WWF and Oliver Wyman today released a new report, Incorporating Sustainability into Infrastructure which examines how environmental, social, and governance (ESG) factors are being applied in the infrastructure investment process.
A broader societal focus on sustainability has encouraged more ESG investments and the report identifies what investors are doing to better integrate ESG factors into their decision-making: Specifically, investors want to:
Acquire better quality ESG data – Investors seek to work closely with portfolio companies and include additional climate- and nature-related ESG measurement requirements as part of the due diligence process.
Enhance the number of climate- and nature-related ESG factors to be integrated – In addition to accessing better data quality when considering a single ESG factor, investors are also seeking better ways to incorporate less prevalent ESG factors, such as air pollution and biodiversity.
Increase the range of infrastructure sectors for ESG factor integration – Investors are looking to identify key asset classes in which to focus ESG factors in infrastructure investment decision-making.
“Infrastructure investments are long-term investments with impacts over multiple decades – meaning that we need to start integrating sustainability now to tackle global challenges such as climate change and nature loss. We found that whilst climate factors are being integrated, investors are at an early stage of integrating risks related to nature and biodiversity in infrastructure investment,” said Dr. Helena Wright, Vice President, WWF Singapore.
“Investors have told us they are increasingly looking to expand from financing green infrastructure, to also selectively investing in cases where legacy infrastructure businesses and assets have developed a robust and clearly articulated plan to transform and become green,” said Nicholas Tonkes of Oliver Wyman.
The report includes case studies from the European Investment Bank (EIB), Allianz Global Investors, and others on how they are integrating ESG factors into their investment process. For example, some companies have dedicated sustainability managers while others have specific goals and performance indicators linked back to ESG factors.
Methodology
To examine the current practices of infrastructure investors related to the integration of ESG factors into investment decision-making, a survey was undertaken that involved more than 30 global infrastructure investors, just over half with over US$ 10 billion in assets under management. In addition, interviews were conducted with numerous investors and institutions to gather further supporting insights. Finally, an in-depth review of existing literature was also performed, to validate and supplement the primary research.
