GIIA welcomes new CBI report ‘Investing in Infrastructure’.

GIIA was pleased to contribute to the CBI’s new report titled ‘Investing in Infrastructure – Sourcing the Finance to Build Back Better’.

We welcome the acknowledgement of the vital role that private investment plays in delivering the modern, efficient and socially responsible infrastructure needed for future generations and the 13 recommendations the report makes.

In particular GIIA welcomes those recommendations calling on the Government to provide more clarity around the role they see for private investment in delivering many of the nation’s major infrastructure projects.

Speaking on the release of the report, GIIA CEO Lawrence Slade said:

“At a time when Government spending is rightly focused on both the social and economic recovery from the coronavirus pandemic, the private sector has the expertise and innovative ideas, and  stands ready to help address the UK’s long term infrastructure challenges while playing a significant role in the UK’s economic recovery.”

The full CBI report can be viewed here

NEW REPORT | Global Risks for Infrastructure – The Climate Challenge

GIIA, in partnership with Marsh & McLennan, is pleased to release the second in a three part analysis of global risks for infrastructure investors. Looking at the Climate Challenge, this report discusses the specific risks to infrastructure investors under each of the key risk categories outlined by the Task Force on Climate-related Financial Disclosures, as well as crucial levers for achieving climate resilience at both the portfolio and asset level for the infrastructure sector.

Click the image below to read Global Risks for Infrastructure – The Climate Challenge

Physical risks related to climate change are becoming a crucial risk category for infrastructure owners and operators. Natural disasters are already a leading cause of infrastructure disruptions in high-income nations, and climate change is expected to exacerbate these disruptions. In addition, increased urbanisation is heightening concentration of infrastructure assets in high risk areas.

Applying the three mutually reinforcing levers discussed in this report can provide infrastructure investors with a launchpad for developing a dynamic and future-ready climate resilience strategy.

 

The first instalment of this series illustrated the risk landscape for infrastructure with the release of the 2020 Global Risks for Infrastructure Map while the upcoming final instalment will explore the impact of transformative and disruptive technological innovations on the infrastructure sector, with an expected release in Q4 2020.

UK MP’s attitudes to infrastructure investment

A new Ipsos MORI survey into MP’s attitudes towards UK infrastructure reinforces the need for increased investment and the important role of the private sector in its delivery, echoing much of the sentiment expressed in the 2019 GIIA/Ipsos MORI Global Infrastructure Index.

All UK MPs interviewed agreed that investing in infrastructure is vital to Britain’s future economic growth, a view shared by 80% of the public. There is also a strong belief that Britain is not doing enough to meet its infrastructure needs, highlighting an overall feeling of dissatisfaction with Britain’s current infrastructure: 22% of MPs rate it positively compared to 36% of the public.

On the question of private investment providing the infrastructure Britain needs, both MPs and the public showed high levels of support with more than 90% of MPs saying they were comfortable with private investment, while the general public responded favourably by a 4 to 1 margin compared to those who were opposed to it.

Views diverge on the sectors that should be prioritised for investment. The Global Infrastructure Index shows that 40% of the public think solar energy infrastructure is an investment priority, followed by flood defences and rail, whereas MPs prioritise digital infrastructure relatively more highly than the public (57% compared to 25%), perhaps indicative of the need for elected representatives to better understand the priorities of their constituents which seem to be more heavily focussed on green, sustainable investments.

At GIIA, we continue to maintain a strategic dialogue with Government on behalf of our members on the role of private investment in infrastructure, including through the UK Investable Infrastructure Senior Leadership Group as well as through key channels across DIT, BEIS and HM Treasury where we are actively informing long term policy development and advocating for the role of private investment to deliver the infrastructure that communities rely on today, and that future generations will need tomorrow.

Results of the 2020 Global Infrastructure Index, produced in partnership between GIIA and Ipsos MORI, will be published in the Autumn.

ELII – Adebayo Ogunlesi talk

GIIA’s Emerging Leaders in Infrastructure Investment network were pleased to hold their inaugural meeting last week, welcoming Founder and Managing Partner of Global Infrastructure Partners Mr Adebayo Ogunlesi to speak about his own career and take questions from members.

Attendees were able to hear first-hand about the career path that Bayo took, after initially practising as a lawyer before moving to Credit Suisse First Boston, rising to Head of Investment Banking and finally founding GIP in 2006.

During the webinar, ELII members asked a number of questions about the infrastructure asset class, managing risk, the challenges of fundraising for a first time fund and the impact of Covid-19 on the sector.

GIIA’s ELII network is a member-led organisation aimed at young professionals who are working within the infrastructure investment sector.

For more information about ELII please join the LinkedIn group or contact Joe Robinson at jrobinson@giia.net

GIIA response to FT article on ESG

GIIA has published the following response to Brad Cornell’s opinion piece in The Financial Times (16th July, 2020) titled ‘The ESG concept has been overhyped and oversold’

Infrastructure investors increasingly believe that key to their commercial success is a focus on the principles of ESG investing, to manage risk, improve the performance of assets under management, and enhance their corporate reputation. It is not just a question of doing the ‘right’ thing, although in today’s society that is pretty fundamental to maintain your ‘social licence’; investing through the ESG lens for the long term also makes good business sense. A way to look at ESG investing is through the 7 R’s model (credit to Wayne Visser, Professor of Integrated Value and Chair in Sustainable Transformation at Antwerp Management School), in the way that it lowers risk, improves reputation, fosters resilience, increases resource efficiency, anticipates regulation, supports recruitment and increases revenues.

Good ESG performance should not be seen as a one-off. Companies that improve their ESG performance go on a journey that results in continued improvement, adding value year after year. Making decisions without ESG information is also risky and, in some cases, could be seen to constitute a disregard for fiduciary duty.

Investors that have embedded ESG into their decision making should not be “called on to make judgments on social issues that they are not empowered to make, nor equipped to handle”. Effective executive decision making is actually informed and empowered by the extent to which an organisation is engaged with the societies within which it operates. Companies that have enhanced engagement with their stakeholders are likely to make better informed, well-rounded decisions.

Infrastructure investors are consciously choosing to invest for the long-term with ESG at the core of their investing strategies, because they know it is the way to build long term value for stakeholders and shareholders.

New Infrastructure Pulse Survey

GIIA, in partnership with Alvarez & Marsal, is pleased to launch the new GIIA Infrastructure Pulse Survey for both the European and Americas markets. This quarterly survey aims to provide a regular temperature check of sentiment in the sector and to monitor emerging trends.

Click here to view the results of the Europe Infrastructure Pulse Survey

 

Click here to view the results of the Americas Infrastructure Pulse Survey

Speaking on the release of the Survey, CEO Lawrence Slade said:

“We are excited to work with Alvarez & Marsal on the Infrastructure Pulse Survey which will monitor some of the key trends and issues affecting the infrastructure investment space in both Europe and the Americas. We are confident this will become a valuable market tool in understanding what is happening in the sector.”

Against a backdrop of Covid-19, a number of interesting common themes emerged from the first survey:

  • Most respondents raising capital expressed a neutral or marginally positive view of the
    fundraising environment.   For those investing new capital, almost three quarters of respondents indicated that infra debt markets remain favourable for funding of new infrastructure deals in both geographies.
  • In terms of general outlook and views of the impact of Covid-19, respondents highlighted the only positive impact of Covid-19 was in communications infrastructure (due to the increased criticality of connectivity as more work from home), which continued the overall positive outlook for the sector.  Unsurprisingly, the most negative outlook was noted for airport transactions and oil & gas related midstream assets.
  • Respondents indicated that the most positive outlook in Europe was for the Nordics, Iberia and Germany, whilst in the Americas the most positive outlook was in the USA. The most negative sentiment was reserved for Greece/Cyprus, Eastern Europe, and Mexico.
  • ESG is emerging as an important consideration for investors and their LP’s across both the Americas and Europe.  Covid-19 and other events in 2020 are likely to accelerate the ESG agenda with a flow through to investment criteria.

Results from the next quarter’s survey are anticipated in mid-October.

New Blog – Responsible investors and the post-pandemic recovery

This blog first appeared on GRESB Insights 

John Kavanagh and Max Worthington

With the overall numbers of new cases and deaths continuing to decline and lockdown measures slowly being eased in most major economies, the worst of the COVID-19 pandemic appears to be abating. As countries start to rebuild in the months ahead, the crisis has clearly revealed a fundamental reshaping of investor priorities, accelerating trends that began long before the pandemic took hold.

During this time, health and care workers have rightly been championed as stalwarts of society while key workers have continued to provide essential goods and services to grateful communities across the world. Charities, community groups and private fundraisers have shown the good that can be done through voluntary affirmative action. Societies have continued to function as people have banded together to support each other in their times of need.

Private investors, too, have risen to the challenges posed by COVID-19, supporting employees, customers, communities and supply chains during the crisis. In response to the crisis, investors have demonstrated the highest principles of responsible asset stewardship and corporate social responsibility. Global Infrastructure Investor Association (GIIA) members have committed upwards of $200 million in financial donations to good causes, care for employees and flexible payment terms for customers during this time. As long-term stewards of capital, private investors are helping to mitigate the impacts of the pandemic on society as a whole.

Stakeholder capitalism

A decade after the global financial crisis of 2008-9 began to precipitate a shift in corporate behavior, such views are starting to converge into something akin to a new worldview, shared by the world’s leading executives, but also by consumers, employees, campaigners, academic institutions and regulators.[1] This shift is often referred to as a new form of ‘stakeholder capitalism’[2].

As Larry Fink, chairman of BlackRock, the world’s largest asset manager, warned in 2019 that companies without a social purpose fail to make the investments in employees, innovation and capital expenditures necessary for long-term growth.[3] Investors have moved the dial forward, marking a clear link between social purpose and the success of private enterprise. One can’t now exist without the other.

Fiona Reynolds, CEO of the UN Principles for Responsible Investment (PRI), points to the emergence of a more ‘progressive mindset’ since the most recent prior crisis in 2008-9.[4] This mindset encourages investors to design their strategies from the start with long-term value creation in mind, not just focusing on maximising private capital returns but on delivering value for the societies within which they operate.

Last year, the World Economic Forum and Business Roundtable updated their mission statements to reflect this new reality; Business Roundtable’s new Statement on the Purpose of a Corporation was signed by 181 CEOs who committed to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.[5]

The COVID-19 crisis has provided the opportunity for these words to be put into action, and responsible investors haven’t hesitated from stepping up and leading the way to the post-pandemic recovery.

Responsible investor actions

Private investors of all sizes have learned from the global financial crisis and stepped forwards when they were needed most. US investment bank Goldman Sachs has pledged US $25 million as part of the Goldman Sachs COVID-19 Relief Fund to support communities in most urgent need globally, while the firm has matched employee donations up to an additional $5 million.[6] These funds have directly impacted on some of the hardest-hit communities in the US while their $275 million Small Business Stimulus Package has supported some of the hardest-hit small businesses, ensuring that they are not left behind during the crisis. Similarly, KKR & Co. has created a $50 million fund dedicated to supporting frontline workers and mitigating the financial hardship created by the pandemic.[7]

DWS, a pan-European asset manager has donated EUR 1 million to various charities and food banks across Europe and the US whilst maintaining day-to-day operations and preserving employee wellbeing. Hamish Mackenzie, Head of Infrastructure at DWS notes that: “a huge effort was made by the DWS team to support management as they worked to ensure the continuity of operations whilst protecting the safety of employees. Clear and regular communication, early engagement with employees and other stakeholders and the ability to draw on the experiences of the Global Financial Crisis were all essential tools to navigate the crisis.”[8]

Others have pointed to the responsibility investors hold towards their portfolio companies and operating assets. Chris Manser, Head of Infrastructure Equity at Swiss Life Asset Managers, observes that: “we are fully aware of the obligation that we particularly have as an infrastructure investor to incorporate and promote sustainability and ESG practices, both within our platform and at the companies we hold in our portfolio. The pandemic has, once again, demonstrated the need for this push towards a responsible business environment and we will continue to support the effort now, and in the future.”[9]

The crisis has also shone a light on those organisations not to be seen to be behaving responsibly through, for example, accepting government support schemes for lower paid staff while retaining the pay-packets of those at the top end of their payroll. “The crisis has definitely impacted how we evaluate company behaviour,” says Marte Borhaug, Aviva Investors’ Global Head of Sustainable Outcomes, who has been engaging with companies on what their social responsibilities might entail. “There’s been a turning point; investors and consumers have become much more vocal about companies that are perceived to be failing to take their social role seriously.”[10]

Long-term challenges

As the crisis recedes, pre-existing structural challenges will move back into focus for governments and regulators. Speaking to some of the leading young investors at the Personal Investment Management & Financial Advice Association’s “Virtual Fest” on Wednesday 3 June, Mark Carney, former Governor of the Bank of England, encouraged young investors to channel their investments to sustainable opportunities. He said that the crisis will precipitate a “sweet spot” of opportunities for investment in areas such as infrastructure, which creates jobs and has “big multiplier effects on the economy”, which will bring benefits across the board to both investors and societies for the long-term.

Investors will once again be leading the way in delivering the transition to Net Zero economies and delivering on the asks of the ‘build-back-better’ movements, including through demanding that the companies that they own and the assets that they operate are resilient to climate risk.[11] Groups like the United Nations Net Zero Asset Alliance and the Investor Agenda are already establishing a roadmap for how the world’s largest investors are seeking to accelerate and scale up the actions that are critical to tackling climate change and achieving the goals of the Paris Agreement.[12]

Much remains to be done but the crisis has shown what can be achieved when private investors step up to the challenge and embed a long term responsible view in their investments to generate returns for society and not just portfolios.

[1] Edgecliffe-Johnson, A. (2019) ‘Beyond the bottom-line: should business put purpose before profit’, The Financial Times, URL Link

[2] World Economic Forum (2020) ‘What is Stakeholder Capitalism?’ URL

[3] Fink, L. (2019), ‘A Fundamental Reshaping of Finance’, Blackrock, URL Link

[4] Reynolds, F. (2020), ‘COVID-19: harnessing the power of collective investor action for change’, UN PRIURL Link

[5] Business Roundtable (2019), Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’, URL Link

[6] Goldman Sachs (2020), ‘Goldman Sachs Commits $300 Million to Support Communities and Small Business’, 3 April 2020 URL Link

[7] Oguh, C. (2020), ‘KKR sets up $50 million international coronavirus relief fund’, Forbes, 8 April 2020, URL Link

[8] Mackenzie, H. (2020), Email from DWS

[9] Manser, C. (2020), Email from Swiss Life

[10] Aviva Investors (2020), ‘Will COVID-19 prove a watershed for ESG?’, URL Link

[11] World Economic Forum (2020), ‘Build Bank Better’, URL

[12] UN PRI, ‘UN-convened Net Zero Asset Owner Alliance,’ URL, Investor Agenda, ‘Accelerating Action for a Low-Carbon World,’ URL

 

GIIA re-affirms commitment to diversity, equality and inclusion

Following a recent Board Meeting, GIIA has undertaken to continue looking for ways to promote the ideals of diversity, equality and inclusion across the sector and has issued the following statement along with specific actions to re-enforce this commitment:

GIIA, representing the world’s leading private investors in infrastructure, affirms not simply a commitment to the principles of equality for all members of society, but a mandate to actively promote diversity, equality and inclusion. GIIA recognizes the important role that infrastructure can play in providing opportunities and economic empowerment to individuals, communities and nations. As such, the sector has a vital role in promoting equality not only within offices and boardrooms but within the communities in which their infrastructure assets operate. We at GIIA will encourage our members to continue to focus on this agenda and share ideas that will help create opportunities for all.

As a membership body, GIIA intends to:

  • Appoint a Board member to be a champion of inclusivity and equality – to assist us, challenge strategies, champion board diversity and where appropriate represent the association
  • Host a specific member event in 2020 on how to increase inclusivity and equality in the infrastructure sector
  • Build inclusivity and equality into our wider program of activities wherever possible

Energy Transition Webinar – The role for electricity and gas

On June 30th, GIIA held the third in a series of exclusive webinars for members. Following on from successful sessions looking at the UK macro-economic picture and the airport sector, this webinar focused on the respective roles for electricity and gas in Europe’s energy transition and what that means for investors.

With thanks to our expert panel:

Janine Freeman, Director Strategy, PwC and Dr James Watson, Secretary General, Eurogas.

Watch the webinar here

View PwC slides here

View Eurogas slides here

GIIA Members’ Assets Exceeds $750bn

The 2020 edition of the GIIA / EY Global Asset Database reveals that GIIA members assets under management has exceeded US$780bn – comprising more than 1,500 assets across 55 countries.

This is an increase of more than £120bn since 2018/19.

The GIIA / EY Global Asset Database shows that GIIA members own, operate and invest in:

  • More than 100 airports serving more than 1 billion passengers annually
  • Utility companies serving 86.3 million customers
  • 321 ports moving more than 500m tonnes of cargo
  • 56,100MW of wind power, 18,600MW of solar power and 12,400MW of hydro power and biomass

CLICK HERE TO VIEW THE 2019/20 GIIA / EY GLOBAL ASSET DATABASE FACTSHEET

Speaking on the release of the GIIA / EY Global Asset Database CEO Lawrence Slade said the results showed the value of private investment in infrastructure.

“At a time when Government balance sheets are under enormous pressure, the private sector has the available capital, experience and innovative ideas to deliver the environmental and socially responsible infrastructure needed for future generations.”

GIIA’s global membership has also continued to increase in 2019/20 with the addition of members from across traditional markets as well as Japan and India.

 

GIIA is grateful to EY for their support in putting together this information.