ADIA’s infrastructure division and sustainable investing
The ADIA Infrastructure Division holds a long term, multi-decade approach to underwriting.
We have long held a strategy and approach to underwriting that penalises potential investments that score poorly on sustainability metrics. That philosophy carries through to our board representation in portfolio companies.
Over the years, we have divested from legacy assets that were fossil fuel related and have taken decisions not to pursue investments due to lack of resiliency in scenarios where climate mitigation and adaptation accelerate.
This has resulted in a portfolio with minimal exposure to gas generation and oil derived products (<2%) and a gas value chain exposure (<10%) limited to LNG or distribution businesses that have a social license to operate and are essential in the path to decarbonisation.
By contrast, our renewable energy platforms have in excess of 12GW of capacity and continue growing, resulting in an exposure of nearly 15% of our Infrastructure Portfolio. From inception, our renewables platforms have grown over fivefold, and continue growing due to strong tailwinds.
We believe that our long-term approach and understanding of the risks and opportunities arising from climate change has resulted in a portfolio that is both resilient and well positioned for the future.
Background on ADIA’s approach to sustainable investing
As a long term, responsible investor, ADIA recognises the importance of building a portfolio that is able to capture opportunities and anticipate challenges arising from major global trends. Key among these is climate change, and ADIA has taken a number of steps over recent years to analyse the implications of climate change and integrate climate considerations into its decision-making around new and existing investments.
Climate change and the potential investment impact
In 2017-2018 ADIA created eight internal asset class-specific task forces, who considered in detail the potential ramifications of climate change for ADIA.
At a two-day event in early 2018, attended by more than 400 ADIA delegates, these eight task forces presented their asset class specific analyses on the likely impact of climate change. Their recommendations, on how ADIA could evolve its future investment strategy to manage and benefit from changing long-term market dynamics, are now being implemented.
One Planet initiative
The One Planet Summit gathered together world leaders and public and private finance stakeholders in Paris in December 2017 to discuss the key issue of financing climate action.
As part of this event, the One Planet Sovereign Wealth Fund Working Group was created to exchange and advance best practices on climate issues.
The Working Group comprised six global SWFs: the Abu Dhabi Investment Authority, the Kuwait Investment Authority, the New Zealand Superannuation Fund, Norges Bank Investment Management of Norway, the Public Investment Fund of the Kingdom of Saudi Arabia and the Qatar Investment Authority.
In July 2018, the Working Group published a framework to promote the integration of climate change analysis in the management of large, long-term and diversified asset pools. Building on current industry best practice, the Framework seeks to foster a shared understanding among long-term asset owners with regard to key principles, methodologies, and indicators related to climate issues. It also aims to identify climate-related risks and opportunities in their investments and enhance investment decision-making frameworks to better inform SWFs’ priorities as investors and participants in financial markets.
As a founding member of the One Planet Sovereign Wealth Funds Working Group, ADIA endorses the Principles in the framework:
- Alignment – Build climate change considerations into decision-making, which are aligned to the SWFs’ investment horizons;
- Ownership – Encourage companies to address material climate change issues in their governance, business strategy and planning, risk management, and public reporting to promote value creation;
- Integration – Integrate the consideration of climate change-related risks and opportunities into investment management to improve the resilience of long-term investment portfolios.
ADIA has embedded climate change into its operating rhythm:
- Where appropriate, Investment Departments are encouraged to explore climate change related opportunities, within their own existing allocations, risk budgets and guidelines;
- Investment Departments incorporate climate change impact and risk assessment as part of investment proposals, company and external manager due diligence, portfolio reporting, and departmental planning;
- Established cross-departmental Working Groups to monitor both changes in technology and climate policy, and report back to the Investment Committee periodically;
- Investment Departments monitor Climate Change investment practices in their interactions with external managers
ADIA has been investing in sustainable assets for many years, most visibly in areas such as infrastructure and real estate. Some recent examples include:
Greenko – India
Based in Hyderabad, Greenko is a market-leading owner and operator of clean energy projects in India with a focus on Wind, Hydro and Solar assets.
Greenko develops, builds and serves as operator of grid parity, utility-scale renewable energy assets that are located strategically across India, with a net installed capacity of more than 4 GW and another 7 GW under construction across 13 states. As such, it is actively contributing to India’s transition from fossil fuel dependency to clean energy generation.
With a core belief in sustainability both operationally and environmentally, Greenko maintains a continuous involvement in localised projects and community programmes. These centre on education, health and wellbeing, environmental stewardship and improving rural infrastructure.
ADIA holds a significant minority stake in Greenko.
ReNew Power – India
ReNew Power is the largest renewable energy independent power producer in India in terms of total energy generation capacity.
ReNew Power develops, builds, owns and operates utility scale wind and solar energy projects as well as distributed solar energy projects that generate energy for commercial and industrial customers. Since commencing operations with a 25.2 MW wind project in Jasdan, Gujarat, the company has grown exponentially, and has a current renewable asset base of over 7 GW, of which more than 4 GW is operational. It operates more than 100 utility scale projects spread across eight states, generating 1% of India’s total electricity and helping to mitigate 0.5% of India’s total carbon emissions. ReNew projects have generated almost 40,000 jobs, directly and indirectly.
ADIA holds a significant minority stake in ReNew Power.
One Museum Place – Shanghai
One Museum Place is a 60-storey office building in central Shanghai that has been designed and built to be a healthy and sustainable building.
The building is one of the first in Shanghai to be certified LEED Platinum, the highest standard of environmental efficiency, and includes advanced air filtration systems that aim to provide the best possible working environment. LEED certified buildings save money and resources and have a positive impact on the health of occupants, while promoting renewable, clean energy.
One Museum Place obtained RESET Air pre-certification status in October 2018. RESET Air Certification is awarded only to those projects that can consistently meet air quality criteria as outlined in the RESET Air Standards. Projects must demonstrate continual performance throughout the lifetime of the project in order to maintain certification.
Majority-owned by an ADIA subsidiary, alongside a leading global developer, the prime Grade-A tower forms the centerpiece of a new commercial zone – the Suzhou Creek Riverfront Hub – in downtown Shanghai.