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Themes of the Year 2019: Climate change investments are moving beyond renewables

From resilience-focused strategies to portfolio emissions-reduction targets, 2019 was the year the industry took a more holistic approach to climate change.

The industry often likes to see itself as being on the forefront of helping to mitigate climate change, and in many ways it is. Renewable energy generation has been the most obvious battlefront and the one where most players have been active. However, 2019 might end up being remembered as the year the industry’s role in fighting climate change went decisively beyond renewables.

Two examples of that: Meridiam’s partnership with the Rockefeller Foundation to launch a new €500 million resilience fund and IFM Investors’ “unprecedented” emissions reduction target for its Australian assets.

Let’s start with the Merdiam/Rockefeller Foundation partnership. At the time of launch in late September, the Rockefeller Foundation outlined the new vehicle’s objectives. “The goal of this partnership is to create an industry standard for resilience infrastructure,” it said in a blog post, referring to infrastructure that “is built to improve daily life, ensure survival and support continued growth in the face of increasingly hazardous climate events”.

Whether we will see a new flurry of resilience-focused strategies is up for debate. However, there is little doubt that resilience and adaptation – as topics and drivers of action – are here to stay.

“Climate resilience is one of the hottest topics of conversation for our LPs – I’ve noticed a rapid increase in focus from them around how prepared our assets are for climate change,” QIC partner Leisel Moorhead, who is responsible for managing ESG concerns for the Brisbane-headquartered fund manager’s infrastructure assets, told us in an October feature. She added that it represents one of the most pressing risks investors and asset owners are currently grappling with.

That puts the climate change-preparedness of infrastructure portfolios front and centre. It also raises a related question: beyond preparedness, are portfolios actively contributing to mitigating climate change?

IFM Investors sought to tackle the latter question when it announced, in late August, public emissions reduction targets for all the assets held in its Australian Infrastructure Fund. The seven assets are New South Wales electricity distributor Ausgrid, Melbourne Airport, Brisbane Airport, Port of Brisbane, NSW Ports, NT Airports and Melbourne’s Southern Cross Station.

Different targets have been set for each asset, with the level of reduction targeted varying depending on the asset’s sector and location. The targets range from a reduction of 8-25 percent by 2024 to 17-100 percent by 2030.

What these two different initiatives illustrate is a more holistic approach to the industry’s role in combating climate change. And while IFM Investors and Meridiam (alongside a few others) are at the forefront of taking this approach, expect demand to force the rest of the industry to catch up sooner rather than later.