deAs the race to decarbonise intensifies, it is hard to think of a sector more urgently in need of an overhaul than roads. Routinely found to be the main source of the transport sector’s greenhouse gas emissions, a 2020 study by Australian and New Zealand transport agency collective Austroads found that, left unchecked, the sector would drive emissions growth in both countries. The study noted in no uncertain terms that “business as usual is inconsistent with the ambition for net-zero emissions by 2050”.

For Brisbane-based asset manager QIC, decarbonisation has long been a key theme across its portfolio. With a 25 percent stake in Northwestern Roads Group, which owns the 40km Westlink M7 toll road concession and the 9km NorthConnex tunnel in Sydney, the crucial role that road infrastructure assets have to play in decarbonisation well into the future has not gone unnoticed. According to QIC global infrastructure partner Leisel Moorhead, the firm is more than ready to face, and even play a hand in, the sustainability-focused changes facing the sector.

“Obviously, there are going to be policy changes, as well as behavioural and technological changes,” Moorhead says. “Given the long-life nature of road infrastructure assets, in order to reach a net-zero emissions target by 2050, some of those changes need to be implemented now.”

In particular, she highlights the electrification of transport, the facilitation of sustainable fuels and reducing emissions through low-carbon transport as three key areas influencing the firm’s approach to decarbonisation and the management of its road assets.

“We see the electrification of transport accelerating over the next 10 to 15 years for commercial freight vehicles, buses and passenger vehicles, in particular,” she says. “That’s the key means by which to decarbonise transport. The technology exists today, but it’s about lending some policy support to drive the acceleration in this area as quickly as possible.”

Fuel a key part of any solution

Moorhead believes that facilitating the use of sustainable fuels is particularly important for freight. “Sustainable fuels such as hydrogen, ammonia and biofuels are key decarbonisation solutions for the harder-to-abate sectors such as heavy vehicles,” she says. “That’s a real opportunity that we see linked to the road transport sector.”

Another key focus is reducing emissions through low-carbon travel options, particularly relating to mobility as a service through the use of technology to optimise travel. “As much as we see the electrification of transport and sustainable fuels will be a means to decarbonise the road sector, we also can’t have that driving a huge amount of congestion,” Moorhead says. “We need to find different solutions to find better connectivity through mobility and service, connecting public transport, cycling and other low-carbon travel options.”

Despite the transformative changes on the horizon as the sector focuses on sustainability, Moorhead believes that as long as a road asset is strong, opportunities arising from implementing more sustainable solutions are likely to equal, if not outweigh, future risks.

“It all comes down to the nature of the individual road corridor and the nature of the different risks that may arise in the future,” she says.

According to QIC global infrastructure senior adviser Tibor Schwartz, the firm’s stake in transport assets beyond roads yields opportunities to leverage decarbonisation solutions across all modes of transport.

“For active asset managers that have a clear idea of where there are opportunities to act at an appropriate time to enable decarbonisation across the entire transportation system, there is actually a lot more opportunity than there is risk if one acts with urgency and brings solutions to the market that are fit for purpose,” Schwartz says. “From a system perspective, as an organisation, we are working hard to understand what the decarbonisation pathway is for every portfolio company and what enabling role we can play.”

Moorhead adds: “The way we look at it is, as an asset manager you’ve got to look at the whole freight supply chain because you can’t decarbonise one tiny part of it. You’ve got to look at how you solve the decarbonisation of the whole freight supply chain. It does have an ecosystem to it which provides the opportunity to look more broadly across ports, roads, airports, and the like.”

Case for collaboration

Schwartz predicts a strong focus on carbon reduction in the construction of roads. He also anticipates greater use of ‘digital twins’, enabling road owners and operators to spot potential problems and generally increase efficiency in the management of road assets, which he says will lead to managers having greater accountability overall.

“Leading constructors [in the roads sector] are looking at significant carbon reduction when it comes to the choice of construction materials and construction methodologies,” he says. “There’s a lot of technology that will come into play around capital efficiency, where the leading approaches today are using artificial intelligence when it comes to portfolio management of construction projects. And when it comes to the actual operation of assets, every asset in the hands of responsible operators will have a digital twin.”

Schwartz highlights extending the useful operating life of transport assets as another area of focus for QIC, noting that the firm is looking to achieve this through its collaboration with structural health monitoring solution provider Eloque. “There are underlying trends where the challenges are common to everyone and the solutions and capabilities that different organisations and fund managers [adopt] will differentiate how quickly they will be able to move down this road [of having] a very disciplined approach to executing the right strategies for the assets in their portfolios,” he says.

Moorhead agrees: “It’s much easier, when you’re building new assets, to ensure that you’re taking sustainability into account as you design it. That’s the most efficient way to make sure that you’re getting the most sustainable outcome through the materials, design [and so on].”

“Using the NorthConnex tunnel as an example, construction began back in 2015 with the design stage in the years leading up to it, and sustainability was a factor that was considered [even then],” she continues. “It did get an excellent rating from the Infrastructure Sustainability Council, and those standards will continue to evolve and change as new infrastructure is built. The expectations in terms of low-carbon materials, climate resiliency and other factors will all become much more important in the design of new infrastructure.”

Another evolving trait in the sector is a willingness to collaborate, Schwartz says. For QIC, this applies not only to working with external organisations but to a cross-sector approach across its own portfolio of assets. “There are opportunities to leverage and learn across our portfolio, opportunities we are exercising [in terms of] how we can do things better for particular assets,” he says. “[In addition], there are opportunities for collaboration that go well outside of our own asset portfolio – we can collaborate with the best peer infrastructure operators globally and co-operate [rather than compete] with them because we’ve got a common objective of doing certain things better.”

He points out that, to enhance supply chain digitisation and energy management solutions, the firm enabled collaboration between several of its portfolio companies – including the largest container and general cargo port in Australia, the Port of Melbourne – and the Port of Rotterdam.

QIC also collaborates with research centres funded by Australia’s federal government, such as the Australian Research Centre for Resilient and Intelligent Infrastructure Systems, to leverage the best research and development to solve problems defined by the firm’s portfolio companies.

“[We have a] very open-minded approach of learning from the best innovators around the world, collaborating with possibly innovative, often emerging technology companies [and] working with university research centres to help solve practical problems around decarbonisation and infrastructure management,” says Schwartz. “We are genuinely looking globally [for opportunities] where we can learn from others and adopt good practices from other industries.”