What progress is the infra asset class making on ESG?
It’s pleasing to see another big increase in GRESB scores this year and growth in the benchmarking participation rates. The sector is clearly on board with ESG and taking it ever more seriously. Investors and funds know how to report on it and report well.
Regionally, Europe and the Americas are still ahead on sustainability, which is consistent with where we see the most public and governmental focus on ESG issues. But the real story this year is that the GRESB score gap between the regions, both in terms of assets and funds reporting, has narrowed significantly. Sector scores are also converging. Those that were previously lagging have stepped up their game in the last year, driving up the overall average score for assets from 62 in 2020 to 72 in 2021.
To what extent has covid-19 influenced progress?
In 2020, covid dragged progress a little bit, especially in the transport and social infrastructure space. That’s settled down in 2021 and ultimately the pandemic has driven more urgency on ESG. It’s heightened awareness of broader issues, beyond just climate change. For example, the pandemic’s devastating impact, particularly on disadvantaged groups, has raised the profile of social issues, emphasising to investors the importance of addressing the ‘S’ factors in their allocation decisions and in the assets they currently hold.
Is the asset class on track to meet net-zero by 2050?
Several infra investors and fund managers have been vocal about their commitments on this issue over the last 18 months. And COP26 is contributing to this momentum. However, when you actually dig down into the data on greenhouse gas emissions reduction, the commitments are not yet reflected in real performance.
Of the assets reporting to GRESB, just 34 percent set targets for GHG emissions (and only 8 percent have a net-zero target). That’s progress from 18 percent in 2019 and 29 percent in 2020, but it’s still well behind real estate where over 70 percent have set targets. So it’s imperative that infra accelerates on net-zero.
Do the private markets need more metrics/certifications on areas like diversity, equity and inclusion, and biodiversity protection?
GRESB is watching initiatives on both areas closely. We’re keen to see metrics developed that we can adopt into our assessment, so the sector can benchmark itself. For DE&I, there needs to be consensus on what targets make sense. Is it 50:50 for gender diversity, for example? Biodiversity is more complex to measure from an LP perspective; they tend to invest in brownfield assets, so it’s difficult for them to influence biodiversity impact, such as the siting and construction of new assets. At the same time, improvements can be made to existing assets – solutions to prevent bird strikes on wind turbines, for example. So, the sector can’t ignore its role in influencing the protection of biodiversity.
COP26 is almost upon us. What one message do you have for delegates?
We need more collaboration between the investment community and policymakers. Governments don’t have the money to deliver net-zero by themselves. So, they need to incentivise more private investors to come to the party. And investors need to ramp up the pressure on governments too.