ESG: Resilience and sustainability are key to risk management

Thierry Déau, founder and CEO of Meridiam, on how environmental, social and governance criteria can be factored into long-term infrastructure development.

Thierry Déau
Thierry Déau

We founded Meridiam nearly 15 years ago with a very specific vision. We knew what we wanted to accomplish and had a sense of why we felt this mission to be critical for communities and compelling for investors. Blending purpose and profit, we wanted to invest in projects that could be defined as essential to the communities that welcomed them. This means investing on a long-term basis to shepherd those projects across generations as vehicles for capacity building, job creation and improving quality of life.

Equally important and simultaneously, our aim was to provide competitive returns and social equity to our investors. At inception, we also fully embraced the idea that the fast-approaching climate change tipping point would be our central challenge. We knew this would irreversibly transform our planet and give way to massive displacement of populations, and that resiliency and sustainability would become a key part of risk management.

On a broader level, we understood that it was also imperative to shape the vision we had for infrastructure as an asset class. We were confident that impact and profit were not mutually exclusive, but rather the two halves of a future-facing, responsible and inclusive whole. We subsequently reached out to the roughly 70 investors around the world who shared our long-term investment specificity and invited them to join us in the creation of the Long Term Infrastructure Investors Association.

The LTIIA would act as our collective voice on policy and perform two extremely important tasks. The first of these would be to provide project data that would be pooled and independently analysed in leading academic institutions, and which in turn would provide clear benchmarking on the returns offered by different segments of infrastructure investment. The second would be to create and promote an ESG and impact blueprint that would provide a roadmap to resilient and sustainable infrastructure development, laying the groundwork for a pathway that came to mirror what would become the United Nations Sustainable Development Goals.

The equal importance of people, planet and profit – known as the triple bottom line – found a new, more urgent iteration through the LTIIA. The association offers infrastructure investors the opportunity to be on the solution side of the world’s greatest challenge by making clear data on this nascent asset class’s performance available to a far broader investor pool.

“We were confident that impact and profit were not mutually exclusive, but rather the two halves of a future-facing, responsible and inclusive whole”

At the same time, Meridiam developed its own SDG-based scoring methodology to screen future investment decisions. Our proprietary system incorporates best-practice benchmarking and determines each project’s real contribution to the SDGs at the investment phase. It identifies the specific areas of operations in which a project’s impact might be improved, takes action accordingly and monitors performance throughout the project’s investment life.

Meridiam moved rapidly following the 2015 UN Climate Change Conference in Paris to address climate change through a dedicated fund that develops new sustainable business models in terms of energy efficiency, the circular economy, energy network optimisation and electric transport. We also support developing countries in achieving their nationally determined contributions and SDGs throughout Africa, Europe and Asia.

Aligning outlook and outcome

Our teams have found that current stakeholders, and those that are likely to become stakeholders in the future, are aware of the need to align investment with the framework formalised by the UN SDGs, of which Meridiam was an early adopter.

What once felt like a new language at the intersection of climate change, inclusive development, capacity building and urbanisation, is now a sought-after investment opportunity that aligns with industry best practice.

Within this context, we have continued to make progress in creating a unique methodology, which has given us the ability to consistently and tangibly measure the environmental impact of our work. This is to ensure we improve the quality of life in the communities we work with, while providing competitive returns and social equity to our investors.
We are constantly pushing the frontiers of what can be done to support communities worldwide for a better quality of life for current and future generations. Our recent milestones include:

  • In 2017, we invested in Agrimaine Méthanisation, a 3.65MW cogeneration biogas power plant in Mayenne in western France. Working with the other shareholder, AB2M – which is composed of 113 participating farmers – we help to develop, implement, finance, operate and maintain the anaerobic digestion plant. In true circular economic fashion, the farmers provide 99 percent of the project’s biomass and then recover organic matter from the fermented waste, which is used as a quality natural fertiliser.
  • Together with the municipal government, we have expanded Florence’s Tramvia inner city light-rail network to bolster social and economic development, support tourism and enhance quality of life for the city’s inhabitants. The recently opened T2 tram line provides a strong alternative to private vehicle usage and led to a rapid reduction in the number of cars during rush hour.
  • Our four new health campuses in Turkey provide approximately 1.6 million people with hospital and other care facilities. These include general care facilities, women’s and children’s hospitals, psychiatric units and dental care centres, with all facilities built to modern international standards.
  • We are partnering with the Rockefeller Foundation to develop a new approach to urban resilience infrastructure. This partnership aims to create an industry standard for urban resilient infrastructure.
  • The UN Capital Development Fund has appointed Meridiam to manage its International Municipal Investment Fund. IMIF is a unique initiative designed to provide a financial ecosystem for cities and local governments. The objective is to unlock public and private finance for underserved communities by addressing the challenges of climate change and urbanisation.

Added benefit

Last year it was announced that Meridiam would become one of the first asset managers in France to be structured as a benefit corporation. This underlined the firm’s commitment to impact measurement practices and its focus on blending purpose and profit.

Today, Meridiam’s team is 250 members strong and the firm has a robust portfolio of 75 projects across our three investment pillars of social, mobility and renewable energy infrastructure. Each asset brings a concrete, measured impact to communities and competitive returns to our stakeholders.

Climate Finance Day, organised by Finance for Tomorrow in Paris in November, provided the opportunity for an important conversation between the public and private sectors on our shared vision and priorities for a plus-two-degree Celsius world. In coming together to share experiences and shape collective solutions, we opened the door for extensive, broader participation in financing a just climate transition.