1

0.8

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 159

GOVERNANCE REPORT

Audit and Risk Committee Report continued

Tender of the External Audit contract

Deloitte was first appointed as External Auditor for the

year ended 31 March 2006 and was reappointed

following a tender process at the 2016 AGM. In

accordance with the provisions of the Statutory Audit

Services for Large Companies Market Investigation

(Mandatory Use of Competitive Tender Process and

Audit Committee Responsibilities) Order 2014, the

Group’s next mandatory tender would therefore need

to be in respect of the 2026 External Audit and due to

mandatory rotation requirements, Deloitte would not

be able to participate having acted as External Auditor

for 20 years.

As previously disclosed, the Committee determined

that the optimum approach would be to conduct an

audit tender process no later than March 2024 in

respect of the 2026 External Audit, to allow for a

significant transition period during the 2024/25

financial year and to allow firms to exit relationships

which may present a conflict of interest.

The proposed approach, formulated to align with the

FRC’s (then draft) Audit Committees and the External

Audit: Minimum Standard (formally issued in May

2023), was discussed by the Committee at its

meeting in March 2023. The Committee agreed that

the proposed selection criteria were transparent and

non-discriminatory, and were focused on quality

(independence, challenge and technical competence)

rather than the proposed fee.

A Steering Committee, led by members of the Audit

and Risk Committee, was established to manage and

govern the audit tender process, accountable to the

Audit and Risk Committee, which maintained overall

ownership of the tender process and ensured that it

was run in a fair and balanced manner. The Steering

Committee was supported by a working group, led by

the Group Financial Controller.

Under the OJEU process, the tender was open to all

firms participating in the market. There was a

pre-qualification stage to eliminate firms that did not

have sufficient listed or water sector experience.

In accordance with statutory requirements, a report

on the tender selection procedure and conclusions

was prepared by the Steering Committee for Audit

and Risk Committee consideration. The Audit and

Risk Committee reviewed the Steering Committee’s

proposal and recommended PwC to the Board as

first choice, along with a second choice

recommendation. The Board selected PwC as the

External Auditor for the 2025/26 audit onwards,

subject to shareholder approval at the 2025 AGM. An

announcement to this effect was made to the market

on 3 November 2023.

The Group confirms it was in compliance with the

provisions of the Statutory Audit Services for Large

Companies Market Investigation (Mandatory Use of

Competitive Tender Processes and Audit Committee

Responsibilities) Order 2014 during the financial year

ended 31 March 2024.

Following the selection of PwC as the Group’s new

External Auditor, a governance structure was

established to manage the audit transition. This

comprises a Transition Steering Committee led by the

Group Financial Controller, and a Working Group, both

of which include representatives from Severn Trent,

PwC and Deloitte. The Working Group will review

progress of key transition milestones and provide a

forum to escalate any risks and issues. Summaries will

be shared with the Transition Steering Committee on a

monthly basis.

A shadowing process will commence during 2024/25

and PwC’s lead audit partner will attend Audit and

Risk Committee meetings during this period,

accompanied by other members of the PwC team

where appropriate.

Subject to shareholder approval, Deloitte will remain

the Group’s statutory auditor for the financial year

ending 31 March 2025 and a resolution will be

proposed to shareholders at the 2025 AGM to appoint

PwC as the Group’s statutory auditor for the financial

year ending 31 March 2026.

Key steps in the tender process:

– The tender details were published on the

Government’s website in line with the relevant

OJEU regulations. These were available to all

firms in the market.

– Interested firms completed a Pre-Qualification

Questionnaire (‘PQQ’) that assessed the firms’

audit experience in the sector and of listed

companies of the scale of Severn Trent.

– The incumbent, Deloitte, was not invited to join the

processdue to the mandatory rotation

requirements. Four firms responded to the tender,

one of whom did not answer the PQQ in full and

was therefore excluded from the process.

– The request for proposal and a comprehensive

data pack was issued to provide the progressed

firms with sufficient information to design an

audit plan, including: financial reports; financial

controls and policies; Group structure and

organisation charts; relevant IT system details;

and Board and Audit and Risk Committee

papers. Further information requests were

permitted under a specified procedure process

to allow the firms to ask questions on the

content of the data pack or request further

information frommanagement.

– The firms participated in a series of meetings

with Committee members and management,

which provided an opportunity for the firms to ask

questions arising from their review of the data

pack, as well as enabling Committee members

and management to interact directly with each

proposed audit team. Over 40 meetings were

held with firms as part of this process.

– Each firm provided an independence assessment

at the start of the process, detailing services

currently provided to the Group, and confirmation

of their ability to achieve independence within the

required timeframe. These responses were

reviewed by management to assess consistency

with Group’s own assessment and independence

status was reconfirmed ahead of the conclusion of

the process.

– The Steering Committee received

presentations from and interviewed the

proposed lead and second audit partners from

each firm at individual sessions which enabled

the Steering Committee to probe the firms on

criteria including: quality review ratings;

technical expertise; understanding of the

business and water industry; planned audit

approach; proposed team structure; and

implementation and transition.

– Reference checks were undertaken with

comparable companies, seeking insights into

matters such as each firm’s ability to challenge

management effectively, use of technology

andtools, diversity of workforce, and

confidence in the team’s expertise,

accreditation and experience.

Principal evaluation criteria used to

assess the firms:

– Service team, including arrangements for

partner rotation and succession.

– Service delivery, including the firm’s FRC and

other regulatory quality review ratings which

are available publicly, and application of

technology on the External Audit and what

insight this might provide.

– Understanding of the business and industry,

including views of the water sector and the

Group’s position within it, observations on the

Group’s reporting and potential areas for

improvement.

– Implementation and transition, including the

firm’s approach to, and experience of,

transition such as developing talent pipelines

in readiness for transition.

Following a detailed review of the performance of

each firm during the process and an evaluation

against all criteria, the Steering Committee

recommended PwC as its preferred candidate. The

factors contributing to the selection of PwC as the

preferred candidate included:

– the quality of the service team proposed by PwC

to undertake the audit;

– PwC’s approach to service delivery in terms of

technical ability, challenge and independence;

– PwC’s understanding of the business and

industry, particularly in relation to the

assessment of risk; and

– the thorough implementation and transition plan

put forward by PwC.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024160

Significant matters considered and addressed in relation to the financial statements

The Committee looked carefully at those

aspects of the financial statements that

require significant accounting judgments or

where there is estimation uncertainty. These

areas are explained in note 4 to the financial

statements. The Committee also considered

the accounting treatment for revenue and

accrued income. It received detailed reports

from both the CFO and the External Auditor on

these areas and on any other matters which

they believed should be drawn to the

Committee’s attention.

The draft External Auditor’s report on the

financial statements was also reviewed, with

particular reference to those matters reported

as carrying risks of material misstatement.

The Committee discussed the range of

possible treatments both with management

and with the External Auditor, confirming that

the judgments made by management were

robust and supportable. For all the matters

described below, the Committee concluded

that the treatment adopted in the financial

statements was appropriate.

Significant matter How the matter was addressed by the Committee

Going concern basis for the financial statements and

long-term Viability Statement

The Committee reviewed and challenged the evidence and assumptions

underpinning the use of the going concern assumption in preparing the

accounts and in making the statements in the Strategic Report on going

concern and long-term viability.

In particular, the Committee considered severe but plausible scenarios

modelled in relation to the Company’s Principal Risks, noting the stress tests

performed by management and the potential mitigating actions identified.

Our Business Model can be found on pages 8 to 9. Principal Risks and

uncertainties can be found on pages 95 to 102. The Viability Statement can be

found on pages 103 to 107 and the Going Concern Statement on page 107.

Determination of the provision for impairment of trade

receivables in Severn Trent Water Limited

At 31 March 2024, the provision in the Group’s financial

statements was £137.6 million and the charge for the year was

£27.3 million. Severn Trent Water Limited has a statutory

obligation to continue to supply water and wastewater services

to customers even when their bills are unpaid. This increases

the risk of bad debts. In addition, it has a large and diverse

customer base which requires impairments against trade

receivables to be assessed on a systematic basis.

The Committee challenged management’s assumptions regarding historical

cash collection and the impact of the cost of living pressures on Severn Trent

Water’s customers on the expected credit losses for trade receivables existing

at 31 March 2024, noting the independent forecasts of the likely economic

impacts and the recent evidence of a link between macroeconomic conditions

and the Group’s bad debt experience.

The Committee considered the work performed by the External Auditor and the

conclusions they reached regarding the adequacy of the provision.

The Committee determined that no adjustment to the amounts recorded

wasrequired.

The proposed classification of costs between operating

expenditure and capital expenditure in Severn Trent

WaterLimited

Severn Trent Water Limited has a significant capital programme

that includes projects made up of combinations of expenditure

and activities, some of which are recognised as property, plant

and equipment and some of which are recognised as operating

costs. For most of the expenditure this distinction is clear but

there is an element where subjective judgments are required to

determine the appropriate accounting treatment.

The Committee considered the application of the Group’s accounting policies

inrelation to capital expenditure during the year. The Committee enquired of

management whether the policies had been applied consistently from year

toyear.

The Committee considered the results of the External Auditor’s work and

discussed the conclusions with the External Auditor.

The Committee determined that no adjustment to the amounts recorded

wasrequired.

Determination of the amount of the Group’s retirement

benefitobligations

At 31 March 2024, net retirement benefit obligations amounting

to £213.0 million were recognised. The net obligation recognised

on the balance sheet is the difference between the fair value of

the schemes’ assets at the balance sheet date and the present

value of the benefits expected to be paid to members of the

schemes. This requires assumptions to be made for the

expected age of retirement and longevity of members, future

inflation rates and increases to benefits.

It is also necessary to determine an appropriate discount rate to

calculate the present value of the estimated gross obligations.

Management takes advice from external qualified actuaries who

perform the calculation of the present value of the benefits

based on the assumptions set by management.

The Committee scrutinised the assumptions underlying the valuation of the

obligations and obtained explanations for the significant reduction in the deficit

recorded. The Committee considered whether the assumptions, taken as a

whole, were appropriate, taking into account the work of the External Auditor

and the benchmark information provided. The Committee also scrutinised the

methodologies applied in assessing the fair values of the schemes’ assets and

considered the estimation techniques used for assets for which an up-to-date

valuation was not available.

The Committee considered that the assumptions and methodologies

werereasonable, and that no adjustment was required to the draft

financialstatements.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 161

GOVERNANCE REPORT

TREASURY COMMITTEE

REPORT

All members of the Committee are

Independent Non-Executive Directors

of the Board. Only members of the

Committee have the right to attend

Committee meetings. Other regular

attendees at meetings at the

invitation of the Committee include

the Chair of the Board, the Chief

Financial Officer, the Group

Treasurer, the Group Financial

Controller and representatives from

the Group’s debt advisers, Rothschild

& Co. None of these attendees are

members of the Committee.

The Committee is authorised to seek external

legal or other independent professional advice

(in addition to that provided by Rothschild & Co)

as it sees fit, but did not need to do so during

the year.

Committee meeting attendance 2023/24

Committee members Member since Meetings attended

Gillian Sheldon

(Chair until May 2024)

January 2022 until May 2024 5/5

Kevin Beeston March 2021 5/5

John Coghlan May 2015 until December 2023 3/3

Sarah Legg November 2022 5/5

Documents available at

severntrent.com

Sustainable Finance Framework

Sustainable Bond Allocation Report

Charter of Expectations

Committee Terms of Reference

Dear Shareholder

I am pleased to introduce the Treasury

Committee Report for the financial year

ended 31 March 2024, which will be my last

following the Company’s announcement

that I intended to step down from the

Severn Trent Plc Board on 14 May 2024.

On 18 March 2024, the Company announced

the appointment of Richard Taylor as an

Independent Non-Executive Director of the

Company with effect from 1 April 2024. In

anticipation of Richard’s planned

appointment as Chair of the Treasury

Committee upon my retirement from the

Board, we spent a considerable amount of

time together to ensure a smooth and

seamless handover of responsibilities,

alongside his extensive induction. You can

read more on page 145. This process

included numerous in-depth sessions

relating to the Group’s treasury-related

activities. I leave the Chairship of the

Committee in a safe pair of hands.

The Committee continues to oversee the

Group’s funding requirements and

financing risks and opportunities and, in

doing so, assists the Board in the effective

dischargeof its responsibilities in relation

to treasury management.

The Committee plays a key role in ensuring

that the Group remains in a strongfinancing

position and the Committee provides

regular updates to the Board in respect

offunding, solvency and liquidity matters

sothat the Group can respond quickly to

any opportunities.

Future funding is an important part of the

normal business planning process and this

year was no exception, given the formulation

of the PR24 Business Plan. During the

planning process, the Committee played a

key role in reviewing the PR24 funding

strategy in consideration of our performance

during AMP7, the evolution of the regulatory

model and significant step-up in investment

in AMP8, and the external market

environment. The Committee provided a

solid sounding board when management

proposed to raise equity prior to submission

of our PR24 Business Plan in order to ensure

a fully funded equity plan for 2025-30 and

support our plans to fast track £450 million

of investment over the remainder of AMP7,

and in diversifying the investor base through

our re-entry to the EUR bond market during

the year.

The Committee is a key contributor

to the Group’s strategy, formulating

robust plans to fund the RCV growth

needed in AMP8 through achieving

theoptimum balance between

equity and debt to maintain our

strong financial resilience.

Gillian Sheldon

Chair

(until 14 May 2024)

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024162

Following deliberation by the Committee,

theBoard accepted the Committee’s

recommendation to proceed with an equity

placing, retail offer and subscription to ensure

our ambitious investment plans for AMP8 were

appropriately funded, as this was deemed to be

in the best interests of shareholders and the

Company’s wider stakeholders, particularly

our customers and communities. On

29 September 2023, we announced the

non-preemptive placing of new ordinary

shares in the capital of the Company, with the

equity placing, retail offer and subscription

raising gross proceeds of approximately

£1 billion. Read more about the placing and

how the proceeds are being used on page 164.

During the year, the Group refinanced

£300 million of its debt and issued

£1,384 million of new debt. The Treasury Team

has continued its activity to diversify its

sources of funds and promote the Group in new

global markets. This year also saw the Group’s

return to the EUR bond market and you can

read more about our benchmark bond issue

onpage 164.

This comprehensive activity ensured that the

Group remained in a strong liquidity position

and in compliance with its Liquidity Policy.

Atthe balance sheet date, the Group had

sufficient liquidity to meet its forecast cash

flow requirements in line with the Group’s

treasury policies.

Of the total debt raised, Severn Trent Water

issued £1,117 million under the European

Medium Term Note Programme, providing

cost-effective liquidity, whilst continuing to

maintain diversity in the Company’s sources

offunding. This comprised a €500 million

sustainable EUR fixed rate bond, a £400 million

sustainable GBP fixed rate bond, an £80 million

tap of an existing bond maturing in 2042

raising £72.6 million net proceeds, a

£75 million CPI debt issue, which provides a

hedge against the Company’s index-linked

revenues and regulatory capital value (‘RCV’),

and Private Placements totalling £134 million.

In addition, Severn Trent Plc raised a further

£232 million through bank loans and Hafren

Dyfrdwy Cyfyngedig raised £35 million through

a bank loan.

Sustainable finance remains a core element of

the Group’s funding strategy and in November

2023 the Group reported its alignment to the

EUTaxonomy. You can read our updated EU

Taxonomy disclosure on pages 76 to 81.

TheGroup closely monitors developments in

sustainable finance through its Sustainable

Finance Committee, a management committee

which reports to the Treasury Committee on at

least an annual basis.

This year, the Committee spent time

considering the Group’s pension schemes

and the risk management actions that ensure

sufficient liquidity and appropriate interest

rate and inflation hedging were maintained,

whilst supporting the schemes’ deficit

reduction strategy. In conjunction with the

Pension Trustee, the overall pension scheme

investment strategy was reviewed during the

year, with oversight from the Committee.

Whilst energy markets stabilised somewhat

compared with previous years, the Committee

kept the Group’s hedging activities under

review given the tumultuous backdrop of

geopolitical events that continue to create

headlines around the world.

The annual Board Effectiveness evaluation,

which was facilitated externally this year,

assessed our performance as a Committee

and I am pleased that the review concluded

that we operate effectively and that the Board

takes assurance from the quality of our work.

The Board is satisfied that Committee

members bring a wide range of financial

experience across various industries and all

members have competence relevant to our

sector, with significant recent and relevant

financial experience. Further information

about each Committee member is contained

intheir individual biographies, which can be

found on pages 134 to 135.

I would like to thank the members of the

Committee, the management team and our

debt advisers, Rothschild & Co, for their

continued commitment throughout the year,

for the open discussions that take place at our

meetings and for the contribution they all

provide in support of our work.

This report was approved by the Committee at

its meeting on 14 May 2024.

Gillian Sheldon

Chair of the Treasury Committee

(until 14 May 2024)

The Treasury Committee’s agenda for 2023/24

The Committee provides Board oversight of the Group’s key financing risks and

opportunities. The Committee reports to the Board on the matters it has considered

following each Committee meeting, and makes recommendations as appropriate.

The key areas of focus at the Committee’s meetings during the year are set out below.

Key areas of focus

Execution of the Group’s financing plan and

evaluation of funding opportunities, in

consideration of the external operating

environment, entering new financial markets

and our PR24 Business Plan, including the

£1 billion equity raise that took place in

September 2023 and the EUR benchmark

bond priced in February 2024.

Consideration of the Group’s Liquidity Policy

and confirmation that a 15-month Policy

remained appropriate.

Review of the Group’s treasury policies in

relation to the hedging of market risks

(including energy, interest rates, inflation and

currency), financial counterparty credit risk

and credit ratings.

Evaluation of the Group’s European Medium

Term Note Programme and approval for

bonds to be issued pursuant to that

Programme during the year, including a EUR

fixed rate bond.

Review of the Group’s Sustainable Finance

Framework and associated governance.

Review of the Group’s Funding Strategy,

including interest rate strategy to support

the Group in consistently outperforming the

cost of debt allowance.

Review of the Group’s pension schemes and

oversight of the pension scheme investment

strategy.

Review and approval of the Committee’s

Terms of Reference during the year, prior to

making a recommendation to the Board. In

completing its review, the Committee

concluded that the Terms of Reference

remained appropriate and reflected the

manner in which the Committee was

discharging its duties.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 163

GOVERNANCE REPORT

£1 billion equity placing

On 29 September 2023, the Company announced the launch of a non-preemptive equity placing of new

ordinary shares to raise funding to support the significant step-up in investment planned for AMP8.

As detailed further on pages 6 to 7, our Business Plan builds on Severn Trent’s strong track record of

delivery, and was developed to continue to deliver for customers, the environment, the region and

shareholders. It was judged as acceptable by 76% of customers surveyed.

As a result of the preparatory work undertaken across a number of teams, and in conjunction with a

cohort of expert advisers, the equity placing was successfully priced at 2,150 pence per placing share

and raised gross proceeds of approximately £1 billion.

Our submitted PR24 Business Plan includes £12.9 billion of total expenditure across our network, the

equivalent of £2,400 for every household we serve. £5 billion of investment centres on enhancing

capacity and service beyond current levels, almost all of which is focused on the environment. For our

customers, it gives us the capacity to accelerate investment and improve service sooner.

With the potential to create 7,000 jobs in our region, our investment will have an important regional

impact, and we hope our focus on employability support – which will see us supporting 100,000 people

over a decade – will help a much more diverse range of people benefit from theseopportunities.

Treasury Committee Report continued

Pre-Emption Group reporting

As the equity placing related to a non-preemptive issue of equity securities for cash pursuant to a general

disapplication of pre-emption rights, in accordance with the Pre-Emption Group Statement of Principles 2022

(the ‘Principles’), a post-transaction report in the format specified was issued to the market through a

regulatory information service on 29 September 2023 and a copy was also provided to the Pre-Emption Group.

As this Annual Report is our first following the non-preemptive issue, in line with the requirements of the

Principles, the contents of the post-transaction report, dated 29 September 2023, are set out below:

Name of issuer Severn Trent Plc

Transaction

details

In aggregate, the Equity Issue of 46,511,628 New Ordinary Shares (comprising 22,922,277 Placing

Shares, 320,750 Retail Offer Shares, 12,787 Director Subscription Shares and 23,255,814

Subscription Shares) represents approximately 18.2% of the Company’s issued ordinary share

capital. Settlement for the New Ordinary Shares and Admission are expected to take place on or

before 8.00am on 3 October 2023.

Use of proceeds The proceeds of the proposed Equity Issue complete the equity contribution to the funding of Severn

Trent’s Business Plan for the regulatory period 2025-2030 (‘AMP8’) which Severn Trent intends to

submit to Ofwat on 2 October 2023. In particular, the plan and Equity Issue will ensure Severn Trent

is responsibly funded from the outset and ensure robust financial resilience is maintained whilst

financing a step-up in investment.

Quantum of

proceeds

In aggregate, the Equity Issue raised gross proceeds of approximately £1 billion and net proceeds of

approximately £987 million.

Discount The Placing Price of 2,150 pence represents a discount of approximately 5.1 per cent to the closing share

price of 2,265 pence on 28 September 2023 and a discount of approximately 7.1 per cent to the middle

market price at the time at which the Company and the Joint Bookrunners agreed the Placing Price.

Allocations Soft pre-emption has been adhered to in the allocations process for the Placing. Management was

involved in the allocations process, which has been carried out in compliance with the MiFID II

Allocation requirements.

Allocations made outside of soft pre-emption were preferentially directed towards existing

shareholders in excess of their pro-rata interests, and wall-crossed accounts.

The committed allocation to Qatar Investment Authority (‘QIA’) pursuant to the Subscription

recognises the support of QIA to the Company in raising the target gross proceeds of the Equity

Issue resulting in a fully funded equity plan for AMP8.

Consultation The Joint Bookrunners undertook a pre-launch wall-crossing process, including consultation with

major shareholders, to the extent reasonably practicable and permitted by law.

Retail investors The Equity Issue included the Retail Offer, for a total of 320,750 Retail Offer Shares, via the

PrimaryBid platform, alongside the Placing.

Retail investors, who participated in the Retail Offer, were able to do so at the same Placing Price as

all other investors participating in the Equity Issue.

The Retail Offer was made available to existing shareholders and new retail investors in the UK.

Investors were able to participate through PrimaryBid’s platform via its partner network (covering

60+ FCA registered intermediaries) and through PrimaryBid’s free-to-use direct channel. Investors

had the ability to participate in this transaction through ISAs and SIPPs, as well as General

Investment Accounts (‘GIAs’). This combination of participation routes meant that, to the extent

practicable on the transaction timetable, eligible UK retail investors had the opportunity to

participate alongside institutional investors.

Allocations in the Retail Offer were preferentially directed towards existing shareholders in keeping

with the principle of soft pre-emption.

EUR benchmark bond

On 27 February 2024, the

Company priced a

€500 million 10-year

benchmark bond. The bond

represented our

reintroduction to the EUR

bond market, with our last

EUR bond having matured

in2016.

The bond was well received,

with the book being 3.4 times

oversubscribed, and

comprised a quality book of

European investors providing

genuine diversification.

The bond was tightly priced,

with final pricing of mid

swaps plus 125 bps which

was around flat to GBP

secondaries and inside the

iBoxx index.

The proceeds were swapped

to £428 million and were

deposited in money market

deposits and money market

funds, providing additional

liquidity and further

de-risking the Group’s

funding plan.

The bond was issued under

our Sustainable Finance

Framework with the

proceeds allocated against

eligible green projects.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024164

CORPORATE SUSTAINABILITY

COMMITTEE REPORT

All members of the Committee are

Independent Non-Executive

Directors of the Board, with the

exception of Christine Hodgson (who

was independent on appointment).

Only members of the Committee

have the right to attend Committee

meetings. Other individuals, such as

the Chief Executive, the Director of

Human Resources and other senior

management and external advisers,

may be invited to attend meetings as

and when appropriate. None of

theseattendees are members of

theCommittee.

Committee meeting attendance 2023/24

Committee members Member since Meetings attended

Tom Delay

(Chair) January 2022 4/4

Christine Hodgson January 2020 4/4

Sharmila Nebhrajani May 2020 4/4

Sarah Legg November 2022 4/4

Documents available at

severntrent.com

Anti-Slavery and Human Trafficking

Statement

Sustainability Report

ESG Data Book

Charter of Expectations

Committee Terms of Reference

Dear Shareholder

I am delighted to introduce my second report

as Chair of the Corporate Sustainability

Committee. The following pages describe

the activities of the Committee and provide

an overview of the topics addressed during

the year.

The Committee has a key role in

supporting the Board by providing

guidance and direction on the Company’s

sustainability ambitions. The Committee

provides Board oversight for elements of

the Group’s strategy that relate to the

environment and also social and economic

priorities in accordance with the

Company’s Sustainability Framework,

ensuring the Company can demonstrate

that it lives through its purpose and

values, and acts responsibly in its

engagement with all stakeholders.

The Committee is authorised to seek external

legal or other independent professional advice

as it sees fit, but did not need to do so during

theyear.

The Corporate Sustainability Committee Terms

of Reference, which were updated inMarch 2024,

can be found at severntrent.com.

Sustainability is not a new or separate

direction for us. Our drive to deliver

outstanding performance in a way that

has a positive, sustainable impact is what

makes Severn Trent so unique, guiding

our purpose of ‘taking care of one of

life’sessentials’.

Tom Delay

Chair

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 165

GOVERNANCE REPORT

Corporate Sustainability Report continued

Sitting alongside me on the Committee are

Christine Hodgson, Sharmila Nebhrajani and

Sarah Legg, and Liv Garfield attends each

meeting, with an open invitation, to bring the

benefit of her expertise in sustainability

matters. Our collective experience and

capability lead to insightful and passionate

debate around a wide range of existing

andemerging sustainability topics. The

Committee’s discussion is then presented to

the Board at the beginning of the next meeting

to ensure that its oversight of Environmental,

Social and Governance (‘ESG’) matters

remains strategic, current and effective.

Our customers and wider stakeholders remain

focused on our impact on the environment and

our response to climate change. As a

Committee we are focused on driving

improvements for our customers and the

environment, both now and over time. As such,

during the year we considered a number of

updates including, our environmental

improvement plan, storm overflows strategy

and regular net zero updates.

We take seriously our responsibilities to our

customers and the broader communities that

we serve, which is why we are so committed to

our Customer Vulnerability Strategy. Alongside

this, our ambitious 10-year Societal Strategy

aims to address the long-term drivers of water

poverty across the Midlands in a landmark

scheme designed to help improve the life

chances of 100,000 people in our region,

through initiatives such as work experience,

training and employability skills development,

partnerships, mentoring and more. You can

read more about the work we have undertaken

during the year on page 31.

Last year, we announced our exciting

partnership with Melbourne Water and Aarhus

Vand, working collaboratively to develop and

test technologies that could reduce the carbon

footprint of wastewater treatment sites, share

existing expertise and establish new

international standards for measuring and

reporting emissions. In September 2023, in the

spirit of this strong collaborative relationship,

members of the Board visited Aarhus Vand to

observe innovative approaches being adopted

in waste and water networks and inform future

discussion on this topic. The visit included a

site visit to its Marseilisborg Sewage

Treatment Works and the Aarhus river, to

observe how Aarhus Vand had reduced storm

overflow spills by c.80% since 2006. Its bold

vision to ‘create a national platform as a driver

for local and global solutions to a healthier

water cycle’ is embraced at all levels of the

organisation, demonstrated in the excellent

service it delivers for customers in their

municipality and the genuine and commercial

interest it has in developing global solutions.

The Committee is proud of the Company’s many

achievements over the last year, described

within the Strategic Report on pages 4 to 127,

and the work we have undertaken to positively

impact communities within our region. Further

detail on key matters, ambitions, and

achievements that the Committee has

considered during the year are set out on the

pages that follow. The increasing focus on the

impact of climate change and other

environmental issues has become evident in

the Committee’s workload. The Committee

plays a key role in the governance of

environmental and climate-related reporting,

including overseeing, in conjunction with the

Audit and Risk Committee and supported by

independent third-line assurers, the Group’s

TCFD and EUTaxonomy disclosures.

I would like to thank the members of the

Committee for the open, constructive,

ambitious, and progressive discussions that

take place at our meetings, and for their

passion and personal commitment to our

wide-ranging and purposeful agenda.

This report was approved by the Committee at

its meeting on 21 May 2024.

Tom Delay

Chair of the Corporate Sustainability Committee

Our TCFD disclosure

We are committed to the

recommendations of the Task

Forceon Climate-related Financial

Disclosures (‘TCFD’), providing

ourstakeholders with transparent

information on climate-related

risks and opportunities that are

relevant to our business.

This year we have begun to evolve

our disclosure to incorporate the

recommendations of the Task Force on

Nature-related Financial Disclosures. We

have included summary boxes throughout

to outline the work we have done to date.

Our TCFD disclosure can be

found on pages 42 to 67.

Our culture ensures

that we care about our

customers and the

broader communities

thatwe serve.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024166

Delivering outcomes

our customers

careabout

There for our

customers when they

need us the most

Greater level of customer

insight

to provide an

understanding of how we can

best support their needs

£30 million of funding

tohelp our customers

inneed of financial support

through our Big Difference Scheme

Over 9% of our

customers signed up

toour Priority

ServicesRegister

A driver of positive

change

ESG action

and ratings

CDP Supplier

Engagement Leader

in2023 Supplier Engagement

Rating conducted by CDP

CDP Climate

Changescore of A-

ISS ESG – B+ ‘Prime’

status

Targeting 46% reduction

in Scope 1 & 2 (Science-

Based Targets) by 2031

Added more electric vehicles to

our fleet, with 69% of

company cars and 16%

of company vans now

electric

Sustainalytics Score

14.7

Carbon Trust accredited

115 suppliers assessed this year

through

EcoVadis, our

online Sustainability

Assessment Platform

Member of UN Global

Compact

100% of our contracted suppliers

have signed up to our

Sustainable Supply

Chain Charter

Caring for people

inourregion

Community

engagement

Awarded over

£2 million

to 100

organisations through our

Community Fund during the year

Over 3,500 learning

events hosted

accounting for over

170,000 hours of

instructor led training

atour Academy during the year

£2 million of Social

Value delivered throughout the

year in addition to Community

Fund donations

Real Living Wage

andLiving Hours

accredited employer

Signatory of the Prompt

Payment Code,

with an

average time to pay of 31 days

Running a business

thatgoes hand-in-

handwith nature

Wastewater treatment

and biodiversity

Delivered over

11,500hectares

of biodiversity improvements

during the year

Over 800,000 trees

planted against a target of

1.3 million by 2030

Biodiversity net gain on

all capital projects that require a

preliminary ecological appraisal

Making the most of our

resources

500,000 tonnes of food

waste recycled

each year

100,000 tonnes of green

waste recycled eachyear

Sustainability and ESG highlights 2023/24

You can read more in our standalone Sustainability Report 2024,

which is available on the Severn Trent Plc website.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 167

GOVERNANCE REPORT

Human rights and modern slavery

We are committed to protecting the human

rights of our employees and contractors, as

outlined in our Code of Conduct, Doing the

Right Thing. We have a responsibility to

understand our potential impact on human

rights and to mitigate potentially negative

impacts. Whilst not having a specific human

rights policy, we have a range of Group policies

on Human Resources, Anti-Bribery and

Anti-Fraud, Whistleblowing (‘Speak Up’) and

Procurement, as well as a Modern Slavery

Escalation and Remediation Policy and a

separate Anti-Slavery and Human Trafficking

Statement. We consider this approach goes

above and beyond a human rights policy.

Additionally, our policies are embedded well

across the Group.

We know Modern Slavery is a growing global

issue which is why we remain fully committed

to protect against Modern Slavery in our

business and supply chain. In common with

companies in our sector, our highest risk is

within our supply chain and, as such, we work

closely with our suppliers to ensure they

operate to the same standards we set

ourselves and ensure the risks involved in

their own supply chains are understood and

mitigated. All suppliers are required to sign up

and operate in line with our Code of Conduct,

which clearly sets out a zero-tolerance

approach to Modern Slavery, and this

requirement is built into our procurement

tender process. Our mandatory training for

colleagues, senior managers and Board

members continues to operate efficiently, and

our partnerships with Slave-Free Alliance, the

Supply Chain Sustainability School and Utilities

Against Slavery help support this. We provide

our supply chain partners with access to a

wide range of learning resources, including

dedicated modern slavery awareness training

for all organisations within the Group’s supply

chain. Our full Anti-Slavery and Human

Trafficking Statement can be found on the

Severn Trent Plc website.

Freedom of association and

collective bargaining

We recognise the right of all employees to

freedom of association and collective

bargaining. We seek to promote co-operation

between employees, our management team

and recognised Trade Unions. We meet with

our Trade Unions on a quarterly basis at the

Company Forum and see mutual benefit in

sharing information with our colleagues to

seek their feedback and suggestions. We

believe this fosters a common understanding

of business needs and helps to deliver joint

solutions aimed at making our business

successful. The Company Forum also provides

an invaluable opportunity for engagement with

the whole workforce to ensure their views are

taken into account. Responsible business

practices are an integral part of our business

strategy. Performance against our

sustainability commitments is reported

throughout our Annual Report and Accounts,

reflecting their embedded nature in our

Governance Framework. You can read more in

our dedicated Sustainability Report, which is

available on the Severn Trent Plc website, and

on our dedicated sustainability webpages.

Net Zero Hub atStrongford

We are committed to achieving net zero on

operational emissions by 2030 andin May 2023

weunveiled plans to create a Net Zero Hub at

Strongford. Work on the £40 million project

completed in April 2024 and we are now focusing

onourcommissioning plan. This ground-breaking

project to transform a large carbon-intensive

treatment works is supported by our international

net zero partnerships with Aarhus Vand

inDenmark and Melbourne Water in Australia.

For the first time, the most innovative technologies are

being integrated on one site to reduce and remove 34,300

tonnes of carbon per year, whichis equivalent to a person

flying between London and NewYork 69,000 times.

We have selected, trialled and tested physical, biological,

chemical and digital technologies to reduce and offset our

operational process emissions at the site. We are also

testing several new technologies at our Resource and

Recovery Centre at Spernal for potential future phases.

The new hub will not only put the Midlands on the map for

innovative wastewater management but will also support

our commitment toreducing our carbon footprint and

protecting the environment, whilecreating a ‘blueprint’ that

will we will share with the sector tohelp them achieve their

net zero commitments.

Corporate Sustainability Report continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024168

DIRECTORS’

REMUNERATION REPORT

All members of the Committee are

Independent Non-Executive Directors

of the Board, with the exception of

Christine Hodgson (who was

independent on appointment). Only

members of the Committee have the

right to attend Committee meetings.

Other individuals, such as the Chief

Executive (‘CEO’), the Director of

Human Resources, the Chief Financial

Officer (‘CFO’), the Group Company

Secretary, other senior management

and external advisers, may be invited

to attend meetings asand when

appropriate. None of these attendees

are members of theCommittee.

Committee meeting attendance 2023/24

Committee members Member since Meetings attended

Sharmila Nebhrajani

(Chair) September 2021 5/5

Christine Hodgson January 2020 5/5

Kevin Beeston November 2016 5/5

Gillian Sheldon September 2022 until May 2024 5/5

Dear Shareholder

On behalf of the Remuneration Committee of

Severn Trent (the ‘Committee’), I am pleased

to present our 2024 Remuneration Report.

This report provides insight into the

decisions the Committee has taken in

determining the remuneration outcomes for

our Executive Directors and the wider

workforce for the financial year ended

31 March 2024.

It also sets out details of our new Directors’

Remuneration Policy (the ‘Policy’), which will

be put to a shareholder vote at the 2024

AGM, as our current Policy approaches the

end of its three-year term. The 2024 Policy

comes at an opportune time for us as we

prepare for the next five-year Asset

Management Plan (‘AMP8’). This is the first

Policy developed during my tenure as the

Chair of the Committee and I am mindful that

the review of our Policy also takes place at a

time when there is a strong focus on

performance-related Executive pay

acrossthe sector.

In approaching the Policy review, the

Committee has spent a considerable amount

of time considering the subject of pollution

and stewardship of the environment, as we

recognise that the interplay between water

companies and the environment is one of the

most critical issues for our customers and

broader stakeholders right now.

Over the next few pages, I set out how we are

actively incorporating the expectations of

customers and our wider stakeholders into

our approach to Executive pay, both for the

year in review and as we look ahead to the

approval of a new Policy.

Quick links

– Chair’s Letter 169

– Remuneration at a Glance 174

– Remuneration for the Year in Review 175

– Summary of Remuneration Policy

andImplementation 179

– Company Remuneration

at Severn Trent 182

– Committee Governance 188

– Annual Report on Remuneration 190

– 2024 Remuneration Policy 195

A key focus for the Committee this year has been

on the review of our Directors’ Remuneration

Policy. The updates we are making are designed

toimprove alignment with the Company’s

strategicfocus areas and reflect the priorities

ofour stakeholders.

Sharmila Nebhrajani OBE

Chair

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 169

GOVERNANCE REPORT

Performance for the year

underreview

The fourth year of AMP7 has seen Severn Trent

deliver strong operational, financial and

environmental performance in year, despite a

backdrop of incredibly challenging weather

conditions. The Executive Committee has also

continued to execute an ambitious long-term

strategy, including the biggest ever year of

capital investment, insourcing of our Waste

Networks operation, and submission of a

transformative Business Plan for AMP8.

Whilst the Committee spent a significant amount

of time discussing the judgment delivered on the

Barlaston pollution of 2019/20, we were

pleasedto see the Company deliver strong

environmental performance in year, including

zero serious pollutions in 2023/24 and high

confidence of an Environmental Performance

Assessment (’EPA’) 4* rating for a fifth

consecutive year. Further detail on overall

performance during the 2023/24 performance

year is set out in the Chief Executive’s Review on

pages 13 to 15, the Chief Financial Officer’s

Review on pages 84 to 91, and highlighted in the

Remuneration for the Year in Review section

which can be found on pages 175 to 178.

Recognising the ongoing challenges in the cost

of living, the Committee was pleased to see the

Company continuing to prioritise its duty of

care to employees throughout the year. As well

as being a real Living Wage employer, the

Company became a real Living Hours

employer in April 2024 and continues to focus

on providing employees with access to a wide

range of services and benefits designed to

support family living and employee wellbeing.

2023/24 bonus outcome

A consistent bonus design operates throughout

the organisation. Page 175 sets out details of

the 2023/24 annual bonus outturn, which pays

out on a formulaic basis at 65.9% of maximum

opportunity, equivalent to 79.0% of salary for

both the CEO and CFO. As noted later in this

letter, the Committee has determined it

appropriate to apply downwards discretion to

the bonus outcome for the CEO.

2021 Long Term Incentive Plan

(‘LTIP’) vesting

The standard Return on Regulated Equity

(‘RoRE’) element of the 2021 LTIP award

measures the Company’s performance against

RoRE set by Ofwat’s Final Determination (‘FD’).

Over the three-year performance period of the

2021 LTIP, the Company achieved a RoRE of

2.27x against the target of 1.39x the base RoRE

return.

This results in full vesting of the standard

element of the 2021 LTIP award, which is

equivalent to 60% of maximum for the total

2021 LTIP award for the CEO, and 53.3% of

maximum for the CFO.

The LTIP granted in 2021 was the first award to

include a sustainability element with targets

aligned to our Triple Carbon Pledge and

external Science Based Targets commitments,

worth 20% of the maximum award. The

sustainability element of the 2021 LTIP award

measures the Company’s performance against

four different measures aligned with our

environmental commitments to reach net zero

carbon emissions by 2030. Based on

performance against these measures over the

three-year period, this element will vest in full,

which is equivalent to 20% of maximum for the

total 2021 LTIP award for both the CEO and CFO.

The remaining 20% of the 2021 LTIP award is

based on achieving upper quartile (‘UQ’) RoRE

performance which will be known in July and

reported in our 2024/25 report.

The Committee has reviewed the vesting of the

award to consider potential windfall gains and

concluded that, subject to the final share price

on vesting, there has not been any windfall gain.

2020 UQ LTIPvesting

Vesting under the UQ RoRE element of the 2020

LTIP award was only known at the end of July

2023 when comparable statistics for the other

Water and Sewerage Companies (‘WaSCs’) were

published. This meant that the LTIP single figure

value reported for 2022/23 did not include the UQ

element of the 2020 LTIP award. We now know

that Severn Trent achieved UQ performance, and

therefore the UQ element of the 2020 LTIP award

is included in the 2023/24 single figure for the

CEO and former CFO, James Bowling.

Assessment of performance in

theround

In overseeing remuneration outcomes, the

Committee ensures that performance is

assessed in the round and over time through a

number of lenses, to incorporate a variety of

stakeholder perspectives. In so doing, the

Committee assesses the extent to which

formulaic incentive outturns are justifiable and

explainable in the context of overall

performance for customers, shareholders,

communities and the environment.

Through its strong operational, environmental

and financial performance in 2023/24, the

Company has demonstrated again that it is one

of the sector’s leading performers, as follows:

– over three-quarters of Outcome Delivery

Incentive (‘ODI’) measures are green,

including those that measure leakage,

blockages and water quality complaints;

– the Company has delivered its biggest ever

year of capital investment at £1.2 billion;

– we are the only company in the sector to

achieve EPA 4* in the Environment Agency’s

(‘EA’) annual assessment for four

consecutive years, and we are highly

confident in achieving it for a fifth

consecutive year; and

– in the first year of our Societal Strategy, the

Company has supported around 9,000

people and generated more than £2 million

of measurable Social Value.

The Committee’s full assessment of

performance in the round is set out in detail on

page 173.

Following the Committee’s assessment of

performance in the round, no discretion has

been exercised to override the formulaic

outturn of either the 2023/24 annual bonus or

the standard element of the 2021 LTIP award in

respect of performance in the year. However,

the Committee has determined that discretion

is required relating to an event in a prior year,

as set out below.

Committee assessment of events

outside of the year in review

As set out in detail on pages 23 and 24 of the

Annual Report, judgment was delivered in

early 2024 in respect of the pollution at

Barlaston which occurred in the 2019/20

performance year. Alongside their

assessment of performance in the round for

2023/24, the Committee considered this

pollution event in detail, including its nature

and severity, as well as its actual and potential

environmental impact.

After significant discussion and careful

consideration, the Committee has determined

that it is appropriate to exercise downward

discretion to the CEO’s annual bonus to reflect

and acknowledge this regrettable event. Whilst

the Company did not have any serious

pollutions in 2023/24 and are highly confident

of EPA 4* rating for an unprecedented fifth

consecutive year, the Committee believes that

an adjustment is appropriate to reflect the

judgment made, the potential impact of this

event, and the expectations of our customers

and broader stakeholders.

In determining an appropriate level of

adjustment, the Committee was mindful of the

changes proposed to the annual bonus as part

of the 2024 Remuneration Policy review, which

are set out in detail later in this letter.

Recognising that as of 2024/25, the Committee

are introducing the requirement for zero

serious pollutions to achieve the EPA 4*

element of the bonus, the Committee exercised

discretion to reduce the EPA element of the

2023/24 bonus to zero for the CEO.

Following this adjustment, the Committee

believes that the overall outcomes of the

annual bonus and LTIP are both appropriate

and reflective of the Company’s broader

performance, and that the Policy has

operatedas intended.

2024 Remuneration Policy review

At Severn Trent we are committed to a

transparent remuneration framework which

embeds our values across the Company. As

noted above, we are also mindful of the wider

public debate around Executive pay, particularly

in the water sector, and the Committee aims to

ensure that our Executive remuneration

arrangements can be clearly articulated and

justified to internal and external stakeholders.

With this in mind, the Committee’s objectives

for the 2024 Policy review were:

Directors’ Remuneration Report continued

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024170

– continuing to focus management on strong

and sustainable financial and operational

performance as we enter an even more

challenging AMP cycle;

– recognising that, as a regulated service

provider such as Severn Trent, the price

review mechanism provides an in-built

alignment between delivery for our

customers and the environment, and the

outcomes for shareholders, which should be

reflected in the selection and weighting of

incentive measures;

– recognising and embedding our short- and

long-term commitments and ambitions

around sustainability and our key

stakeholders within our incentive framework;

– working within the framework of our

regulator’s guidance;

– ensuring that the remuneration framework

continues to align fully with the UK

Corporate Governance Code;

– ensuring that malus and clawback

provisions within our incentive schemes

continue to enable the Committee to apply

discretion where Company performance is

not aligned to stakeholder expectations; and

– maintaining high levels of stakeholder

engagement and support.

In approaching the Policy review, the

Committee undertook a detailed review of the

existing Policy, including consideration of how

it has aligned to the strategic priorities of the

Company over the past three years, as well as

giving thought to future strategic priorities,

regulatory expectations going into AMP8, and

shareholder and broader stakeholder feedback

and expectations. On behalf of the Committee,

I would like to thank all who engaged with us

during the consultation phase of the Policy

review; your feedback, challenge and support

was highly valuable and it enabled us to test

and validate our initial conclusion that the

existing Policy continues to provide an

effective framework through which to reward

and incentivise our Executive Directors.

Details of the review approach and the

outcomes are set out in the table below.

Based on the review findings, we believe that

the current Policy remains fit for purpose,

particularly versus each of our review

objectives. As such, the Policy outlined in this

report, and being put to shareholder vote, is

largely unchanged from the existing Policy.

Proposed changes to the implementation of the

Policy are summarised below:

– reweight the annual bonus performance

measures such that there is an even

stronger focus on environmental

performance;

– evolve the LTIP to increase the focus on

broader stakeholders over the long term,

whilst maintaining a strong focus on

financial performance;

– removal of the option for personal objectives

in the bonus structure. Although not used in

the bonus design since 2019/20, our 2021

Policy retained the option to incorporate

them into the bonus design. However, we

strongly believe in a structure that is based

on quantitative data, where all employees are

working to the same set of objectives; and

– clarify the treatment of deferred share

awards under the annual bonus for good

leavers so that the default treatment is that

subsisting awards vest as per their original

timelines (rather than at the point

ofcessation).

Further details of the proposed changes are

presented in the Remuneration for the Year

Ahead section below and on pages 195 to 204.

Approach to the Remuneration Policy review

The table below shows some of the key activities carried out as part of the Remuneration Policy review:

Assessment of

the current

Policy

Our current Policy was approved at the 2021 AGM with 99.66% of votes in favour and it has continued to receive strong support from shareholders in

each subsequent implementation year. Under this Policy, Executive Directors’ pension contributions have been brought into alignment with those of

the wider workforce, we have successfully demonstrated the application of post-employment shareholding requirements following the retirement

of the former CFO and proved our ability to recruit, motivate and retain exceptional talent in the form of the CEO and new CFO.

The Committee is satisfied that the Policy provides a framework which has allowed the implementation of remuneration arrangements that are

aligned to the Company strategy and provide outcomes that are fair and in line with the experience of all stakeholders, whilst providing suitable

provisions to override formulaic outcomes in the event that the Committee believes there is a misalignment. In addition, the flexibility within the

Policy, in particular around performance measures, allows the Policy to continue to be implemented in line with the Company strategy and

regulatory framework as either evolves.

Shareholder

engagement

In early 2024, we conducted an extensive consultation exercise with shareholders representing 73% of our issued share capital, to understand

their views on our proposed new Policy. In summary, they were pleased to see the overarching principles of the Policy retained, whilst

supporting the Company’s commitment to the introduction of a broader range of non-financial LTIP measures that support the key pillars of the

Company’s strategy going into AMP8.

Alignment to

regulatory

expectations

In June 2023, Ofwat published its final guidance for performance-related Executive pay, in which it sets out how performance-related pay

should demonstrate a substantial link to stretching delivery for customers and the environment, both now and over time; be based on stretching

targets; and take into account factors which are wider than the individual metrics used as part of performance-related pay arrangements.

As part of the Policy review, we considered Ofwat’s expectation that at least 50% of incentives should be aligned to stretching delivery for

customers and the environment. Our annual bonus already exceeded these expectations and will continue to do so. We have now also aligned

the LTIP to Ofwat’s expectations with Customer, Environment and/or Communities related measures now accounting for 50% of the overall

award. Financial performance will continue to be assessed through RoRE, which has been down-weighted to 50% of the award. RoRE

remains a key financial measure that provides a strong alignment between the long-term financial and operational performance of the Group

and the reward delivered to management.

Reflecting

broader

stakeholder

priorities

The Committee wants to ensure our Policy is designed to deliver balanced outcomes for all of our stakeholders, driving long-term performance

for the benefit of all groups. Whilst the measures and weightings of the individual components of the LTIP and annual bonus are linked to how we

implement the proposed Policy, the structures were front of mind as we went through the process.

Alongside extensive shareholder consultation, in March 2024 the Company undertook a survey of customers via ‘Tap Chat’, our customer

surveying tool. Customers were asked for their views on service delivery priorities and how they should be reflected in performance-related pay

structures. The results of the survey, which received over 350 responses, were factored into the Committee’s review of incentive measures.

For more details on the changes we are making to the annual bonus and LTIP structures and targets, please see the Remuneration at a Glance

section on page 174, and the case studies on page 187.

2024/25 bonus

The maximum bonus opportunity will continue

to be 120% of salary for the Executive Directors,

with performance conditions remaining

consistent throughout the organisation. Our

stretching targets mean that the typical payout

is much lower than maximum, with the average

outturn across AMP7 to date being 62.3% of

maximum.

Aligning reward to environmental

performance

The Committee has spent a significant amount

of time this year considering the interplay

between environmental performance and

Executive pay. Whilst the Committee is

confident that we already have strong links

between environmental performance and pay,

Remuneration for the year ahead

Base salaries and fees

The average salary increase across the wider

workforce in July 2024 will be 5%, and

Executive Director base salaries, the Chair’s

fee and Non-Executive Director base fee

increases will be aligned to that.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 171

GOVERNANCE REPORT

Directors’ Remuneration Report continued

with 30% of the current annual bonus aligned to

environmental measures, we believe it is

appropriate to go even further and not only

increase the focus of the annual bonus on

environmental measures, but also strengthen

the robustness of the measures and targets

themselves.

As part of the 2024 Remuneration Policy

review, the Committee have approved an

increased weighting of the EPA 4* rating

measure from 5% to 10%, and an increase to

the combined sewer overflow (‘CSO’) measure

from 12% to 15%. When combined with the

environmental ODIs, which make up just over

a third of the ODI measure at 10% of the total

bonus, this means that from 2024/25, 35% of

the annual bonus will be linked to measures

directly relating to environmental

performance and river health.

The changes include the introduction of the

requirement for no serious pollutions in year

to achieve the EPA 4* element of the bonus,

thereby making this element of the bonus even

more challenging and robust. This underpin

will be binary, therefore if there is a serious

pollution event within the 2024/25

performance year, the EPA 4* measure will

not pay out, irrespective of whether EPA 4*

status is achieved. We have also split the CSO

measure into two equal components, so that,

in addition to CSO reductions, half of this

measure is focused on delivering CSO

enhancements at pace. The enhancements

will build climate-related resilience into the

system, reducing spills and overall

environmental harm. This enhancement

activity will run in parallel with our

development plan for more complex capital

solutions and will provide valuable new insight

to drive further improvements for customers

and the environment.

Further detail on how we link environmental

performance and remuneration can be found

in the case study on page 187.

2024 LTIP and evolution of the LTIP

measures

In recognition of the CFO’s excellent

performance in her first year in role, her wider

role remit relative to the former CFO (including

the Group Commercial function), and also in

anticipation of the largest ever capital

investment programme over the next five years,

the Committee has approved an increase to the

maximum LTIP opportunity for the CFO from

150% to 175% of salary. The maximum LTIP

opportunity will continue to be operated at

200% of salary for the CEO, and both Executive

Directors will continue to only receive full

vesting if all measures are achieved at

maximum and the Company’s RoRE

performance is upper quartile relative to other

WaSCs.

As part of the 2024 Policy review, the

Committee has focused on ensuring that our

remuneration framework is designed to

deliver balanced outcomes for all of our

stakeholders, driving long-term performance

for the benefit of all groups. To help achieve

this aim, we will be increasing the weighting

of non-financial measures within the LTIP

from 20% to 50%. Whilst this reduces the

weighting on financial measures, from a

shareholder perspective, the Committee

believe that the increase in non-financial

measures benefits shareholders through

increased stakeholder trust and associated

reputational benefits.

The non-financial measures will consist of a

selection of environment, customer and/or

community measures – to ensure the interests

of all of our stakeholders are considered – and

will not exceed 50% of the LTIP performance

measures. Within this structure, different

performance measures, targets and/or

weightings may be set for future LTIP awards

to reflect the business strategy and regulatory

framework operating at that time. The

performance measures and weighting for the

2024 LTIP award are set out in the table below:

It is the Committee’s view that the specific targets which have been set are suitably challenging and aligned with the Company’s strategy and

Business Plan. Further detail on the targets and vesting percentages can be found on page 181.

The Committee will assess the value of the 2024 LTIP award at vesting and will ensure that the final outturn reflects all relevant factors, including

an assessment of broader performance in the round.

Measure Sub-measure Weighting Measure details

RoRE 50%

Requires the Company’s RoRE to outperform the target set out in Ofwat’s FD and, for full

vesting, to deliver upper quartile relative performance compared with other WaSCs.

Environment

Scope 1 and 2

emissions

reduction

10%

Cumulative reduction against a Science Based Target (‘SBT’) glidepath for Scope 1 and 2

emissions compared with the agreed 2019/20 baseline.

Self-generation 10%

As we push further on renewable energy investment for both economic resilience and net zero

purposes, this measure remains a fundamental driver of a credible carbon reduction journey.

Reasons for Not

Achieving Good

Status (‘RNAGS’)

10%

As part of our Get River Positive approach, we intend to make sure that our CSOs and sewage

treatment works do not harm rivers, based on the Environment Agency’s RNAGS measures.

Customer

Price Control

Deliverables

(‘PCD’)

10%

This Ofwat mechanism is a long-term measure of customer performance that holds companies

to account for the timely delivery of the outcomes and outputs promised to customers in their

respective PR24 Business Plans.

Communities Social Value 10%

This is the value we contribute to society. Our ambition is to maximise the Social Value we

deliver within our communities, whilst still reaching 100,000 people through our Societal

Strategy, by tackling the underlying causes and long-term drivers of water poverty.

Board changes

As we set out in last year’s report, James

Bowling stepped down as CFO and as an

Executive Director in July 2023, and retired

from the Company in December 2023. His

remuneration arrangements were treated in

line with the shareholder-approved Policy. He

did not receive any compensation for loss of

office, but as a retiree he will be treated as a

good leaver in relation to his outstanding

incentive awards. For more details see the

Payments to former Directors upon

retirementsection on page 190.

We remain committed to maintaining an ongoing and transparent dialogue with our major

stakeholders and I am grateful for the time and input they have given us throughout the

Policy engagement process. I hope that we can rely on your vote in support of our approach

to remuneration. If you would like to discuss any aspect of this report, I would be happy to

hear from you. You can contact me through our Group Company Secretary.

Sharmila Nebhrajani OBE

Chair of the Remuneration Committee

9 May 2024

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024172

PERFORMANCE IN THE ROUND FOR 2023/24

In overseeing remuneration outcomes, the Committee ensures that performance is assessed in the round and over time through a number of

lenses, incorporating a variety of stakeholder perspectives. This assessment examines whether formulaic incentive outcomes are justifiable and

explainable in the context of overall business performance for customers, the environment and wider stakeholders. It also considers other

factors, including regulatory investigations, environmental compliance beyond the measures contained in the incentive schemes, health and

safety performance, treatment of the wider workforce and societal matters such as support for our local communities.

The schematic below sets out a summary of the key data points that the Committee considers as part of their assessment of performance in the

round. It also sets out the process followed in order to determine if formulaic incentive outcomes are justifiable and explainable in the context of

overall business performance and service delivery for customers, the environment, shareholders and wider stakeholders.

Factors considered by the Committee

Delivery for customers With 35% of the 2023/24 annual bonus structure based on ODI performance, and the financial rewards of ODIs flowing into the

Company’s RoRE performance, customer performance metrics are embedded within the formulaic calculation of executive

remuneration. In assessing performance in the round, the Committee considered the Company’s performance across all of its

performance commitments both over time and relative to the performance of other WaSCs.

Deep dives were provided on the following key areas:

– Customer measure of experience (‘C-MeX’) performance, including improvement activity underway and planned.

– Company response to extreme weather events.

Environmental performance For 2023/24, environmental measures make up 30% of the annual bonus, through a combination of environmental ODIs (13%), EPA

4* rating (5%) and River Health measures (12%). Beyond the formulaic outturn, the Committee considered the Company’s

performance against a broad range of environmental performance indicators, supported by deepdives into the following key areas:

– The EA’s overall EPA framework, including Company performance against all of the measures that make up the EPA rating,

both in year and over time.

– CSO performance, including improvement activity underway and planned.

– Progress against the Company’s stated environmental commitments, including the Green Recovery Plan, Get River Positive

pledges, and Triple Carbon Pledge.

– An in-depth review of the Barlaston pollution event from 2019/20, including the timeline, Company response, and the actual

and potential impact of the event.

Financial performance

andresilience

Whilst 40% of the 2023/24 bonus is based on Group profit before interest and tax (‘PBIT’) performance and this subsequently feeds

into the RoRE performance that influences the LTIP outturn, not all measures of the Company’s financial performance are readily

visible in this top-level number. The Committee therefore considered other factors when assessing the Company’s financial

performance and resilience in the round, as follows:

– Gearing and financial resilience.

– Capital delivery and investment.

– Regulatory Capital Value (‘RCV’) growth.

– Shareholder experience.

Impact on our communities The Committee considered the long-term value creation for the mutual benefit of our customers and communities, supported by

deep dives into the following key areas:

– Affordability.

– Progress achieved in the first year of the Company’s Societal Strategy, including around 9,000 people supported and the

generation of more than £2 million of measurable Social Value.

Alignment to wider

workforce

In addition to the Committee’s biannual update on workforce policies and practices, the Committee considered the alignment

between executive remuneration outcomes and the wider workforce experience, supported by the following key areas:

– Assessment of employee policies and benefits – including the updates to maternity and adoption leave policies in year which

enable colleagues to take up to a year of leave on full pay.

– Internal and external benchmarks of employee experience – including the Company’s best ever employee engagement

score, very high Sharesave participation rates, and real Living Wage and real Living Hours accreditation.

– Health and Safety performance - including the Company’s best ever ‘Lost Time Incidents’ rate

Stakeholder relationships The Committee reviewed the strength and status of the Company’s relationships with key stakeholders, including its regulators,

regional MPs, local business forums and shareholders.

Independent assessment

An independent assessment of performance in the round was provided by the Committee’s independent external remuneration advisers.

Decision in determining whether any adjustment is required to remuneration outcomes

Following this assessment, the Committee confirms that it has considered the Company’s wider performance in the round and has concluded that the formulaic

outturns are reflective of the Company’s overall performance and delivery for stakeholders in the 2023/24 performance year. However, as set out in the Chair’s

letter, due to the judgment that was delivered in respect of the Barlaston pollution event which occurred in 2019/20, the Committee considered it appropriate to

apply downwards discretion to the CEO’s 2023/24 annual bonus outcome, reducing the EPA 4* performance measure from full vesting, to zero.

Following this adjustment, the Committee confirms that the overall outcomes of the annual bonus and LTIP are appropriate, justifiable and explainable, and that

the Policy has operated as intended.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 173

GOVERNANCE REPORT

The approach to remuneration across the Group

ensures all employees are rewarded and

incentivised to deliver Severn Trent’s performance

driven, sustainability led strategy. Delivering

against this strategy is critical to the creation of

long-term value for our stakeholders: customers,

communities, employees, shareholders, suppliers

and contractors, and our regulators.

In determining the right performance measures for

our incentive plans, the Committee seeks to strike a

balance between short- and long-term financial,

operational and sustainability goals. Aswe are a

long-term business, actions taken in a single year

flow through to longer-term performance. We

operate an Annual Bonus Scheme across the Group,

which reflects our belief that all our employees play

a part in the creation of value for our stakeholders.

The diagrams below illustrate the performance

measures that we use within our incentives and

explain how they, together with the overall

structureof incentives, help deliver the Company’s

strategic goals.

REMUNERATION AT A GLANCE

’

Performance

driven,

sustainability

led

The table below sets out the key remuneration principles the Committee considers when overseeing Executive remuneration to ensure it is aligned to stakeholder priorities:

Remuneration

Principle How it is applied

Stakeholders

whobenefit

Stretching

targets

– The Committee’s insistence on stretching targets means that we have not paid out the maximum possible bonus during

AMP7 to date, despite delivering sector-leading ODI, financial and environmental performance.

– LTIP maximum outturn can only be achieved if Severn Trent’s RoRE performance is UQ relative to other WaSCs.

Focus on the

environment

– For 2024/25, the weighting of environmental measures in the bonus increases from 30% to 35%. This is achieved primarily

by increasing the CSO element to 15%, and increasing the EPA 4* measure to 10%.

– In addition we have introduced an underpin on the EPA measure for zero serious pollutions.

– We have increased the environmental element of the 2024 LTIP through the inclusion of RNAGS, worth 10%.

Assessment of

performance

in the round

– When determining Executive pay outcomes, we do not simply follow the formulaic outcome of each performance measure

but also undertake a thorough assessment of ‘performance in the round’ through several lenses. This assessment

examines whether formulaic outcomes are appropriate and justifiable in the context of overall business performance and

service delivery for customers, the environment and wider stakeholders, and allows the Committee to exercise discretion

to override the formulaic outturns where appropriate.

– ‘Performance in the round’ is supported by an independent market assessment report prepared for the Committee by PwC.

Focus on

long-term

performance

– 50% of Executive Directors’ annual bonuses are awarded in shares that are deferred for three years and 100% of the LTIP is

awarded in shares, which are subject to a two-year holding period post-vesting.

– All of the Company’s incentive scheme rules contain robust malus and clawback provisions, allowing the Committee to

reduce or recoup any past incentive payments from individual Executives if we later learn of information that was material

to the incentive scheme outcome after the time of the award.

– Post-employment shareholding requirements reinforce the importance of sustainable long-term performance.

Ability to apply

discretion

– Where the Committee exercises discretion to reduce performance related pay outcomes, this is not limited by the

weighting applicable to specific measures. Therefore, outcomes could be reduced by up to 100% if deemed appropriate

forthe circumstances.

Stakeholder key

Customers Communities Shareholders

and Investors

Sustainability

andESG

Employees Suppliers

and Contractors

Regulators

and Government

2024/25 Annual Bonus

40%

Group PBIT Underlying profit is a key measure of

shareholder value.

27%

Customer

and

Environment

ODIs

A significant proportion of ODIs relates to

the service we provide to our customers and

supports alignment with customer

outcomes.

Just over a third of our ODIs are linked to

environmental measures.

15%

CSOs In line with pledge one of our five river

pledges, we will reduce the number of CSO

spills, and deliver targeted CSO

enhancements.

10%

EPA/Serious

Pollutions

We are committed to achieving the

industry-leading 4* EPA status, underpinned

by zero serious pollutions.

Health and

Safety

We are committed to keeping our employees

safe and well, and we set stretching targets

via our ‘Lost Time Incidents’ measure.

2024 LTIP

50%

Financial

RoRE 50%

(Standard and

UQ element)

RoRE is a financial KPI and is the core driver of overall Company

performance, supporting the long-term sustainability of the Company.

Components of RoRE are:

– Wholesale totex

– Customer ODIs

– Retail operating costs

– Financing

As explained on page 175, the RoRE performance measure of the LTIP

award comprises a standard element and a UQ element. The UQ element

ensures that exceptional relative performance must be achieved to justify

full vesting of the RoRE element.

30%

Environmental

Carbon

Reduction 20%

Our two carbon reduction measures are aligned with our environmental

commitments to reach net zero carbon emissions by 2030 and comprise

Scope 1 and 2 emissions reduction (10%) and self-generation (10%).

RNAGS 10% Through our investment and capital delivery programmes, we will deliver

significant improvements in river quality, reducing our share of RNAGS.

10%

Customer

PCDs 10%

This Ofwat mechanism is a long-term measure of customer performance

that holds companies to account for the timely delivery of the outcomes and

outputs promised to customers in their respective PR24 Business Plans.

10%

Communities

Social Value

10%

This measures the value we contribute to society, using the Government’s

preferred Social Value methodology.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024174

The graphs below show how the successful delivery of our strategy has flowed through to the rewards provided to our Executive Directors.

Thefull explanatory notes for each element of remuneration are detailed on page 193 in the Annual Report on Remuneration.

2023/24 single figure outcomes (£’000)

Liv Garfield – CEO Helen Miles – CFO

Single figure

2023/24

Sing

le figure

2022/23

Salary

Benefits and pension LTIP standard element

Annual bonus LTIP UQ element

£3,183

0 500 1,000 2,500 3,5001,500 2,000 3,000

£3,117

2020 UQ2021 standard

2020 standard

2019 UQ

0 500 1000 1500 2000 2500 3000 3500

Single figure

2023/24

Single figure

2022/23

2021

standard

£1,278

Fixed

Salary Benefits and pension

Variable

Annual bonus LTIP standard element LTIP UQ element

The single figure amount in 2023/24 is 2.1% higher than 2022/23 for the CEO, mainly due to the strong performance in year resulting in a higher

bonus outcome in 2023/24.

As part of the 2018 Policy review, the maximum potential remuneration of the Executive Directors was increased through the introduction of a

stretch UQ element within the LTIP, meaning the maximum LTIP outturn is only achieved if Severn Trent’s RoRE performance is upper quartile

relative to that disclosed by other WaSCs. In order to determine if the Company has achieved the stretch LTIP target, comparative data for the

other WaSCs needs to be collated, verifiedand published by Ofwat. This process concludes in July each year, which is after the publication date

of the Directors’ Remuneration Report. The outcome of the LTIP UQ element will therefore always be published one year in arrears.

Comparative data published by Ofwat in July 2023 confirmed that the Company achieved UQ status and therefore the UQ element of the

2020LTIP award vested in full, and is reported in the 2023/24 single figure as shown above.

For more detail on the single figure value, see page 177.

Annual bonus 2023/24 outturn

A summary of business performance is set out on pages 2 to 127 within the Strategic Report.

Bonus element

Threshold

(0% payable)

Target

(50% payable)

Maximum

(100% payable) Outturn Weighting

Outcome

achieved

Group PBIT

£494.2m £509.2m £524.2m £511.8m 40% 22.9%

Customer and Environment ODIs

(i)

£40.0m £50.0m £60.0m £55m 35% 24.0%

River Health

(ii)

0% 50% 100% 50% 12% 6.0%

Health and Safety

(iii)

0.17 0.13 0.09 0.08 8% 8.0%

EPA rating

(iv)

N/A N/A Achieved Achieved 5% 5.0%

Total 100% 65.9%

CEO total outcome following

discretion

(v)

60.9%

(i) Our ODIs are grouped into three categories. The outcome achieved reflects in-year

performance across all three ODI categories, and the outturn represents significant

outperformance in two of the three categories. Total reported ODIs of £55 million also

include £20.0 million of end of AMP ODIs.

(ii) Our River Health element is split into two equally weighted sections for reduction in CSO

activations and reduction in RNAGS. The outcome achieved represents maximum

outperformance on the RNAGS element (achievement of 161 versus threshold of 120,

target of 140 and maximum of 160), and nil outcome against the CSO element (achievement

of 24.9 versus threshold of 22.6, target of 21.9 and maximum of 21.2).

(iii) Measured as number of Lost Time Incidents divided by number of hours worked multiplied

by 100,000.

(iv) This measure only pays out if we achieve the highest EPA 4* rating.

(v) As set out in the Chair’s letter, downwards discretion was applied to the CEO’s annual

bonus, reducing the EPA 4* element outcome from full vesting to zero.

REMUNERATION FOR THE YEAR

INREVIEW

The Committee believes it is important that, for Executive Directors and senior management, a significant proportionof the remuneration

package should be performance related and aligned to targets that deliver valuefor stakeholders.

The following section highlights the performance and remuneration outcomes for our Executive Directors for the year ended 31 March 2024,

starting with the total single figure outcomes.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 175

GOVERNANCE REPORT

Directors’ Remuneration Report continued

Bonus opportunity and outcome

Performance measures and weightings in the annual bonus arrangements at Severn Trent are consistent throughout the organisation.

2023/24 salary

(£’000)

(i)

Bonus opportunity

(% salary)

Bonus outcome

(% max)

Annual bonus

(£’000)

Value of cash bonus

(£’000)

Value of deferred shares

(£’000)

(ii)

CEO 799.6 120% 60.9%

(iii)

584.0 292.0 292.0

CFO 480.0 120% 65.9% 379.4 189.7 189.7

Former CFO

(iv)

362.1 120% 65.9% 286.2 286.2 0.0

(v)

(i) Bonus calculated using salary as at 31 March 2024. For James Bowling, this reflects his

pro-rated salary for service in the year to 31 December 2023.

(ii) Value of bonus deferral shares is 50% of the total bonus value.

(iii) As set out in the Chair’s letter, downwards discretion was applied to the CEO’s annual

bonus, reducing the EPA 4* element outcome from full vesting to zero.

(iv) Bonus figures shown for James Bowling relate to the period up to his retirement in December 2023.

The bonus he received in respect of his Executive Director services to July 2023 was £100.9k.

(v) As disclosed last year, the bonus has been pro-rated to reflect James Bowling’s service in

the year and settled in cash in line with the approved Policy.

LTIP Outturn

2021 LTIP award vesting for performance levels (as a % of salary)

RoRE, which captures a range of measures such as totex, financing and customer ODIs, is the primary LTIP measure in the 2021 LTIP structure,

with a weighting of 80%. RoRE is assessed over a three-year period so that the focus is on long-term performance. The remaining 20% relates to

our sustainability measures, aligned with our environmental commitments to reach net zero operational emissions by 2030.

The table below shows the 2021 LTIP award vesting schedule for performance levels as a percentage of salary:

RoRE Sustainability

Total

maximumThreshold FD 1.39x FD

UQ RoRE

performance

relative to

WaSCs

Fleet

target

Self-generation

target

Innovation trials

target

Process

Emissions

target

CEO 30% 120% 160% 10% 10% 10% 10% 200%

CFO 16% 64% 96% 6.0% 6.0% 6.0% 6.0% 120%

We note that the vesting schedule for the CFO applies to the awards that were granted prior to Board appointment at a level of 120% of salary.

2021 LTIP standard RoRE element

The standard RoRE element of the 2021 LTIP award measures the Company’s performance against RoRE set by Ofwat’s FD. Over the three-year

period of the 2021 LTIP, the Company achieved a RoRE of 2.27x against the target of 1.39x the base RoRE return.

Based on the performance levels set out above, this results in full vesting of the standard RoRE element of the 2021 LTIP award, which is

equivalent to60% of maximum for the total 2021 LTIP award for the CEO and 53.3% of maximum for the CFO.

The UQ element of the 2021 LTIP award cannot be measured, and so the associated vesting will not be known, until the end of July 2024 when

comparable statistics for the other WaSCs are published and provided to Ofwat; such vesting, if any, will therefore be disclosed in the 2024/25

Directors’ Remuneration Report.

2021 LTIP sustainability element

The sustainability element of the 2021 LTIP award measures the Company’s performance against four different measures aligned with our

environmental commitments to reach net zero operational emissions by 2030. Over the three-year period of the 2021 LTIP, the Company achieved

thefollowing:

Measure Description Target Actual Weighting

Outcome

achieved

Fleet Delivering 58% of the total car fleet and 16% of the total light commercial fleet as electric

vehicles by 31 March 2024.

58%

16%

69%

16%

5% 5%

Self-generation Achieving an outturn of 50 GWh additional generation from the 2019/20 baseline of

486GWh, enabling a minimum total renewable generation of 536 GWh by 31 March 2024.

536GWh 549GWh 5% 5%

Innovation trials The delivery of innovation trials where the combined, verified, scaled opportunity

isgreater than 7.5 ktCO

e, with a signed-off plan for delivery.

7.5 ktCO

e 9.1 ktCO

e 5% 5%

Process emissions To have established effective monitoring on operational wastewater treatment sites

responsible for 40% of our total NO and CH gas emissions.

40% NO

40% CH

40% NO

40% CH

5% 5%

20% 20%

This is equivalent to 20% of maximum for the total 2021 LTIP award for both the CEO and CFO.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024176

2020 LTIP UQ RoRE element

As reported last year, the standard element of the 2020 LTIP award vested in full, being equivalent to 75% and 67% of maximum for the total

2020LTIP award for the CEO and former CFO respectively. Full vesting was based on delivering UQ RoRE performance relative to the other

WaSCsover the three-year performance period to 2022/23 (the UQ element). Vesting under the UQ element of the 2020 LTIP award was only

known at the end of July 2023 when comparable statistics for the other WaSCs were published and provided to Ofwat. We now know that Severn

Trent achieved UQperformance, and therefore the UQ element is included in the 2023/24 single figure for the CEO and the former CFO (equivalent

to 25% and 33% of maximum of the total 2020 LTIP award respectively).

No discretion has been exercised by the Committee to override the formulaic outturns of either the 2020 or 2021 LTIP awards.

Breakdown of the LTIP single figure value

The LTIP single figure amounts include share price appreciation between grant and vesting, as well as any dividend equivalents.

For 2023/24, the reportable LTIP figures are the standard RoRE element of the 2021 LTIP award, the sustainability element of the 2021 LTIP

award, and the UQ element of the 2020 LTIP award. For 2022/23, the reportable LTIP figures are the standard element of the 2020 LTIP award and

the UQ element of the 2019 LTIP award.

The table below shows the comparative value of each of the elements included in the single figures:

CEO CFO

2022/23 2023/24 2022/23

(i)

2023/24

Standard RoRE element 1,292.5 924.1 N/A 234.2

Sustainability element N/A 308.0 N/A 87.8

UQ RoRE element 559.8 430.8 N/A N/A

LTIP total in single figure values (£’000) 1,852.3 1,663.0 N/A 322.0

(i) As per the regulations, figures are not included for Helen Miles in respect of 2022/23, as she did not become an Executive Director until 1 April 2023.

For more detail on the share price appreciation and dividend equivalents, see page 192.

Assessment of performance in the round

In overseeing remuneration outcomes, the Committee ensures that performance is assessed in the round and over time through a number

oflenses, incorporating a variety of stakeholder perspectives, as set out in more detail on page 170 to 171 of the Chair’s letter.

Following its assessment of performance in the round for 2023/24, the Committee confirms that it has considered the Company’s wider

performance in the round and has concluded that it would not be appropriate to override the formulaic outcomes of either the 2021 LTIP or the

2023/24 annual bonus due to performance in the year. However, as set out in the Chair’s letter, due to the judgment that was delivered in respect of

the Barlaston pollution event which occurred in 2019/20, the Committee considered it appropriate to apply downwards discretion to the CEO’s

2023/24 annual bonus outcome, reducing the EPA 4* performance measure from full vesting, to zero.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 177

GOVERNANCE REPORT

Directors’ Remuneration Report continued

Executive Director shareholdings

The CEO and CFO have exceeded the shareholding requirements applicable in 2023/24 of 300% and 200% of salary respectively.

Shareholding requirement

The Executive Directors have built significant shareholdings during their employment with the Company and since becoming Executive Directors

have retained (except in the case ofstatutory tax and National Insurance deductions) all Company shares acquired as a result of discretionary

awards vesting or options being exercised under the Company’s share plans. The Executive Directors have also increased their shareholdings

further through personal share purchases.

The minimum shareholding requirement for Executive Directors, and the current share interests of the Executive Directors, take into account

shares which are owned outright or vested, shares which are unvested and shares which are subject to performance. The chart below sets out

theminimum shareholding requirements and the shareholdings of the Executive Directors. The shareholding requirement must be built up over

five years and then subsequently maintained.

All calculations in the chart below use a closing share price on 31 March 2024 of £24.70.

Further detail regarding the Executive Directors’ outstanding share awards can be found on page 194.

Executive Director shareholdings % of base salary

CEO

CFO

Unvested subject to

continued employment

(ii)

Shares counting towards

shareholding requirement

(i)

Unvested subject to performance

(iii)

Shareholding requirement

% of

salary

600%400%200%0 800% 1,800%1,600%1,400%1,200%

2,000%

1,000%

340%

214%

177%

81%

1,227%

363%

(i) Represents beneficially owned shares as well as shares held in trust as part of the annual bonus deferred share awards (of which 47% are deducted to cover statutory deductions).

(ii) Represents 2021 LTIP shares (where the performance period is now complete) which are subject to an ongoing vesting period and a two-year holding period post vesting, plus shares

heldas part of the Sharesave Scheme.

(iii) Represents the 2022 and 2023 LTIP awards which are subject to ongoing performance.

Overall link to remuneration and equity of the Executive Directors

As a Committee, we want to incentivise the Executive Directors to take a long-term sustainable view of the performance of the Company.

Thisiswhy, when we look at the remuneration paid in the year, we also look at the total equity they hold and its value based on the performance

ofthe Company.

The table sets out the number of shares beneficially owned by the Executive Directors at the beginning and end of the financial year, and the

impact on the value of these shares taking the opening and closing price for the year.

2023/24

single figure

(£’000)

Shares held at the

start of the year

Shares held at the end

of the year

Value of shares at

start of the year

(£’000)

(i)

Value of shares at the

end of the year

(£’000)

(ii)

Difference

CEO 3,182.7 332,898 381,089 9,584.1 9,412.9 (171.2)

CFO 1,277.7 47,378 62,932 1,364.0 1,554.4 190.4

(i) Based on a closing share price on 31 March 2023 of £28.79. (ii) Based on a closing share price on 31 March 2024 of £24.70.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024178

The Company’s Policy is designed to attract, retain and motivate its leaders and to ensure they are focused on

deliveringbusiness priorities within a framework which promotes the long-term success of Severn Trent, aligned

with stakeholder interests.

The tables below illustrate the balance of pay and time period of each element of the Policy for Executive Directors, and sets out key changes

between the current and proposed Policy. Full details of the proposed 2024 Policy can be found on pages 195 to 204. In addition, the table below

setsouthow the Policy elements are aligned with the factors set out in Provision 40 of the 2018 UK Corporate Governance Code (the ‘2018 Code’).

Total pay over five years Year 1 Year 2 Year 3 Year 4 Year 5

Fixed pay

Annual bonus

(Malus and clawback provisions apply)

LTIP

(Malus and clawback provisions apply)

Shareholding requirement

(Not a monetary value)

SUMMARY OF REMUNERATION POLICY

AND IMPLEMENTATION

Policy

element

Purpose, operation and

opportunity levels

How we implemented

the Policy in 2023/24

How we plan to implement

the Policy in 2024/25

Alignment with Provision 40

of the 2018 Code

Fixed pay elements

Base salary

Y1 Y2 Y3 Y4 Y5

To recruit and reward Executive Directors

ofasuitable calibre for the role and

dutiesrequired.

Salaries are reviewed annually and increases

normally take effect from 1 July. Setwith

reference to:

– individual performance;

– experience and contribution;

– developments in the relevant employment

market;

– company performance and affordability;

– wider economic environment; and

– internal relativities.

Any increase will generally be no higher than

theaverage increase for the workforce.

Higherincreases may be proposed in the event

of a role change or promotion, or in other

exceptional circumstances.

No change to Policy

A salary increase of 3.0% was

applied at the salary review

date, with the exception of

theCFO Designate whose

salary wasset on appointment

on 1April 2023.

These rises were less than half

of the 7.5% wider workforce

salary increase.

A salary increase of 5.0% will

be applied at the salary

review date. From 1 July

2024, Executive Director

salaries will be:

– CEO £839,600

– CFO £504,000

These rises are in line

withthe wider workforce

salary increase.

Proportionality

There is a reasonable

balancebetween fixed

payand variable pay, and

variable pay is weighted to

long-term performance.

Clarity

Base salaries are competitive

against companies of a

similar size and complexity.

Alignment with culture

Base salary increases are

generally below or aligned to

the average increase for the

wider workforce. Pension

rates for Executive Directors

are aligned with the rate

offered to the majority of

thewider workforce.

Benefits

Y1 Y2 Y3 Y4 Y5

To provide competitive benefits in the

market to enable the recruitment and

retention of Executive Directors.

Benefits typically include green travel

allowance, family-level private medical

insurance, life assurance, personal accident

insurance, health screening, an incapacity

benefits scheme and other incidental benefits

and expenses.

The value of benefits is based on the cost to

theCompany and there is no pre-determined

maximum limit. The range and value of the

benefits offered are reviewed periodically.

No change to Policy

Normal Company

benefitprovision.

Normal Company

benefitprovision.

Pension

Y1 Y2 Y3 Y4 Y5

To provide pension arrangements

comparable with similar companies in

themarket to enable the recruitment

andretention of Executive Directors.

A defined contribution scheme and/or cash

supplement in lieu of pension.

For current Executive Directors, the Company

contribution and/or cash allowance is 15%

ofsalary. This aligns pension contribution

quantum for all Executive Directors with the

maximum 15% contribution available to

members of the Severn Trent Group Personal

Pension (the majority of the wider workforce).

For any new recruit, the contribution will be

upto a maximum of 15% of salary.

No change to Policy

Executive Director pension

arrangements were as follows:

– CEO 15% of salary

– CFO 15% of salary

Executive Director pension

arrangements are as follows:

– CEO 15% of salary

– CFO 15% of salary

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 179

GOVERNANCE REPORT

Two-year holding period

No further performance conditions

Salary,

benefits

andpension

50% in cash

50% in shares

Three-year deferral period

No further performance conditions

Up to 200% of salary

Three-year performance period

Executive Directors’ minimum shareholding requirement

Summary of Remuneration Policy and Implementation continued

Policy

element

Purpose, operation and

opportunity levels

How we implemented

the Policy in 2023/24

How we plan to implement

the Policy in 2024/25

Alignment with Provision 40

of the 2018 Code

Variable pay

elements

Annual bonus

Up to 120%

ofsalary

Y1 Y2 Y3 Y4 Y5

50% paid in cash

Y1 Y2 Y3 Y4 Y5

50% deferred

Y1 Y2 Y3 Y4 Y5

To encourage improved financial and operational

performance, and to align theinterests of

Executive Directors with shareholders through

the partial deferral ofpayment into shares.

Bonuses are based on financial, operational,

customer and environmental performance.

Performance measures and targets are

selectedannually.

50% of the bonus is paid in cash and 50% is

deferred into shares which vest after three years

(with the value of any dividends rolled up and paid

on vesting). There are nofurther performance

targets on the deferredamount.

Malus and clawback mechanisms apply for three

years from the payment of the cash bonus or the

grant of deferred shares.

Maximum award of 120% of salary for the

CEOandCFO.

For threshold performance, 0% of maximum

opportunity will be paid. For target performance

50% of maximum opportunity will be paid.

Changes to Policy:

– Removal of the option for personal objectives in

the bonus structure.

– Default treatment for good leavers is that

subsisting awards vest as per their original

timelines (rather than at the point ofcessation).

Performance measures

(as a % of maximum):

Group PBIT – 40%

Customer and

Environment ODIs – 35%

River Health – 12%

Health and Safety – 8%

EPA – 5%

Performance measures

(as a % of maximum):

Group PBIT – 40%

Customer and Environment

ODIs – 27%

CSOs – 15%

EPA and zero Serious

Pollutions – 10%

Health and Safety – 8%

The Committee considers the

forward-looking targets to be

commercially sensitive but full

disclosure of the targets and

performance outcome will be

set out in next year’s Directors’

Remuneration Report.

Clarity

Variable remuneration is

based on supporting the

successful implementation

ofthe Company’s strategy

measured through KPIs

which are used for the

annualbonus and LTIP.

Simplicity

Defined limits on the

maximum awards which

canbe earned. Variable

remuneration focuses on

long-term sustainable

performance, including

theCompany’s

environmentalambitions.

Risk

The Policy ensures there is

sufficient flexibility to adjust

bonus and LTIP payments

through malus and clawback

and an overriding discretion

to depart from formulaic

outcomes.

Predictability

Shareholders are given full

information on the potential

values which can be earned

under the annual bonus

andLTIP.

Proportionality

Incentive plans clearly

reward the successful

implementation of the

strategy and our

environmental ambitions,

andthrough deferral

andmeasurement of

performance over a number

of years to ensure that the

Executives have a strong

drive to deliver performance

that is sustainable over

thelong term.

Alignment with culture

A key principle of the

Company’s culture is a focus

on customers and their

experience; this is reflected

directly in the type of

performance conditions used

for the bonus. The focus on

ownership and long-term

sustainable performance is

also a key part of the

Company’s culture.

LTIP

Up to 200%

ofsalary

Y1 Y2 Y3 Y4 Y5

Five-year period

Y1 Y2 Y3 Y4 Y5

To encourage strong and sustained

improvements in operational and financial

performance, in line with the Company’s

strategy and long-term stakeholder value.

Awards are granted annually and are subject to

one or more performance conditions assessed

over a three-year performance period.

Awards made to Executive Directors are subject to

a two-year holding period post vesting which

continues to operate post cessation of employment.

Malus and clawback mechanisms apply within

three years of vesting.

The value of dividends paid on the shares

comprising the award will be rolled up and

paidonvesting.

Maximum award opportunity up to 200% of salary.

Up to 25% of the LTIP award may vest for

thresholdperformance.

No change to Policy

Grant levels:

CEO – 200% of salary

CFO – 150% of salary

The 2023 LTIP awards

were based on the

following performance

measures:

– 80% of the maximum

LTIP award based on

RoRE and will require

the Company’s RoRE

to outperform the

target set out in

Ofwat’s FD and, for full

vesting, to deliver

upper quartile relative

performance

compared with other

WaSCs.

– 20% of the maximum

LTIP award based on

measures relating to

Severn Trent’s

Sustainability

Framework.

Grant levels:

CEO – 200% of salary

CFO – 175% of salary

The 2024 LTIP awards will be

based on the following

performance measures:

– 50% of the maximum LTIP

award based on RoRE and

will require the Company’s

RoRE to outperform the

target set out in Ofwat’s FD

and, for full vesting, to

deliver upper quartile

relative performance

compared with other

WaSCs.

– 20% of the maximum LTIP

award based on measures

relating to carbon

reduction.

– 10% of the maximum LTIP

award based on RNAGS.

– 10% of the maximum LTIP

award based on PCDs.

– 10% of the maximum LTIP

award based on Social

Value.

See page 181 for detail on

LTIP awards to be granted.

Other Policy elements

All-employee

share plans

Up to £500 per

month for

3or 5years

Y1 Y2 Y3 Y4 Y5

To encourage widespread employee share

ownership to enable employees to share in the

success of the business.

The Executive Directors are able to participate in

HMRC tax advantaged all-employee share plans on

the same terms as other eligible employees.

The maximum limits under the plans are as set

byHMRC.

No change to Policy

– In line with all

employees.

– In line with all employees. Alignment with culture

All-employee share plans

support a culture of share

ownership and align

employee interests with

thelong-term sustainable

performance of the Company.

Shareholding

requirement

Y1 Y2 Y3 Y4 Y5

To encourage strong shareholder

alignmentboth during and after

employmentwith the Company.

The CEO is expected to build and maintain aholding

of shares to the value of 300% of salary, and other

Executive Directors 200% ofsalary.

Executive Directors are expected to retain all of the

net of tax number of shares they receive through

the LTIP and deferred share bonus until the

shareholding requirement has beenmet.

A post-employment shareholding requirement

applies to Executive Directors who leave the

Company. Leavers will have a requirement to

maintain their in-employment shareholding

requirement (or actual shareholding, if lower) for

two years following cessation of employment.

Thisrequirement applies to shares acquired

undershare plan awards granted following

approval of the 2021 Policy.

No change to Policy

– CEO – 300% of salary

– CFO – 200% of salary

– Post-employment

shareholding

requirement applies.

– CEO – 300% of salary

– CFO – 200% of salary

– Post-employment

shareholding

requirementapplies.

– See page 194 for further

details on shareholding

requirements and

outstanding shareawards.

Risk

Incentives are primarily paid

in shares which must be

retained until minimum

shareholding requirements

have been met. Post-

employment shareholding

requirement further

increases the exposure of

Executive Directors to the

share price after leaving

theCompany.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024180

LTIP awards to be granted in 2024

The table below describes how the LTIP will be implemented in 2024. 50% of the maximum LTIP opportunity will be based on RoRE and 50%

willbebased on a range of non-financial measures. The CEO’s award will be 200% of salary and the CFO’s award will be 175% of salary. As in

previous years, the stretch target for absolute RoRE will be set as a multiple of the FD. The FD has not yet been confirmed by Ofwat and as such,

the Committee will finalise the respective multiple when the FD is known, and will disclose this at a later date. All performance conditions will be

measured over three years, to 31 March 2027, and corresponding vesting (asapercentageof salary) will be:

Financial

Non-Financial

Environment Customer Communities

Operation Award recipient

Threshold

Target

Multiple of

UQ RoRE

performance

relative to WaSCs

Scope

1 and 2

reduction

Self-

generation RNAGS PCDs

Social

Value

Max

outturn

Vesting for

performance

CEO 18.8% 75% 100% 20% 20% 20% 20% 20% 200%

CFO 14.6% 58% 87.5% 17.5% 17.5% 17.5% 17.5% 17.5% 175%

The performance targets/milestones for the non-financial elements of the 2024 award will be as follows:

Measure Sub-measure Weighting Measure details

Environment

Scope 1 and 2

emissions

reduction

10%

Achieving a cumulative reduction in our Scope 1 and 2 emissions of 33% against the 2019/20 baseline

(of 508.4kT) by 31 March 2027.

Self-generation 10%

Achieving an outturn of 154 GWh additional generation from the 2019/20 baseline of 486 GWh,

enabling a minimum total renewable generation of 640 GWh by 31 March 2027.

RNAGS 10% Achieving a cumulative reduction of 409 RNAGS by 31 March 2027.

Customer PCDs 10%

To have all in-flight PCDs on track vs the phased milestones as per the milestones agreed with Ofwat

in the PR24 Final Determination.

Communities Social Value 10% To generate a Social Value of £12 million between 1 April 2024 and 31 March 2027.

The Committee will assess the value of the 2024 LTIP awards at vesting and will ensure that the final outturn reflects all relevant factors,

including consideration of underlying performance, experience of our key stakeholders, and progress towards the achievement of our

TripleCarbon Pledge.

Chair and Non-Executive Directors’ fees (audited)

The Chair, Senior Independent Director and Non-Executive Directors are appointed for a three-year term, subject to annual re-election by

shareholders at the Annual General Meeting following the annual Board Effectiveness evaluation process. The current Letters of Appointment

areavailable on the Severn Trent Plc website.

From 1 July 2024, Non-Executive Director fees will be increased by 5.0% from £62,300 to £65,400, and the Chair’s fee will be increased by 5.0%

from £323,500 to £339,700. These increases are in line with the wider workforce salary increase. The current fee levels, and those forthe future

financial year, are set out in the table below.

Operation Fees 2023/24 Fees 2024/25 Increase %

Chair’s fee £323,500 £339,700 5.0%

Fee paid to all Non-Executive Directors £62,300 £65,400 5.0%

Supplementary fees:

– Senior Independent Director £15,815 £16,600 5.0%

– Audit and Risk Committee Chair £17,920 £18,820 5.0%

– Corporate Sustainability Committee Chair £15,815 £16,600 5.0%

– Remuneration Committee Chair £17,920 £18,820 5.0%

– Treasury Committee Chair £16,865 £17,700 5.0%

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 181

GOVERNANCE REPORT

Eligibility

Number of

employees

covered Remuneration element Details Committee focus areas Implementation at Severn Trent

All employees

9,192

(as at

31 March

2024)

Salary

Salaries are set to reflect the market value of the role, and

to aid recruitment and retention. Employees who arenot on

a training rate of pay (such as apprentices) receive at least

the voluntary Living Wage. We also monitor closely the rates

of pay of people who are training with us to make sure they

remain fair andcompetitive.

– Date of annual increase

acrossall employee groups.

– Wider workforce increases

versus the Executivepopulation.

– Differences across

employeegroups.

– The average annual salary increase across the workforce in

2023/24 was 7.5%.

– Annual pay reviews are effective in July for all employeegroups.

– The Company has real Living Wage and real Living Hours

employer accreditation and reviews employment terms and

salaries in this context.

– Enhanced visibility on salary ranges within the organisation to

enable fairness and transparency.

Benefits

All employees are eligible to participate in our flexible

benefits scheme which we believe is one of the best in the

industry and is designed to support physical, mentaland

financial wellbeing.

– Types of benefits.

– Eligibility across levels.

– A consistent approach is applied across the business

forbenefits.

Pension

We offer a market-leading defined contribution pension

scheme and double any contributions that employees make

(up to a maximum of 15% of salary).

When colleagues get closer to retirement, we provide

education and support to help plan for the next stage

oftheir lives.

We are proud that 98.5% of our employees are members

ofthe pension scheme and 56.7% pay contributions above

the minimum of 3%.

– Employer pension contributions

across theworkforce.

– Comparisons of wider

workforce pension to

Executivepensions.

– Employer pension contributions for Executive Directors are

aligned with the maximum 15% contribution available to

members of the Severn Trent Group Pension Plan (themajority

of the workforce).

Annual bonus

All of our people share in our success by participating

inourall-employee bonus plan, ensuring all employees

arealigned with the same measures and rewarded

forachievingour key objectives.

– Bonus design across

differentpopulations.

– Details of performance

measures and targets.

– Outturn during the year.

– A consistent design is operated throughout the business.

– At all levels, performance outcomes are measured against the

same metrics.

– An individual performance multiplier is in place

acrossmanagement grades informed by our Inspiring Great

Performance outcomes.

– Our frontline colleagues and team managers benefit from an

all-company fixed bonus payment.

– Bonus opportunities vary by grade.

– We also operate some sub-schemes in Business Services, to

reflect specific business needs.

– Malus and clawback provisions are in place.

Sharesave

Offering the opportunity to participate in our

SharesaveScheme encourages employee engagement and

reinforces our strong performance culture, enablingall

colleagues to share in the long-term success of the

Company, whilst also aligning participantswith

shareholderinterests.

Our Sharesave scheme gives employees an opportunity to

save from £5 to £500 per month over three or five years,

with the option to buy Severn Trent Plc shares

atadiscounted rate at the end of the period.

– Participation rates. – All Severn Trent Plc employees can participate in the SaveAs

You Earn scheme – Sharesave.

– There is a significant take-up of this benefit with 72%

ofemployees actively participating in 2023/24.

Management

and senior

management

449

LTIP

A proportion of this

population participate

in the LTIP by annual

invitation

The LTIP reinforces delivery of long-term creation of value

and sector outperformance, and progress towards our net

zero ambitions. The retention of shares by Executive

Directors for the longer term also supports ashared

ownership culture in the Group.

– Eligibility.

– Cost.

– Dilution.

– Details of performance

measures and targets.

– Eligibility is reviewed annually.

– The LTIP is available to Executive Directors, the Executive

Committee and some members of senior management.

– The performance period is three years, with 50% basedon RoRE

performance and 50% on a range of non-financial measures.

– The Executive Directors are subject to an additional two-year

post-vesting holding period for awards grantedfrom

2018onwards.

– LTIP opportunities vary by role from 25% of salary to200%

ofsalary.

– Executive Directors have a RoRE UQ stretch performancetarget.

– Malus and clawback provisions are in place.

Executive

Directors

and Executive

Committee

Shareholding requirement as

a % of salary

CEO – 300%

CFO – 200%

Executive Committee – 100%

Supports alignment of Executives’ interests

withshareholders.

– Eligibility.

– Requirements versus

actualshareholdings.

– Shareholding requirements are in place for the Executive

Directors and Executive Committee.

– A post-employment shareholding requirement was introduced

for Executive Directors as part of the 2021Policy. This was the

first year this has been put into action, following the retirement

of James Bowling. See case study on page 190 for more detail.

Our supply

chain

All colleagues across Severn Trent are paid in line with the

real Living Wage, for which we hold accreditation.

We expect this of all new contracts within our supplychain

and detail this within our SustainableSupply Chain Charter.

In April 2024 we became an accredited real Living

Hoursemployer.

COMPANY REMUNERATION

ATSEVERN TRENT

This section sets out the steps we take to

make sure that our pay and reward

framework is transparent andfair, beyond

Executives and senior management, in a way

that is meaningful and useful.

The table to the right sets out details of how the cascade

of the reward framework applies across different levels

within the organisation combined with a summary of the

information which the Committee has received as part of

its annual review process.

Pay and alignment across the business

Alongside our thriving culture and inclusive working

environment, our reward framework is designed to

attract, motivate and retain people who are inspired

bySevern Trent’s purpose, and who live ourvalues

every day.

Our reward package recognises the great performance

of our employees, as we deliver our essential service to

customers acrossthe region, and is designed to fairly

reward all colleagues throughout the organisation. The

terms and conditions from which our employees benefit

evolve in line with external practice and new initiatives

from within Severn Trent. We pride ourselves on keeping

pace with trends in talent management andacquisition,

and skills development, in order to motivate, develop

andretain a positive workingenvironment.

This section of the report covers:

Pay and alignment across the business

Paycomparisons:

– CEO pay ratios; and

– Gender and ethnicity and pay gap reporting.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024182

Eligibility

Number of

employees

covered Remuneration element Details Committee focus areas Implementation at Severn Trent

All employees

9,192

(as at

31 March

2024)

Salary

Salaries are set to reflect the market value of the role, and

to aid recruitment and retention. Employees who arenot on

a training rate of pay (such as apprentices) receive at least

the voluntary Living Wage. We also monitor closely the rates

of pay of people who are training with us to make sure they

remain fair andcompetitive.

– Date of annual increase

acrossall employee groups.

– Wider workforce increases

versus the Executivepopulation.

– Differences across

employeegroups.

– The average annual salary increase across the workforce in

2023/24 was 7.5%.

– Annual pay reviews are effective in July for all employeegroups.

– The Company has real Living Wage and real Living Hours

employer accreditation and reviews employment terms and

salaries in this context.

– Enhanced visibility on salary ranges within the organisation to

enable fairness and transparency.

Benefits

All employees are eligible to participate in our flexible

benefits scheme which we believe is one of the best in the

industry and is designed to support physical, mentaland

financial wellbeing.

– Types of benefits.

– Eligibility across levels.

– A consistent approach is applied across the business

forbenefits.

Pension

We offer a market-leading defined contribution pension

scheme and double any contributions that employees make

(up to a maximum of 15% of salary).

When colleagues get closer to retirement, we provide

education and support to help plan for the next stage

oftheir lives.

We are proud that 98.5% of our employees are members

ofthe pension scheme and 56.7% pay contributions above

the minimum of 3%.

– Employer pension contributions

across theworkforce.

– Comparisons of wider

workforce pension to

Executivepensions.

– Employer pension contributions for Executive Directors are

aligned with the maximum 15% contribution available to

members of the Severn Trent Group Pension Plan (themajority

of the workforce).

Annual bonus

All of our people share in our success by participating

inourall-employee bonus plan, ensuring all employees

arealigned with the same measures and rewarded

forachievingour key objectives.

– Bonus design across

differentpopulations.

– Details of performance

measures and targets.

– Outturn during the year.

– A consistent design is operated throughout the business.

– At all levels, performance outcomes are measured against the

same metrics.

– An individual performance multiplier is in place

acrossmanagement grades informed by our Inspiring Great

Performance outcomes.

– Our frontline colleagues and team managers benefit from an

all-company fixed bonus payment.

– Bonus opportunities vary by grade.

– We also operate some sub-schemes in Business Services, to

reflect specific business needs.

– Malus and clawback provisions are in place.

Sharesave

Offering the opportunity to participate in our

SharesaveScheme encourages employee engagement and

reinforces our strong performance culture, enablingall

colleagues to share in the long-term success of the

Company, whilst also aligning participantswith

shareholderinterests.

Our Sharesave scheme gives employees an opportunity to

save from £5 to £500 per month over three or five years,

with the option to buy Severn Trent Plc shares

atadiscounted rate at the end of the period.

– Participation rates. – All Severn Trent Plc employees can participate in the SaveAs

You Earn scheme – Sharesave.

– There is a significant take-up of this benefit with 72%

ofemployees actively participating in 2023/24.

Management

and senior

management

449

LTIP

A proportion of this

population participate

in the LTIP by annual

invitation

The LTIP reinforces delivery of long-term creation of value

and sector outperformance, and progress towards our net

zero ambitions. The retention of shares by Executive

Directors for the longer term also supports ashared

ownership culture in the Group.

– Eligibility.

– Cost.

– Dilution.

– Details of performance

measures and targets.

– Eligibility is reviewed annually.

– The LTIP is available to Executive Directors, the Executive

Committee and some members of senior management.

– The performance period is three years, with 50% basedon RoRE

performance and 50% on a range of non-financial measures.

– The Executive Directors are subject to an additional two-year

post-vesting holding period for awards grantedfrom

2018onwards.

– LTIP opportunities vary by role from 25% of salary to200%

ofsalary.

– Executive Directors have a RoRE UQ stretch performancetarget.

– Malus and clawback provisions are in place.

Executive

Directors

and Executive

Committee

Shareholding requirement as

a % of salary

CEO – 300%

CFO – 200%

Executive Committee – 100%

Supports alignment of Executives’ interests

withshareholders.

– Eligibility.

– Requirements versus

actualshareholdings.

– Shareholding requirements are in place for the Executive

Directors and Executive Committee.

– A post-employment shareholding requirement was introduced

for Executive Directors as part of the 2021Policy. This was the

first year this has been put into action, following the retirement

of James Bowling. See case study on page 190 for more detail.

Our supply

chain

All colleagues across Severn Trent are paid in line with the

real Living Wage, for which we hold accreditation.

We expect this of all new contracts within our supplychain

and detail this within our SustainableSupply Chain Charter.

In April 2024 we became an accredited real Living

Hoursemployer.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 183

GOVERNANCE REPORT

Company Remuneration at Severn Trent continued

The relationship between the remuneration of the CEO and all employees

The Company’s approach to remuneration is consistent for all employees, as outlined on pages 182 and 183 and in our 2024 Policy, which can be

found on pages 195 to 204.

The table below shows how the CEO’s total single figure of remuneration compares with the equivalent figures for employees occupying the 25th,

50th and 75th percentiles.

We have chosen Option A under the Regulations for the calculation, which takes into consideration the full-time equivalent basis of all employees

and provides a representative result of employee pay conditions across the Company.

Total pay and benefits for all have been calculated as at 31 March 2024, in accordance with the single figure methodology, and are based on

full-time equivalent pay and benefits. We have not omitted any pay elements from the calculation. The median CEO ratio is consistent with the pay

and progression policies for the Company’s employees as a whole.

CEO pay ratio

CEO 2020 2021 2022 2023 2024

(ii)

Total single figure (£’000)

(i)

2,765.1 3,084.0 3,948.4 3,116.9 3,182.7

Annual bonus payment level achieved (% of maximum opportunity) 74.0% 63.8% 81.0% 38.5% 60.9%

LTIP vesting level achieved (% of maximum opportunity)

(ii)

100% 100% 100% 100% 80%

Ratio of CEO’s single total remuneration figure shown:

To employee at the 25th percentile 84.5 92.8 116.0 91.1 85.7

To employee at the 50th percentile 65.7 72.3 90.8 71.0 66.6

To employee at the 75th percentile 53.9 59.8 75.3 58.9 54.6

Ratio of CEO’s single total remuneration figure shown to the median

Executive Committee member: 4.5

(i) Figures for 2023 have been restated to reflect the updated 2020 LTIP values based on the share price at the date of vesting and include dividend equivalents in respect of vested shares.

(ii) The value of the UQ element of the 2020 LTIP award for 2022/23 (£430.8k) could not be measured until July 2023, and is therefore included in the total remuneration value for 2024. The value

of the2021 LTIP award for 2023/24 is based on the Committee’s assessment of the standard element of the total potential LTIP vesting, as this measures the Company’s performance

against the RoRE set by its FD, plus the UQ element of the 2020 LTIP. The UQ element of the 2021 LTIP cannot be measured until the end of July 2024; such vesting, if any, will therefore be

disclosed in the 2024/25 Directors’ Remuneration Report.

The median CEO pay ratio has decreased from 71.0 to 66.6 year on year, mainly due to the higher pay increase in 2022/23 of 7.5% for the wider

workforce, compared with 3.0% for the CEO. More detail on the single figure amount is included on page 190.

The Committee is satisfied that the individuals identified within each relevant percentile appropriately reflect the employee pay profiles at those

quartiles and that the overall picture presented by the ratios is consistent with our pay, reward and progression policies. Over the long term,

itisreasonable to expect there to be a degree of volatility year on year in the CEO pay ratio given that the CEO’s single figure is made up of a higher

proportion of performance-related pay than that of our employees, in line with the expectations of our shareholders and the Company’s

remuneration approach. This introduces a higher degree of variability each year which affects the ratio. It should be noted that all employees

inthe Company who meet the service requirement are eligible to receive a bonus based on the same broad Company performance conditions.

Thisensures all employees share in the success of the Company.

The key factors to note for this year’s CEO pay ratio are as follows:

– For 2023/24, the single figure includes the standard element of the 2021 LTIP award plus the UQ element of the 2020 LTIP award.

– Long-term incentives are provided in shares, and therefore any increase in share price over the three years, as has been observed when

previous LTIP awards have vested, can magnify the impact of a long-term incentive award vesting in a year.

– None of the lower quartile, median or upper quartile employees identified this year are participants in the LTIP. If the value of the LTIP

isexcluded from the CEO total remuneration pay ratio calculation, the ratios would be as follows:

– To employee at the 25th percentile: 40.9

– To employee at the 50th percentile: 31.8

– To employee at the 75th percentile: 26.1

The table sets out the base salary and total pay benefits details for the CEO and employees at the 25th, 50th and 75th percentiles.

CEO 2024

Base salary (£’000) 793.8

Total pay and benefits (£’000) 3,182.7

Employees

Base salary (£’000)

– Employee at the 25th percentile 28.4

– Employee at the 50th percentile 34.2

– Employee at the 75th percentile 42.7

Total pay and benefits (£’000)

– Employee at the 25th percentile 37.1

– Employee at the 50th percentile 47.8

– Employee at the 75th percentile 58.3

The CEO pay ratio is just one of many factors that we take into consideration in ensuring a just and fair reward framework for all our colleagues.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024184

Percentage change in the remuneration of the Executive Directors and Non-Executive Directors

The Committee looks to ensure that the approach to fair pay is implemented in practice throughout the Group, and monitors year-on-year changes

between the movement in salary, benefits and annual bonus for the CEO between the current and previous financial year compared, with that of

the average employee.

The Committee has elected to use the average earnings per employee as this avoids the distortions that can occur to the Group’s total wage bill

asa result of the movements in the number of employees.

The Committee monitors this information carefully to ensure that there is consistency in the fixed pay of the Executive Directors and

Non-Executive Directors compared with the wider workforce. Also, this information demonstrates the Company’s approach to having

anall-employee bonus throughout the organisation with employees and the CEO benefiting when the Company does well.

% change on last year

for 2019/20

% change on last year

for 2020/21

% change on last year

for 2021/22

% change on last year

for 2022/23

% change on last year

for 2023/24

Salary/

Fees Benefits Bonus

Salary/

Fees Benefits Bonus

Salary/

Fees Benefits Bonus

Salary/

Fees Benefits Bonus

Salary/

Fees

(i)

Benefits

(ii)

Bonus

(iii)

Executive Directors

Liv Garfield

11 April 2014

–present 2.4% 0.6% 29.5% 2.3% (1.2)% (11.8)% 2.3% (3.1)% 30.0% 2.3% 5.3% (51.3)% 2.8% 1.8% 62.8%

Helen Miles

(iv)

1 April 2023

–present N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Non-Executive Directors

(v)

Christine

Hodgson

(vi)

1 January 2020

– present N/A N/A N/A 431.4% N/A N/A 1.7% N/A N/A 2.3% N/A N/A 2.9% N/A N/A

Kevin Beeston

1 June 2016

–present 2.2% N/A N/A 1.5% N/A N/A 6.8% N/A N/A 4.9% N/A N/A 2.7% N/A N/A

Tom Delay

1 January 2022

– present N/A N/A N/A N/A N/A N/A N/A N/A N/A 19.3% N/A N/A 8.2% N/A N/A

Sarah Legg

1 November

2022 – present N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 8.9% N/A N/A

Sharmila

Nebhrajani

(vii)

1 May 2020

–present N/A N/A N/A N/A N/A N/A 8.7% N/A N/A 8.3% N/A N/A 17.8% N/A N/A

Gillian

Sheldon

(viii)

1 November

2021 – 14 May

2024 N/A N/A N/A N/A N/A N/A N/A N/A N/A 12.6% N/A N/A 17.4% N/A N/A

Former Directors

James Bowling

Resigned

6 July 2023 2.4% 0.0% 29.5% 2.3% 0.0% (11.8)% 2.3% 0.0% 30.0% 2.3% 3.4% (51.4)% 2.8% 0.9% 76.1%

John Coghlan

Resigned

31 December

2023 13.3% N/A N/A 1.0% N/A N/A 3.5% N/A N/A (3.5)% N/A N/A 5.9% N/A N/A

Colleagues

Average per

employee

(ix)

3.7% (5.5%) 21.8% 2.2% (7.1)% (13.7)% 2.1% 0.3% 9.9% 3.4% 2.8% (41.6)% 6.8% (1.0)% 67.2%

(i) The salary/fees, benefits and bonus figures shown are based on full-time equivalent comparisons.

(ii) The benefits figures include green travel allowance and family-level private medical insurance for senior and middle managers.

(iii) The figures shown are reflective of any bonus earned during the respective financial year. Bonuses are paid in the following June.

(iv) As per the regulations, figures are not included for Helen Miles in respect of 2022/23, as she did not become an Executive Director until 1 April 2023.

(v) Non-Executive Directors receive fees only and do not receive any additional benefits or bonus payments.

(vi) 2020/21 reflects a change in rate from Non-Executive Director to Chair of the Board on 1 April 2020.

(vii) Appointed as Chair of the Remuneration Committee on 1 December 2022.

(viii) Appointed as Chair of the Treasury Committee on 1 November 2023.

(ix) The average annual pay increase for the wider workforce during the year was 7.5%.

Please see previous Directors’ Remuneration Reports for historical details of events that impact the changes in remuneration, such as role

changes, joiners and leavers.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 185

GOVERNANCE REPORT

Company Remuneration at Severn Trent continued

Gender and ethnicity pay gap reporting

We are delighted to have published our second combined Gender and Ethnicity Pay Gap Report.

Gender pay gap

Gender pay gap reporting legislation came into force in April 2017

and requires all UK employers with 250 or more employees to

publish annual information illustrating pay differences between

maleand female employees. We reported our gender pay gap in

March 2024 in line with statutory requirements, based on figures

from 5 April 2023.

We are proud to see a continued downward trend in our median

gender pay gap, which is now at the lowest level in the seven years

wehave been reporting it. The 7.8% gap in 2023 is a decrease on

the9.4% in 2022, whilst the hourly rates for both male and female

employees have increased. The mean gender pay gap has also

decreased to 2.0% in 2023 from the 2.9% seen in 2022.

Our gender pay gap metrics continue to be positively impacted by

ahigh proportion of women within our management and senior

management roles. Severn Trent is proud to have such strong female

representation throughout our Senior Management Team, and we

believe we have created an environment where women can thrive,

develop their careers and act as role models to others looking to

jointhe industry.

Our mean gender bonus gap is as a result of the high percentage

ofwomen in our Executive and senior management population,

whilstour median bonus gap is relatively stable, with small

fluctuations influenced by one-off recognition vouchers and

longservice award payments.

Gender pay gap %

2017 20232021202020192018

2022

Median Mean

The difference in hourly pay between male and female employees

in 2023 is:

Median

7.8%

Mean

2.0%

The difference in annual bonus pay between male and female

employees in 2023 is:

Median

-2.9%

Mean

-65%

Ethnicity pay gap

In our second year of publishing our ethnicity pay gap information,

themedian gap is 6.3% and the mean gap is 7.2%. Around 93% of

ouremployees have shared their ethnicity information and we

continue to actively encourage all employees to share their data.

Ofthose who have declared themselves as being from an minority

ethnic background, more than 60% are Asian/Asian British.

The difference in hourly pay between white and minority ethnic

employees in 2023 is:

Median

6.3%

Mean

7.2%

The difference in annual bonus pay between white and minority

ethnic employees in 2023 is:

Median

-2.1%

Mean

50.7%

The full Gender and Ethnicity

Pay Gap Report can be found

online atseverntrent.com.

This outlines themethodology

anddefinitions, and includes

casestudies showcasing

howouradvisory groups

arefostering a working

environment where

colleagues trust and know

that opportunities are

available to all, regardless

ofan individual’s gender,

ethnicityorbackground.

Pay distribution Men Women

op quartile

pper middle quartile

ower middle quartile

ower quartile

verall

31%69%

20%80%

23%77%

42%58%

29%71%

White Minority ethnic

op quartile

pper middle quartile

ower middle quartile

ower quartile

verall

11%89%

90%

16%84%

12%

88%

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024186

Social Value

We want to ensure our Policy is designed to deliver balanced

outcomes for all our stakeholders, including the communities we

serve. Our Societal Strategy aims to support 100,000 people across

our region, over the next 10 years, to tackle the underlying drivers

of water poverty. We want to make sure that the support not only

reaches the total number of people, but that the contacts are also

meaningful, which is why we also want to measure Social Value.

In reaching 100,000 people, some of the initiatives, such as school

employability days, are able to reach many people at once.

Otherinitiatives are much more resource intensive and do not reach

as many people, but may have a greater benefit on society in the long

term. Social Value aims to balance this by placing a value on different

types of activities. Our ambition is to maximise the Social Value we

deliver within our communities, whilst still reaching 100,000 people.

We have looked to take an evidence-based approach to our

interventions, ensuring that we target our activities and resources in

those areas that will have the greatest impact.

Post-Employment Shareholding Requirement (‘PESR’) in action

Since implementation of our PESR

mechanism, an Executive Director has not

left the business and so we have not been

able to articulate how it works in practice.

Following the retirement of the former CFO,

James Bowling, at the end of 2023, we

undertook a review to determine the number

of his shares that needed to be retained for

PESR purposes.

The Company already had an established

PESR policy embedded in its Remuneration

Policy requiring the in-employment

shareholding (200% of salary in James’ case)

to be retained for a period of two years

following cessation. This is enforceable via a

custody arrangement in place with the Trustee

of our Employee Benefit Trust (‘EBT’) who

holds shares in ‘safekeeping’ forthe purposes

of meeting shareholding requirements.

Following James’ retirement, we calculated

the number of shares which must continue to

be held by the EBT to satisfy the Remuneration

Policy. James’ accumulated shareholding was

considerably in excess of the in-employment

requirement set out in the Remuneration

Policy, having never sold any of the shares that

he had acquired, other than those sold for

taxpurposes.

As part of the PESR review, in alignment

with Investment Association (‘IA’)

recommendations, we have taken into

account vested LTIP shares that are still

subject to the two-year post-vesting holding

period but only taken into consideration

unvested shares (on a net of tax basis) where

these are no longer subject to performance

conditions, i.e. deferred shares yet to be

released under the Annual Bonus Scheme.

As a result, we were able to determine those

share certificates that needed to be retained

by the EBT and to facilitate a release of

shares to James where the restriction no

longer applied. We continually review PESR

requirements, for example when LTIP

post-vesting holding periods come to an end.

EPA rating/serious pollutions

CSO reduction and

enhancements

Health and

Safety

PBIT

40%

10%

15%

10%

17%

35%

is linked to

environmental

performance

27%

Total ODIs

A focus on environmental performance

As part of the 2024 Policy review we have reweighted the annual bonus

performance measures within the current Policy such that there is an

increased focus on customer and environmental measures.

– We have increased the weighting of the River Health element from 12% to

15%. Thismeasure will now be split 7.5% for CSO spill reduction, and

7.5% forCSO enhancements.

– We have increased the weighting of the EPA element from 5% to 10%,

with an extra underpin on serious pollutions. This measure will only pay

out if we achieve both thehighest EPA 4* rating, and there are zero

serious pollutions in the year.

– The ODI element is worth 27%, and just over a third of the ODIs are

environmental measures, equating to 10% of the total bonus.

In total, the environmental performance element of the budget for 2024/25

is worth 35%.

Themes, Outcomes and Measures

(‘TOMs’)

The Social Value measure quantifies the value delivered and

wider value created for society, through the National TOMs

Framework. The TOMs Framework is widely recognised as the

best standard for measuring and reporting on Social Value and

is adopted by organisations in central and local Government. It

also providesametric that can be directly benchmarked against

other companies.

Targets

For the performance period of the 2024-27 LTIP, we are setting

ourselves a very stretching ambition of impacting 30,000 people and

generating a Social Value of £12 million. This is a huge increase on

our run rate to date and will depend on both higher levels of activity

and greater involvement across our whole business. The scale of

this ambition will move our social impact activities from being

activity undertaken by a smaller group of volunteers in the periphery

of the business, to a core part of how we operate, requiring

engagement and involvement across every part of the business.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 187

GOVERNANCE REPORT

COMMITTEE GOVERNANCE

The Committee’s process

Each year, the Committee is presented with interim and annual updates that set out developments in Severn Trent’s wider workforce pay

policiesand practices. The provision of these reports meet the requirements of the 2018 Code. The Committee continues to be engaged

onthemechanisms for how the reward framework is applied across different levels within the organisation, which in turn has been shared

inthisreport.

The Remuneration Committee’s agenda for 2023/24

The Committee carries out an annual review of remuneration elements, policies and processes.

This process was introduced in 2019 for the Committee to expand its responsibility to oversee

and review wider workforce pay and policies, and to ensure they are designed to support the

Company’s desired culture and values.

The Committee believes that the context and knowledge shared is a useful underpin to ensure

that our future decision making around Executive and senior management pay supports fair

andequal remuneration throughout the entire workforce.

How does the Committee set performance targets?

The Committee has a well-established process for setting stretching targets to ensure that incentives drive our strategic outcomes and

deliver value for our stakeholders.

1. Review and approve targets

Management proposes targets for

thebonus and the LTIP, taking into

consideration the AMP7 Business Plan,

company strategy, the Board-approved

budget, historical performance,

consensus forecasts, stakeholder

expectations and wider market/economic

conditions. The Committee reviews the

proposed targets (including the underlying

assumptions) to ensure they are suitably

stretching but also realistic. Following

thisreview, the Committee approves

thetargets.

2. Assess performance

At the end of the performance period

(oneyear for the bonus and three years for

the LTIP), the formulaic outcomes of each

performance measure are assessed on a

standalone basis, including those that are

independently verified by our external

regulator, Ofwat. The UQ element for LTIP

awards can only be measured once data

for all WaSCs is available. A specific

Committee meeting isscheduled for this

purpose.

3. Determining final outcomes

The Committee assesses whether

formulaic outcomes are fair in the context

of overall business performance and

service delivery for customers and the

environment. The Committee

hasawell-established process to review

formulaic outcomes and, as part of this

process, independent external advice

issought whereby the Committee looks

at‘performance in the round’. The

Committee has the ability to exercise

discretion to adjust formulaic

incentiveoutcomes. Read more on

page173.

Key areas of focus

Review of the current Policy as part of the

2024 Remuneration Policy Review, ensuring

alignment with regulatory guidance and

ongoing compliance with the 2018 Code.

Review of performance in the round for

2022/23 ahead of approving the formulaic

outturns for the 2022/23 annual bonus and

the 2020 LTIP award.

Review of the Company’s incentive scheme

structures, ensuring alignment with

regulatory guidance and broader

stakeholder priorities.

Completion of its annual assessment on wider

workforce policies and practices, including

the updates made in year to the Maternity and

Adoption leave policies, the Company’s real

Living Wage and real Living Hours

accreditations, Severn Trent Plc’s 2023

Gender and Ethnicity Pay Gap Report, and

alignment of Executive and wider workforce

annual pay increases. The Committee

reported to the Board on this matter.

Attendance at the Company Forum to share

guiding remuneration principles with

employee and Trade Union representatives.

Consideration of an independent update,

provided by PwC, on current market practice

and future remuneration trends.

Review of the expenses claim procedure for

the Chair and CEO.

Review and approval of the Company’s Terms

of Reference during the year, prior to making

a recommendation to the Board. In

completing its review, the Committee

concluded that the Terms of Reference

remained appropriate and reflected the

manner in which the Committee was

discharging its duties.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024188

What the Committee will look at in 2024/25

The Company remains committed to continuous improvement of terms and conditions. We pride ourselves on keeping pace with trends in talent

management and acquisition, and skills development, in order to motivate, develop and retain a positive working environment, to ensure the best

prospects for the long-term success of theCompany.

Governance matters

The Committee’s performance was assessed as part of the externally facilitated Board Effectiveness evaluation. The Committee is regarded as

operating effectively and it is noted that the Board takes assurance from the quality of the Committee’s work.

2023 AGM shareholder voting outturn

Resolution Votes for Votes against Votes withheld

Approve Directors’ Remuneration Report

192,267,172 9,273,727 74,027

(95.40%) (4.60%)

2021 AGM shareholder voting outturn

Resolution Votes for Votes against Votes withheld

Approve Directors’ Remuneration Policy

191,642,002 662,228 625,355

(99.66%) (0.34%)

Committee advisers

To ensure that the Company’s remuneration practices are in line with best practice, the Committee has appointed independent external

remuneration advisers, PwC. This appointment in 2017 followed a formal selection process. PwC attends meetings of the Committee.

PwC is one of the founding members of the Remuneration Consultants Group Code of Conduct and adheres to this Code in its dealings with

theCommittee. The Committee reviews the appointment of its advisers annually and is satisfied that the advice it receives is objective and

independent. Fees, on a time-spent basis, for the advice provided by PwC to the Committee during the year were £151,958 excluding VAT

(2022/23: £92,985). Separate teams within PwC also provided unrelated tax consulting, pensions, and other assurance and advisory services

during the year. There are no connections between PwC and individual Directors to be disclosed.

The CEO, CFO, Director of Human Resources and the Head of Reward and HR Operations also attend meetings, by invitation, to provide advice

andrespond to specific questions. Such attendances specifically excluded any matter concerning their own remuneration. The Group Company

Secretary acts as secretary to the Committee.

Below are some of the focus areas for the Committee during 2024/25:

Employee wellbeing

The Committee will continue to review

the support we provide to employees

across all three pillars of wellbeing

(physical, mental and financial) to

ensure we are embodying our value of

‘Showing Care’ as much as possible.

Fair and transparent pay

Continued commitment to monitor and

evaluate developments in our pay

framework and the review of Executive

pay in line with the wider workforce. We

will continue to clarify the contribution

of unique role types to ensure an equal

and fair reward package that is

representative ofroles with similar

skill types.

Implementation of the 2024 Policy

Overseeing the implementation of the

new Policy, including the increase of the

Non-Financial element of the LTIP from

20% to 50%, and the introduction of two

new measures – Social Value and PCDs.

For more details see page 172.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 189

GOVERNANCE REPORT

ANNUAL REPORT ON REMUNERATION

The Annual Report on Remuneration and the Annual Statement will be put to an advisory shareholder vote at the

AGM on 11 July 2024.

The 2024 Remuneration Policy, which is set out on pages 195 to 204, will also be submitted to shareholders for

approval at the AGM.

Total single figure of remuneration (audited)

The tables below and on the next page set out the total single figure of remuneration received by the Executive Directors for 2023/24 (or for

performance periods ended in 2023/24 in respect of long-term incentives) and 2022/23 for comparison, and total fees received by Non-Executive

Directors for 2023/24 and 2022/23, for comparison.

Where necessary, further explanations of the values provided are included below. The tables and the explanatory notes have been audited.

Executive

Directors

Financial year

ended

31 March

Salary

(£’000)

(i)

Benefits

(£’000)

(ii)

Pension

(£’000)

(iii)

Other

(£’000)

(iv)

Fixed pay

and benefits

sub-total

(£’000)

Annual

bonus

(£’000)

(v)

LTIP

standard

element

(£’000)

LTIP UQ

element

(£’000)

LTIP total

(£’000)

(vi)

Variable

remuneration

sub-total

(£’000)

Total

remuneration

(£’000)

(vii)

Liv

Garfield

2023/24 793.8 18.4 119.1 4.5 935.8 584.0 1,232.1 430.8 1,662.9 2,246.9 3,182.7

2022/23 771.9 18.1 115.8 0.0 905.8 358.8 1,292.5 559.8 1,852.3 2,211.1 3,116.9

Helen

Miles

2023/24 480.0 24.3 72.0 0.0 576.3 379.4 322.0 N/A 322.0 701.4 1,277.7

2022/23

(viii)

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

James

Bowling

2023/24 124.9 4.7 18.7 0.0 148.3 100.9 N/A

(ix)

259.4 259.4 360.3 508.6

2022/23 465.2 17.6 69.8 0.0 552.5 216.2 519.5 337.0 856.4 1,072.6 1,625.1

(i) Salaries are shown before the deductions of benefits purchased through the Company’s salary sacrifice scheme, such as pension contributions.

(ii) Benefits include a green travel allowance of £15,000 p.a., family-level private medical insurance, life assurance worth six times salary and participation in an incapacity benefits scheme.

This also includes a benefit-in-kind relating to electric vehicles, which increased from 1% in 2021/22 to 2% in 2022/23.

(iii) The Executive Directors’ maximum pension contribution is aligned with the wider workforce at 15%. None of the Executive Directors accrued benefits under any defined contribution

pension plans during the year or have participated in a defined benefits scheme whilst an Executive Director.

(iv) This figure relates to the difference between the market price and the discounted option price relating to a SAYE option granted during the financial year.

(v) The annual bonus is paid 50% in cash and 50% in shares, with the portion deferred into shares subject to continued employment for three years but with no further performance conditions

attached. See page 175 for further details of the annual bonus outturn for 2023/24.

(vi) For 2023/24 the value of the LTIP is based on the outcome of the standard element of the total potential 2021 LTIP vesting, plus the UQ element of the 2020 LTIP. For 2022/23 the value of

the LTIP is based on the standard element of the total 2020 LTIP vesting, plus the UQ element of the 2019 LTIP. The prior year LTIP figure has been restated using the share price at the date

of vesting and includes dividend equivalents in respect of vested shares. Details of share prices used to calculate these values are set out on page 192.

(vii) The 2023/24 total remuneration figures include £430.8k for the CEO and £259.4k for the former CFO in respect of UQ performance for the 2020 LTIP, which is published one year in arrears

and relates therefore to the 2022/23 remuneration figure.

(viii) As per the regulations, figures are not included for Helen Miles in respect of 2022/23, as she did not become an Executive Director until 1 April 2023.

(ix) James Bowling’s LTIP figure for 2023/24 includes the 2020 UQ element only. The 2021 standard element is reported in the ‘Payments to former Directors upon retirement’ section below.

Payments to former Directors upon retirement (audited)

James Bowling stepped down as Chief Financial Officer and an Executive Director in July 2023, and retired from the Company in December 2023.

His remuneration arrangements were treated in line with the shareholder-approved Policy. He did not receive any compensation for loss of office,

but as a retiree he was treated as a good leaver in relation to his outstanding incentive awards. His bonus for 2023/24 will be pro-rated and paid

incash and he will retain original vesting dates for Annual Bonus Scheme deferredawards. Full details of James’ 2023/24 bonus are set out on

page 176.

James was not awarded an LTIP in 2023 or 2024, and his in-flight LTIP awards will vest in line with the normal timeline, pro-rated tohis

termination date and maintaining the two-year holding period. For more details on the vesting of his 2021 LTIP, see below. His two-year PESR

period commenced in July 2023, once he stepped down from the Severn Trent Plc Board. See case study on page 187 for more details.

Standard proportion of

award

(Absolute RoRE plus

sustainability elements) LTIP

Total

number of

granted

Value of

award at

grant

(£’000)

End of

performance

period

Standard

element of

award

vesting

(% max)

(i)

Total

number of

vesting

(pro-rated to

termination

date)

Vesting

date

Value

attributable

to share

price

movement

(£’000)

Value of LTIP

vesting

(ii)

(£’000)

Value of

dividend

equivalents

due

(iii)

(£’000)

Value of

element of

LTIP

(£’000)

James Bowling 2021 25,068 614.8 31/03/2024 73.3% 16,856 24/07/2024 -21.8 429.0 39.0 468.1

(i) The standard element of award vesting has been calculated in line with the outcomes set out on page 176 for other Executive Directors, applying the vesting schedule set out in the 2021

Remuneration Report.

(ii) Based on the average share price over the final three months of the performance period of £25.45 as the awards will not be released until after the end of the closed period.

(ii) Based on dividends paid in the period since date of grant to 31 March 2024.

If relative element of

award is achieved –

indicative values LTIP

Maximum number of

shares that could

vest (pro-rated to

termination date)

Vesting

date

Value attributable to

share price

movement

(£’000)

Potential value of UQ

element vesting

(i)

(£’000)

Value of dividend

equivalents

due

(ii)

(£’000)

Potential value of

element of LTIP

(£’000)

James Bowling 2021 6,130 24/07/2024 (7.9) 156.0 14.1 170.1

(i) Based on the average share price over the final three months of the performance period of £25.45 as the awards will not be released until after the end of the closed period.

(ii) Based on dividends paid in the period since date of grant to 31 March 2024.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024190

Total Non-Executive Directors’ fees (audited)

2022/23

(£’000)

2023/24

(£’000)

Fees Fees

Christine Hodgson

1 January 2020 – present 312.2 321.1

Kevin Beeston

1 June 2016 – present 75.5 77.5

Tom Delay

1 January 2022 – present 71.6 77.5

Sarah Legg

1 November 2022 – present 25.2 66.3

Sharmila Nebhrajani

1 May 2020 – present 67.6 79.6

Gillian Sheldon

1 November 2021 – 14 May 2024 66.9 78.6

Former Directors

John Coghlan

(i)

Resigned 31 December 2023 97.3 80.1

(i) Inclusive of a fee of £10,785 in relation to his responsibilities as Chair of Hafren Dyfrdwy

Cyfyngedig in 2023/24 and £10,470 in 2022/23.

Relative importance of spend on pay

The table below shows the expenditure of the Company on staff costs

against dividends paid to shareholders for both the current and prior

financial periods and the percentage change between the two periods.

Relative importance

of the spend on pay

2022/23

£m

2023/24

£m % change

Staff costs 382.3 473.4 23.6%

Dividends 261.3 301.4 15.3%

Annual bonus outturn for 2023/24 (audited)

Our all-employee Annual Bonus Scheme ensures that all of our people,

from Executive Directors to our frontline employees, are aligned with

the same measures and rewarded appropriately for achieving key

objectives. Full detail on the Company’s performance during the

financial year can be found in the Strategic Report.

The performance outcomes in respect of financial performance

conditions, and the overall bonus awarded to each Executive Director

and our frontline employees, is set out in the Remuneration for the

Yearin Review section on page 175.

Remuneration of the CEO

The total remuneration for the CEO over the last 10 financial years is shown in the table below. The annual bonus payout and LTIP vesting level as a

percentage of the maximum opportunity is also shown.

Year ended 31 March 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

CEO

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Liv

Garfield

Total remuneration (£’000)

(i)

2,197.6 2,493.6 2,424.0 2,193.5 2,478.8 2,765.1 3,084.0 3,948.4 3,116.9 3,182.7

Annual bonus (% of maximum) 52.0% 88.2% 75.8% 60.4% 58.5% 74.0% 63.8% 81.0% 38.5% 60.9%

LTIP vesting (% of maximum) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

(ii)

80.0%

(iii)

(i) 2018 onwards includes any SAYE grants made during the year as well as dividend equivalents in respect of vested LTIP shares.

(ii) The vesting of the 2020 LTIP award was reported in the 2022/23 Directors’ Remuneration Report as 75% of maximum. In light of UQ performance being achieved, the UQ element of the

2020LTIP award has since vested in full. To reflect this, the LTIP vesting percentage for 2023 has been restated. The additional LTIP value arising from the full vesting of the UQ element

(£430.8k) is included in the total remuneration value for 2023/24.

(iii) The value of the 2021 LTIP award for 2023/24 is based on the Committee’s assessment of the vesting of the standard element of the LTIP. The UQ element cannot be measured until the

endof July 2024; such vesting, if any, will form part of the total remuneration value for 2024/25.

CEO remuneration vs returns to shareholders

The graph below shows the value at 31 March 2024 of £100 invested in Severn Trent Plc on 1 April 2014 compared with the value of £100 invested in

the FTSE100. The FTSE100 was chosen as the comparator index because the Company is a constituent of that index. The intermediate points show

the value of the intervening financial year ends.

Total shareholder return (‘TSR’) and total CEO remuneration

250

150

200

100

2014

TSR vs. Total CEO Remuneration, rebased to 100

2023 20242020 2021 20222017 2018 20192015 2016

Severn Trent Plc TSR FTSE 100 TSR CEO total remuneration (indexed)

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 191

GOVERNANCE REPORT

Annual Report on Remuneration continued

Benefits for 2023/24 (audited)

The value of benefits is based on the cost to the Company and there is no pre-determined maximum limit. The range and value of the benefits

offered are reviewed periodically. In line with the Policy outlined on page 179, we show below the benefits received by the individual Executive

Directors in the year, and their typical annual value where possible.

Benefits for 2023/24 (audited) Typical annual value 2022/23 Typical annual value 2023/24 Percentage increase/(decrease)

Green travel allowance £15,000 £15,000 0%

Private medical insurance £1,563 £1,918 23%

Life assurance Up to 6x salary Up to 6x salary 0%

Personal accident cover As per the Group-wide policy As per the Group-wide Policy 0%

Biennial health screening £671 per health screen £671 per health screen 0%

Incapacity benefits Worth 75% of salary

for a period of five years

(subject to qualifying criteria)

Worth 75% of salary

for a period of five years

(subject to qualifying criteria)

LTIP awards vesting in relation to performance in 2023/24 (audited)

Under the 2018 Policy, which received very strong shareholder support, we implemented a UQ comparison against other WaSCs under the RoRE

performance measure for all future LTIP awards made to the Executive Directors. This ensures full vesting is only achieved for UQcomparative

performance and it aligns with the Company’s aspirations to be an upper quartile performer.

The outcome of the 2021 LTIP is based on performance over the three-year period from 1 April 2021 to 31 March 2024. This is the fourth LTIP award

vesting that includes a stretch measure relative to the UQ performance of the other WaSCs. The value set out below is based on achievement of

the standard element against the total potential LTIP vesting, as this measures the Company’s performance against the RoREset by its FD.

Achievement under the standard element was 2.27x and this was measured against the target that we set of 1.39x the baseRoRE return.

Thisresults in a vesting equivalent to 60% of salary for the CEO and 53.3% of salary for the CFO. Full details are set out inthe table below.

Standard proportion of 2021 award (Absolute RoRE plus sustainability elements)

Total

number

ofshares

granted

Value of

award at

grant

(£’000)

End of

performance

period

Standard

element of

award

vesting

(%max)

Number of

vesting

Vesting

date

Value

attributable

to share price

movement

(£’000)

Value

of LTIP

vesting

(i)

(£’000)

Value of

dividend

equivalents

due

(ii)

(£’000)

Value of

standard

element of LTIP

(single figure)

(£’000)

Liv Garfield 55,461 1,483.4 31/03/2024 80.0% 44,368 24/07/2024 (57.5) 1,129.2 102.8 1,232.1

Helen Miles 15,815 423.0 31/03/2024 73.3% 11,597 24/07/2024 (15.0) 295.2 26.9 322.0

(i) Based on the average share price over the final three months of the performance period of £25.45 as the awards will not be released until after the end of the closed period.

(ii) Based on dividends paid in the period since the date of grant to 31 March 2024.

(iii Details regarding James Bowling’s 2021 LTIP awards can be found in the ‘Payments to former Directors upon retirement’ section on page 190.

The vesting of the standard element of the 2020 LTIP award was reported in the 2022/23 Directors’ Remuneration Report. The below reflects the vesting

oftheUQ element of the 2020 LTIP award (as a percentage of the maximum award). The 2020 LTIP vested at 100% of maximum when these two elements

arecombined.

UQ element of 2020 award

(i)

Total

number

ofshares

granted

Value of

award at

grant

(£’000)

End of

performance

period

UQ element

of award

vesting

(%max)

Number of

vesting

Vesting

date

Value

attributable

to share price

movement

(£’000)

Value

of LTIP

vesting

(ii)

(£’000)

Value of

dividend

equivalents

due

(iii)

(£’000)

Value of UQ

element of LTIP

(single figure)

(£’000)

Liv Garfield 60,483 1,450.0 31/03/2023 25.0% 15,121 24/07/2023 23.8 386.3 44.5 430.8

James Bowling 27,336 655.3 31/03/2023 33.3% 9,103 24/07/2023 14.4 232.6 26.8 259.4

(i) Figures are not included for Helen Miles, as she did not become an Executive Director until after the performance period of the 2020 LTIP.

(ii) Based on the three-day average share price to 24 July 2023 of £25.55.

(iii) Based on dividends paid in the period since date of grant to 24 July 2023.

The UQ element of the 2021 LTIP award cannot be measured, and so the associated vesting will not be known, until the end of July 2024 when

comparable statistics for the other WaSCs are published and provided to Ofwat; such vesting, if any, will therefore be disclosed in the 2024/25

Directors’ Remuneration Report. The LTIP value in the 2024/25 single figure table will comprise the UQ element of the 2021 LTIP award (if any)

plus the standard element of the 2022 LTIP award. For full transparency, we set out below the maximum number of additional shares that could

vest if UQ performance relative to other WaSCs is achieved.

UQ element of 2021 award

Maximum number

of shares that

could vest

Value based on share price

at grant of £26.75

(£’000)

Value attributable to

share price movement

(£’000)

Value based on average

share price of £25.45

(i)

(£’000)

Liv Garfield 11,093 296.7 (14.4) 308.0

Helen Miles 4,218 112.8 (5.5) 117.1

(i) Details regarding James Bowling’s 2021 LTIP awards can be found in the ‘Payments to former Directors upon retirement’ section on page 190.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024192

2023 LTIP award (awards granted during the year)

Basis of award

(% of base salary)

Number of

granted

(i)

Grant

date

Face value of

award at grant

(£’000)

End of

performance

period

Vesting

date

3-day average share

price used for grant

calculations

Liv Garfield 200% 57,094

06/06/2023

1,522.6

31/03/2026 27/07/2026 £27.19

Helen Miles 150% 26,477 720.0

(i) LTIP awards are conditional share awards subject to performance conditions, as set out below.

2023 LTIP award

Threshold FD

baseline 3.89%

(% salary)

1.39x FD 5.41%

(% salary)

UQ performance

relative to WaSCs

(% salary)

Sustainability

performance measure

(% salary)

Max outturn

(% salary)

Vesting for

performance

Liv Garfield 30% 120% 160% 40% 200%

Helen Miles 20% 80% 120% 30% 150%

Sustainability performance measure details

Direct Contributors to Carbon Reduction (10%)

Scope 1 & 2 reduction Achieving a cumulative reduction in our Scope 1 & 2 emissions of 30% against a 2019/20 baseline of 508.4 kT by

31March 2026.

Self-generation Achieving an outturn of 137 GWh additional generation from the 2019/20 baseline of 486 GWh, enabling a minimum

total renewable generation of 623 GWh by 31 March 2026.

Innovation and Engagement for Carbon Reduction (10%)

Roll-out of Net Zero Hub Achieving a cumulative reduction in Scope 1, 2 and 3 emissions by 15 kT by 31 March 2026.

Scope 3 supply chain

engagement

To have suppliers representing 70% of our Scope 3 emissions committed to a Science-Based Target at 31 March 2026.

Deferred shares under the Annual Bonus Scheme (including awards granted during the year)

One half of the bonus earned in respect of performance during 2022/23 was deferred into shares, as detailed below:

Award

Basis of

award

Number of

shares granted

(i)

Grant

date

Face value of

award at grant

(£’000)

Vesting

date

3-day average

share price used

for grant

calculations

Liv Garfield

2023 Annual Bonus Scheme

relating to 2022/23

Deferred

bonus

6,521

13/06/2023

179.4

13/06/2026 £27.51

Helen Miles 3,031 83.4

James Bowling 3,930 108.1

(i) Annual bonus shares are deferred shares which are subject to continued employment, but are not subject to further performance conditions.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 193

GOVERNANCE REPORT

Annual Report on Remuneration continued

External directorships

Liv Garfield was appointed a member of the Takeover Panel in November 2017. She retains any fees in respect of her appointment for the year

ended 31 March 2024. In December 2022, she also became a Non-Executive Director of Brookfield Asset Management Limited and retains any

fees associated with this appointment. Helen Miles has been a Non-Executive Director at Breedon Group Plc since April 2021, and retains any fees

associated with this appointment.

Service contracts for Executive Directors

Copies of the service contracts for the Executive Directors are available for inspection at the Company’s registered office during normal

businesshours.

All Directors will retire at this year’s AGM and submit themselves for appointment or reappointment by shareholders at the AGM on 11 July 2024.

Liv Garfield and Helen Miles have service contracts which provide for a notice period of one year. Non-Executive Directors do not have service

contracts; their Letters of Appointment can be found on the website and are available for inspection at the Company’s registered office during

normal business hours.

Name Date of service contract Nature of contract Notice period Termination payments

Liv Garfield 11/04/2014

Rolling 12 months

Payments for loss of office comprise a maximum

of12months’ salary and benefits only

Helen Miles 01/04/2023

Sharmila Nebhrajani OBE

Chair of the Remuneration Committee

9 May 2024

Directors’ shareholdings and summary of outstanding share interests (audited)

Page 178 in the Remuneration for the Year in Review section summarises the shareholding requirements under which Executive Directors are

expected to build and maintain a shareholding in the Company, and whether Executive Directors have met the shareholding requirements. The

shareholding requirements for the CEO and CFO remained unchanged in 2023/24.

The Committee believes that it is an essential part of the Policy that Executive Directors become material shareholders, and this is evidenced by

the number of shares held by both Executive Directors. The retention and build-up of equity is important in a long-term business such as Severn

Trent as it encourages decisions to be made on a long-term sustainable basis for the benefit of all stakeholders.

There has been no change in the Directors’ interests in the ordinary share capital of the Company between those set out below and 21 May 2024.

Directors

Beneficially

owned

LTIP

(i) (ii)

Annual bonus

(iii)

SAYE

options

Shareholding

requirement as a

% of salary

Current

shareholding

asa%of salary

% shareholding

requirement

achieved

(iv)

Liv Garfield

11 April 2014 – present 381,089 165,506 30,722 1,842 300% 1,227% 409%

Helen Miles

1 April 2023 – present 62,932 57,394 14,469 0 200% 363% 182%

Non-Executive Directors

Christine Hodgson

1 January 2020 – present 7,486 – – – – – –

Kevin Beeston

1 June 2016 – present 5,996 – – – – – –

Tom Delay

1 January 2022 – present 0 – – – – – –

Sarah Legg

1 November 2022 – present 1,912 – – – – – –

Sharmila Nebhrajani

1 May 2020 – present 231 – – – – – –

Gillian Sheldon

(v)

1 November 2021 – present 350 – – – – – –

Former Directors

James Bowling

(vi)

Resigned 6 July 2023 127,352 76,338 18,514 780 200% 703% 352%

John Coghlan

Resigned 31 December 2023 3,832 – – – – – –

(i) LTIP awards are conditional share awards subject to ongoing performance conditions.

(ii) Additional dividend equivalent shares may be released where provided in the rules.

(iii) Annual bonus shares are deferred shares which are not subject to further performance conditions.

(iv) The share price used to calculate the percentage of the shareholding guideline achieved for both current and former directors was £24.70 (as at 31 March 2024). The guideline figures

include unvested annual bonus shares (47% deducted to cover statutory deductions).

(v) Gillian Sheldon remained in role as a Non-Executive Director as at 31 March 2024, and subsequently stepped down from the Board in 14 May 2024

(vi) James Bowling’s shareholding as a percentage of salary has been calculated with reference to the number of shares held at 6 July 2023, being the date he retired from the Board.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024194

REMUNERATION POLICY

This section contains Severn Trent Plc’s proposed

Directors’ Remuneration Policy (the ‘Remuneration

Policy’) that will govern and guide the Company’s

futureremuneration payments. The Remuneration

Policydescribed in this section is intended to apply

forthreeyears and will be applicable from the date

ofapprovalby shareholders at the Company’s

2024AnnualGeneral Meeting (‘AGM’).

Development of Remuneration Policy report

The Remuneration Committee sets the Remuneration Policy for

Executive Directors and other senior executives, taking into account the

Company’s strategic objectives over both the short and the long term,

stakeholders expectations, and the external market. The Committee

addresses the need to balance risk and reward, and monitors the

variable pay arrangements totake account of risk levels, ensuring an

emphasis on long-term and sustainable performance. The Committee

believes that the incentive plans are appropriately managed and that

the choice of performance measures and targets does not encourage

undue risk taking by the Executives, so that the long-term performance

of the business is not compromised by the pursuit of short-term value.

The plans incorporate a range of internal and external performance

metrics, measuring operational, financial and environmental

performance over differing and overlapping performance periods,

providing a rounded assessment of overall Company performance.

In order to manage conflicts of interest, no Director or employee

participates in discussions pertaining to their own remuneration.

TheCommittee reviews the performance of its external advisers

onanannual basis to ensure that the advice provided is independent

ofanysupport provided to management.

Linkage to all-employee pay

The Committee reviews changes in remuneration arrangements

intheworkforce generally as we recognise that all employees play

animportant role in the success of the Company. Severn Trent is

committed to creating an inclusive working environment and to

rewarding employees throughout the organisation in a fair

andtransparent manner. When making decisions on Executive pay, the

Committee considers wider workforce remuneration and conditions

toensure that they are aligned on an ongoing basis. Inparticular,

theCommittee considers wider workforce salary increases when

determining those for Executive Directors. We believe that employees

throughout the Company should be able to share in thesuccess of the

Company. Therefore, the annual bonus scheme iscascaded throughout

the organisation and all employees may participate in the HMRC tax

advantaged Save As You Earn (‘SAYE’)scheme.

As part of our commitment to fairness, the ‘Company remuneration at

Severn Trent’ section on pages 182 to 187 sets out the steps we take to

make sure that our payand reward framework below Executives and

senior management, is transparent in a way that is meaningful and

useful. This section also includes more information on our wider

workforce pay conditions, our gender and ethnicity pay statistics and

our CEO pay ratio disclosure.

Shareholder views

The Committee engages proactively with the Company’s major

shareholders and is committed to maintaining an open dialogue. It

reviews any feedback received from shareholders throughout the year,

and as a result of the AGM process. Committee members are available

to answer questions at the AGM and throughout the rest of the year. The

Committee takes into consideration the latest views of investor bodies

and their representatives, including the Investment Association, the

Pensions and Lifetime Savings Association and proxy advice agencies.

In preparing the 2024 Remuneration Policy, the Company carried out an

extensive shareholder consultation exercise with our largest

shareholders and representative bodies to seek feedback on the main

changes proposed.

In summary, shareholders were pleased to see the overarching

principles of the Remuneration Policy retained, whilst supporting the

Company’s commitment to the introduction of a broader range of

non-financial Long Term Incentive Plan (‘LTIP’) measures that support

the key pillars of the Company’s strategy going into AMP8.

Contents

Development of Remuneration Policy report 195

Linkage to all-employee pay 195

Shareholder views 195

Summary of changes to the proposed Remuneration Policy 196

2024 Directors’ RemunerationPolicy table 196

– Salary

– Benefits

– Pension

– Annual bonus

– LTIP

– All-employee share plans

– Shareholding requirements

External directorships 200

Approach to recruitment andpromotion 200

Service contracts and LettersofAppointment 201

Policy on payments forlossofoffice 201

Policy on change of control 203

Chair and Non-ExecutiveDirectors 203

Application of the RemunerationPolicy 204

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 195

GOVERNANCE REPORT

Summary of changes to the proposed Remuneration Policy

Element of remuneration Summary of proposed Remuneration Policy changes and rationale

Base salary No changes proposed.

Benefits No changes proposed.

Pension No changes proposed.

Annual bonus Removal of the option for personal objectives as an element within the bonus structure

(notusedsince 2019/20).

Note: Proposed changes to performance metrics and weightings (implementation of Policy) are

setout on page 180.

Long-term Incentive Plan No changes proposed.

Note: Proposed evolution of performance metrics and weightings (implementation of Policy) are

setout on page 180.

All-employee share plans No changes proposed.

Shareholding requirements No changes proposed.

Approach to recruitment and promotion No changes proposed.

Policy on payments for loss of office Clarify the treatment of deferred share awards for good leavers so that the default treatment

isthat subsisting awards would vest as per their original timelines (rather than at the point

ofcessation).

Policy on change of control No changes proposed.

Chair and Non-Executive Directors No changes proposed.

Remuneration Policy continued

2024 Directors’ Remuneration Policy table

The following table sets out the key elements of the remuneration for the Executive Directors.

Salary

Purpose and link to strategy: To recruit and reward Executive Directors of a suitable calibre for the role and duties.

Operation (including performance metrics) Maximum opportunity

– Salaries for individual Executive Directors are reviewed annually

bythe Committee and normally take effect from 1 July.

– Salaries are set with reference to individual performance,

experienceand contribution, together with developments in

therelevant employment market (having regard to similar roles

inpublicly quoted companies of a comparable size), Company

performance, affordability, the wider economic environment

andinternal relativities.

– In addition, when the Committee determines a benchmarking

exercise is appropriate, it will also consider salaries within the

rangespaid by the companies in the comparator groups used for

remuneration benchmarking.

– The Committee intends to review the comparators periodically

andmay add or remove companies from the group as it considers

appropriate. Any changes to the comparator groups will be set out

inthe section headed Implementation of Remuneration Policy,

inthefollowing financial year’s Directors’ Remuneration Report.

– Details of the current salary levels for the Executive Directors

aresetout in the Annual Report on Remuneration on page 190.

– Any increase to the Executive Directors’ salaries will generally be no

higher than the average increase for the UK workforce. However,

ahigher increase may be proposed in the event of a role change or

promotion, or in other exceptional circumstances.

– The Company, where appropriate, may set salary levels below the

market reference salary at the time of appointment, with the intention

of bringing the salary levels in line with the market as the individual

gains the relevant experience. In such cases, subsequent increases

insalary may be higher than the general rises for employees until

thetarget positioning is achieved.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024196

Benefits

Purpose and link to strategy: To provide competitive benefits in the market to enable the recruitment and retention of Executive Directors.

Operation (including performance metrics) Maximum opportunity

– A green travel allowance (formerly car allowance, changed to

recognise the use of public transport and introduction of our

electricvehicle car scheme), family-level private medical insurance,

lifeassurance, personal accident insurance, health screening,

anincapacity benefits scheme and other incidental benefits

andexpenses.

– The Committee recognises the need to maintain suitable flexibility

inthe benefits provided to ensure it is able to support the objective

ofattracting and retaining personnel in order to deliver the

Groupstrategy. Therefore, additional benefits such as relocation,

disturbance and expatriate allowances, and tax equalisation

maybepaid as appropriate.

– Directors will be reimbursed for any reasonable business

expensesincurred in the course of their duties, including

thetaxpayable thereon.

– The value of benefits is based on the cost to the Company and

thereisno pre-determined maximum limit. The range and value

ofthe benefits offered are reviewed periodically.

Pension

Purpose and link to strategy: To provide pension arrangements comparable with similar companies in the market to enable the recruitment

and retention of Executive Directors.

Operation (including performance metrics) Maximum opportunity

– The Company maintains a defined contribution scheme and/

or cash supplement in lieu of pension.

– For Executive Directors, the Company contribution to a pension

scheme and/or cash allowance is a maximum of 15% of salary, which

aligns with the maximum available to members of the Severn Trent

Group Personal Pension (the majority of the wider workforce).

Annual bonus

Purpose and link to strategy: To encourage improved financial, operational and environmental performance, and to align the interests of

Executive Directors with shareholders through the partial deferral of payment in shares.

Operation (including performance metrics) Maximum opportunity

– Bonuses are based on financial, operational, customer and

environmental measures over a performance periodof one

financial year.

– 50% of the bonus is paid in cash and 50% in shares which vest after

three years (with the value of any dividends to be rolled up and paid

onvesting). There are no further performance targets on the

deferred amount.

– The performance measures and targets for the annual bonus

areselected annually to align with the business strategy and the

keydrivers of performance set under the regulatory framework.

Theannual weighting of the bonus between the various metrics

mayvary depending on the key priorities of the business for the year

ahead. Robust and demanding targets are set, taking into account

theoperating environment and priorities, market expectations and

the business plan for the year ahead.

– The Committee is of the opinion that given the commercial sensitivity

arising in relation to the detailed financial targets used for the bonus,

disclosing precise targets in advance would not be inshareholder

interests. Therefore, performance targets andperformance achieved

will be published at the end of the performance period, so

shareholders can fully assess the basis forany payouts.

– Malus and clawback mechanisms apply to allow the recoupment

within three years of the payment of the cash bonus or the grant

ofdeferred shares in the event of financial misstatement, errors in

calculation, misconduct, reputational damage, regulatory censure,

corporate failure of the Company, or failures of risk management or

of other operational systems and controls.

– Any exercise of discretion by the Committee will be communicated to

shareholders in full in the following year’s Directors’ Remuneration

Report. Cessation of employment and change of control provisions

apply as set out in the notes to the Remuneration Policy table.

– The maximum annual bonus payment will equal 120% of salary for

maximum performance. For threshold performance, 0% of maximum

opportunity will be paid. For target performance 50% of maximum

opportunity will be paid.

– The Committee will operate all incentive plans according to the

rulesof each respective plan and the discretions contained therein.

The discretions cover aspects such as the timing of grant and vesting

of awards, determining the size of the award (subject to the policy

limits), the treatment of leavers, retrospective adjustment of awards

(e.g. for a rights issue, a corporate restructuring or for special

dividends) and, in exceptional circumstances, the discretion to adjust

previously set targets for an incentive award if events happen which

cause the Committee to determine that it would be appropriate to

doso. In exercising such discretions, the Committee will take into

account generally accepted market practice, best practice guidelines,

the provisions of the Listing Rules and the Company’s approved

Remuneration Policy.

– In exceptional circumstances the Committee retains the discretion to:

a) Change the performance measures and targets, and the

weighting attached to them, part way through a performance

year, if there is a significant andmaterial event which causes the

Committee to believe the original measures, weightings and

targets are no longer appropriate; and

b) Make downward or upward adjustments to the amount of bonus

earned resulting from the application of the performance

measures, if the Committee believes that the bonus outcomes

arenot a fair and accurate reflection of business performance.

SEVERN TRENT PLC ANNUAL REPORT AND ACCOUNTS 2024 197

GOVERNANCE REPORT

Remuneration Policy continued

LTIP

Purpose and link to strategy: To encourage strong and sustained improvements in financial performance, in line with the Company’s strategy

and long-term shareholder returns.

Operation (including performance metrics) Maximum opportunity

– Awards are granted annually and will be subject to one or more

performance conditions which will be assessed over three years.

– A two-year holding period will apply following the three-year

vestingperiod for LTIP awards granted to the Executive Directors.

– The LTIP will be based on a combination of financial and non-financial

measures. Financial measures will constitute at least 50% of the

LTIPperformance measures. The non-financial measures will be

made up of a selection of environment, customer and/or communities

measures, and will not have a weighting exceeding 50% of the

LTIPperformance measures.

– For the first LTIP awards under this Policy, the following will apply:

– 50% of the maximum LTIP award will be based on Return on

Regulatory Equity (‘RoRE’) and will require the Company’s RoRE to

outperform the target set out inOfwat’s FD and, for full vesting, to

deliver upperquartile relative performance compared with other

watercompanies.

– 30% of the maximum LTIP award will be based on environmental

performance, comprising 20% on carbon reduction and 10% on

reduction of Reasons for Not Achieving Good Status (‘RNAGS’).

– 10% of the maximum LTIP award will be based on a long-term

measure of customer performance, via Price Control

Deliverables (‘PCDs’).

– 10% of the maximum LTIP award will be based on a communities-

related performance measure, focused on creating Social Value.

– Using RoRE to assess long-term performance reflects the focus

ofOfwat in AMP7 and AMP8 and is consistent with our aim to deliver

efficient returns to shareholders. RoRE measures the returns (after

tax and interest) that companies have earned by reference to the

notional regulated equity, where regulated equity is calculated from

the Regulated Capital Value (‘RCV’) and notional net debt. The

Committee believes that the use of RoRE provides a strong alignment

between the long-term financial and operational performance of the

Group and the reward delivered to management.

– The Committee believes that including carbon reduction measures

within the long-term incentive framework is important given the

Company’s ambitious long-term sustainability commitments.

– Whilst the reduction in storm overflow spills measure has worked

well in the annual bonus, we believe that the reduction in RNAGS is a

long-term driver ofperformance, and is therefore better aligned to

the LTIP.

– We already include a significant element in the annual bonus tied

toin-year operational delivery for customers; there will now be

anadditional element in the LTIP, in the form of PCDs, that will focus

on capital delivery programmes and is aligned with the long-term

interests of our customers.

– In November 2022, we announced our 10 year Societal Strategy to

help change the lives of 100,000 people through tackling the

underlying drivers ofpoverty and improving the lives of people in our

communities. This will be measured using the Themes, Outcomes

and Measures (‘TOMs’) methodology. See more detail on page 187.

– The structure of the non-financial measures and targets will vary

based on the nature of the target set (e.g. for milestone targets it

maynot always be practicable to set such targets using a graduated

scale and so vesting may take place in full for strategic targets if

thecriteriaare met in full). Full disclosure of targets and the

verification process for measures will be disclosed in future

Directors’Remuneration reports.

– Maximum limit is 200% of salary. Up to 25% of an award may vest

forthreshold performance, as applicable.

– The Committee will review the measures, weightings and targets

before each grant to ensure they remain appropriate. The Committee

may change the weighting of the measure, or use different measures

for subsequent awards, as appropriate.

– The Committee will operate all incentive plans according to the rules

of each respective plan and the discretions contained therein.

– The discretions cover aspects such as the timing of grant and vesting

of awards, determining the size of the award (subject to the Policy