Rising interest rates increasingly a threat to net zero progress in infrastructure
Infrastructure's move to net zero is overlooked by short term pressures despite the sector's strong green credentials, an investment veteran has said
Infrastructure may have strong ESG credentials but this is threatened by the industry overlooking areas such as the move to net zero in the face of short term pressures, specifically rising interest rates, a finance heavyweight warned a group of industry insiders yesterday.
According to Claire Roborel de Climens, global head of private and alternative Investments at BNP Paribas Wealth Management, “infrastructure is maybe the most well advanced investment strategy when looking at ESG factors, for example when looking at investments in energy transition or social infrastructure.
Last year, the Global Real Estate Sustainability Benchmark (GRESB), an ESG ratings tool specialising in real estate and infrastructure, launched two reporting tools based around transition risk and TCFD requirements.
“There is still some progress to do. While real estate has an ESG agenda, when it comes to focusing on climate change mitigation with green buildings and decarbonisation targets, I have the feeling that today's industries are more worried about rising interest rates and worsening economic outlook," Roborel de Climens said.
The comments were made at a webinar hosted by capital markets firm Candriam, on the subject of private illiquid assets and ESG.
While positive on the some of the ESG credentials in sectors such as infrastructure, de Climens also expressed disappointment on research from law firm Macfarlanes showing that only 25% of private equity firms currently have a dedicated ESG team.
Also speaking at the event, Soojin Kim, head of ESG research at investment data firm Preqin, shared recently published data showing ESG funds that are in a benchmark, three years past vintage and with a net IRR. While the sample size was still small, it showed further evidence that ESG-linked investments perform equally or better than non-ESG linked.
“There has been a lot of conversation around where do these funds perform in comparison to their non ESG peers. And many of the non ESG believers would say that they perform worse [in spite of evidence]”, she said.
Soojin also shared data showing that 54.7% of investors surveyed by Preqin consider ESG issues in investment analysis because of a proven link between high ESG scores and financial performance.