Investors are “demanding” that managers take climate-change considerations seriously, IFM Investors executive director of responsible investment Chris Newton has told Infrastructure Investor.
Newton was speaking as the Melbourne-based firm published data on the carbon footprint of its infrastructure assets for the first time in its 2018 Infrastructure Carbon Footprint Report, revealing that the financed CO2 emissions of its total infrastructure portfolio were 3,160,055 tonnes in the year ending June 2017.
This consisted of 2,619,353 tonnes of financed CO2 emissions in its global portfolio, excluding Australia. The Australian portfolio accounted for 540,702 tonnes of financed CO2 emissions.
Financed CO2 emissions are the proportion of emissions from each asset that are representative of an investor’s ownership stake.
“Investors around the world are just demanding this now,” Newton said when explaining the rationale behind compiling and publishing the data. “It’s not ideological for them – it’s purely driven by their view of risk and view of opportunities. The fact is the world’s got to start acting [on climate change] or there’ll be a decline in their returns.
“They’re holding us to account and our view is that our assets, especially in our infrastructure portfolio, are community assets, and we’ve got to look after them for the long term.”
He added: “We believe we’re one of the first managers ever to release something like this publicly, from an unlisted assets perspective.”
IFM previously measured its emissions for the year to end of June 2016 but only published the results internally.
In a comparison, IFM’s Australian portfolio saw emissions decrease by 5.5 percent compared to an approximate 9.4 percent in investment values in Australian dollars over the period, accounting for capital appreciation and currency movements.
In the global portfolio, emissions increased by approximately 7.0 percent over the period compared to an increase in investment values in US dollars of 37.7 percent, accounting for capital appreciation and the addition of new assets to the portfolio.
Emissions intensity per A$1 million ($707,581; €624,928) decreased in both portfolios, though, by 13.6 percent in the Australian portfolio and by 16.0 percent in the global portfolio.
Emissions reduction and commercial value
Newton explained the difference in emissions reduction was because of several newer additions to IFM’s global portfolio, coupled with the challenges of driving change across several separate jurisdictions and regulatory environments compared to one policy environment in Australia.
“In Australia it’s a pretty steady portfolio and we’ve been working with [the assets] for a number of years,” he said. “Some of the global assets are relatively new to the portfolio so there’s a hierarchy of things we focus on. For us, safety at our sites is often the number one thing, then progressively over time we can focus on x or y, with climate change one of those.”
Newton added that the firm “really had to work collaboratively with other investors who are like-minded [to] push forward” the low-carbon agenda, acknowledging that IFM does not always own 100 percent of the equity in assets in its portfolio.
IFM said it was undertaking more detailed portfolio risk assessment work to better understand the potential impact of climate change on its portfolio and that it “will determine the most suitable plan of action” once this is complete.
In addition, IFM has engaged technical specialists to develop a set of “science-based targets and emissions reduction pathways” for the assets in its Australian portfolio. Once complete, this will be rolled out to the assets in its global portfolio as well.
“The interesting part for us is that we can now work out where the greatest areas of opportunity are and that’s quite exciting,” Newton said.
“If we turn the dial left or right on a certain investment, we might get an emissions reduction, which is great, but more importantly it can actually add some commercial value to the business, too.”
Newton also highlighted a A$150 million commitment from the Clean Energy Finance Corporation to the IFM Australian Infrastructure Fund, with that capital to be used to support emissions reduction and energy efficiency initiatives across IFM’s Australian infrastructure assets.