Feedback Welcomed on New ESG Covenant Package

A group of Infrastructure debt investors including GIIA members Aviva Investors, IFM Investors, Macquarie Asset Management, and Allianz Global Investors along with three others, have been working on behalf of the sector to develop an Environmental, Social and Governance Covenant Package.  The initiative aims to:

(i) unify ESG data collection by providing a consistent set of requirements as “best practice” for borrowers when reporting to lenders in respect of ESG matters; and

(ii) facilitate lenders’ compliance with their increasing ESG disclosure obligations under applicable EU and/or UK law and regulations and, where relevant, lenders’ compliance with their own net zero targets and investor demand.

View the documents below:

The ESG Covenant Package
Final Form of Report

The ESG Covenant Package has been designed to be provided and considered as part of the term sheet negotiation stage between the relevant parties, in order to facilitate discussion on ESG reporting obligations under the finance documents.

To ensure that the ESG Covenant Package has the widest reach, market recognition and is available for adoption by any type of lender, it is intended that it will be shared and further developed with the Loan Market Association in early 2022.

Feedback is welcomed on the design and content of the ESG Covenant Package (including a short form version 1 report and long form version 2 report – the contents of and the differences between the two versions are explained in the guidance notes to the ESG Covenant Package).  Feedback can be provided by email to InfraDebtESGCovenants@avivainvestors.com and should be sent by 31 January 2022.

The initiative was discussed at GIIA’s ESG working group in October 2021 we are pleased to make it available for comment to our wider membership and stakeholder network.

REPORT | Decarbonisation of European Transport

GIIA were pleased to make a contribution to the Decarbonisation of European Transport Report from Advisory Member, DLA Piper. 

Click here to read Decarbonisation of European Transport

Key findings of the Report were:

• Decarbonisation high on the agenda: 79% of respondents say that decarbonisation is a primary driver of their organisation’s investment strategy.
• Capital allocation rises: 34% of corporates and 66% of investors expect to devote at least EUR1 billion to decarbonisation projects and technologies over the next 24 months, versus 20% of corporates and 48% of investors over the past 24 months.
• Investment increases: The majority of respondents across all subsectors anticipate significant increases
(between 50% and 200%) in their investment in decarbonisation over the next five years compared to the past five years.
• Ambitious plans: More than half of corporates (across all three subsectors) say that their organisation plans to cut net carbon emissions by at least 40% by 2030 compared with current levels.

Blog | UK’s Autumn Budget acknowledges the need for private investment in infrastructure

With UK Government finances stretched to record levels as a result of the pandemic, private capital will be vital to achieving the huge levels of investment required to meet long-term strategic ambitions, such as Net Zero and the Levelling-Up agenda. On the eve of COP26, GIIA Policy & Research Executive Estela Bibiloni Diaz analyses how these priorities have been reflected in the Autumn budget …

The budget and spending review announced on 27tOctober has targeted some key infrastructure areas. The Government has committed to investing £21bn on roads, £35bn on railways, and £6.9bn on transport infrastructure in cities outside London as part of the Levelling Up agenda. An additional £1.4bn will go into the establishment of the Global Britain Investment Fund, which will support the development of emerging technology, particularly in the electric vehicle sector, and thus crowd in private investment. An additional £1.7bn will go towards a new UK nuclear plant (widely expected to be Sizewell C).

Additionally, the UK Infrastructure Bank, with its role as a catalyzer of private investment, is off to a great start, having made the first commitment to the development of offshore wind infrastructure in the Tees Valley recently.

However, during the Budget announcement, Chancellor Rishi Sunak also acknowledged that ‘government action won’t be enough to create a stronger economy’ on its own.

As COP26 approaches, this statement builds on the recently released Net-Zero Strategy, which estimates that £90bn in additional private investment will be needed by 2030 if we are to achieve climate change targets. GIIA members are strongly committed to the achievement of the 2050 Net-Zero target and, over the last five years, have invested more than £25bn to new green infrastructure projects to meet the energy transition, on top of £63bn of investments already made.

In all, the Autumn Budget brings us one step closer to our goals in the allocation of public funding, and gives investors a better perspective on the plans of the Government.

What is now needed is a clear statement of intent to investors that the model of economic regulation in the UK will move away from a short-term focus on bill reduction and towards prioritising the investment that is required to meet existing and future challenges, while achieving a fair balance between cost and return.

Investors, therefore, look forward to the publication of the White Paper on Levelling-Up, the Regulation Policy Paper, which will set up the UK’s economic regulation environment for coming years, and the response of the Government to the Better Regulation Framework review.

These announcements, alongside the already published Regulated Asset Base (RAB) model for nuclear, will set out the first steps towards achieving the much-needed clarity that will help unlock the vast sums of long-term patient capital available from infrastructure investors.

GIIA looks forward to continuing working with the UK Government in achieving that regulatory stability and bringing into the conversation the voice of private infrastructure investors, who are keen to play their part in the transition to net zero by 2050.

Latest Infrastructure Pulse Survey shows increasingly positive outlook in North America and Europe

GIIA is pleased to launch the results of the latest Infrastructure Pulse Survey for both the Americas and European markets, produced in partnership with Alvarez & Marsal.

Click here to read the Infrastructure Pulse Survey

The Q4 2021 Pulse Survey provides a track on market sentiment among infrastructure investors and insights on emerging trends and barriers to investment. Key findings include:

  • More funds are looking to deploy larger amounts of capital and realise one or more assets than at any time on the last 12 months, reinforcing the amount of deal activity in the market.
  • An increasingly positive outlook for European markets
  • Rising optimism around the US, Canada and other Americas
  • Negative sentiment around regulated utilities with unattractive regulatory regimes being seen as the highest barrier for investment in Europe
  • Europe seen as more negative than Americas across all of the ‘key barriers’ to investment
  • Communications Infrastructure remains the hottest sector

2021 Global Infrastructure Index – Survey results

A new global study carried out in 28 countries by Ipsos MORI, in collaboration with the Global Infrastructure Investor Association, finds that the public places greater priority on addressing impacts on the environment over the economy when making decisions about how to improve infrastructure in their country.

Click here to view the 2021 Global Infrastructure Index results

In the lead-up to COP26, an average of 51% of citizens across the 28 countries felt that it is right to prioritise the impact on the environment, nearly double the 26% who put greater weight on economic impacts.

Furthermore, the environment was also ranked as the most important factor among seven criteria when planning for the future; an average of 26% of people ranked this first, slightly ahead of the quality of infrastructure, chosen by 23%. Ownership and disruption were the least likely to be chosen as the top priority, selected by just 9% and 7% respectively, with ownership most commonly chosen as the lowest ranked factor (ranked as seventh out of seven by 24%).

Lawrence Slade, CEO Global Infrastructure Investor Association, said:

“As world leaders come together in Glasgow to consider next steps in the battle to address climate change, this survey should embolden decision makers to put the environment at the heart of their infrastructure investment plans. Global citizens are far from satisfied with their infrastructure today and want to see improvements, with many placing climate-related infrastructure such as water supply, renewable energy and flood defences at the top of their list.”

The Global Infrastructure Index survey, which has been running annually since 2016, shows wide variations in satisfaction with infrastructure. For example:

  • 77% are satisfied with infrastructure in China while only 18% are positive in Italy, compared with the global country average of 39%.
  • Across the G8 nations 37% are satisfied, higher than the 35% in Great Britain and 27% in the U.S.
  • In Europe, infrastructure in the Netherlands (74%), France (53%) and Germany (51%) is rated much more positively than in Spain (25%), Hungary (20%) and Italy (18%) at the other end of the scale.

Globally in 2021, people in South Africa (79%) and Brazil (75%) are most likely to agree that their country is “not doing enough to meet our infrastructure needs” but this is a majority view in all but five of the 28 countries. Agreement is weakest in South Korea (28%) and Japan (29%). Great Britain (64%) and the U.S. (61%) rank higher than the G8 average of 55%.

On average, three-quarters, 75%, across the 28 countries agreed that investing in infrastructure will create new jobs and boost the economy. South Africa leads – 90% agree – while the lowest level of agreement was in Japan with 51%.

Water supply and sewerage were identified as priorities for investment with 42% selecting it from a list of 13 possibilities, followed by solar energy infrastructure (39%) and flood defences (36%). Airports were seen as a priority for investment by much smaller proportions of people with just 11% selecting this. The same proportion chose nuclear infrastructure to generate energy (it was excluded as an option in the survey in nine countries).

In Great Britain, four of the top five priorities are climate-related; flood defences (selected by 44%), solar energy (38%), wind energy (38%), and EV charging (37%) head the list alongside rail infrastructure (37%).  In the U.S., the top five priorities are water supply and sewerage (48%), the local road network (43%), motorway/major road network (42%), solar (37%) and wind energy (31%).

Globally, more people continue to prioritize improvements to social infrastructure (42%) such as schools, hospital buildings and housing in preference to economic infrastructure (35%) such as road, rail and air networks, utilities such as energy and water, and broadband and other communications. However, the gap has narrowed since last year – when the pandemic had increased attention to hospitals and schools – from 16 percentage points then (48% versus 32%), to 7 points this year.

There continues to be a preference for maintaining and repairing existing infrastructure (chosen by 55%) as a priority rather than spending on new infrastructure projects (20%), an identical pattern to that found in 2019.

In both the U.S. and Britain, 61% support the role of the private sector in investing in infrastructure with only 6% against this in the U.S. and 9% in Britain; they welcome the prospect of private investment if it means their country gets the infrastructure they need.

Slade continued: “Our survey shows that people are much less concerned about whether infrastructure improvements come from private or public sources and are much more focused on the quality and environmental considerations.  At a time when many countries are looking to boost their economies and recover from the effects of the pandemic, governments should be focused on how to unlock private sector expertise to help deliver their future infrastructure needs.”

Spotlight on the U.S.

  • In the States, 27% are satisfied with their country’s infrastructure, compared to 37% who are dissatisfied. The Latin America region is the only one among six where dissatisfaction is higher.
  • 70% agree that investing in infrastructure will create new jobs and boost the economy, yet 61% believe that ‘not enough is being done’ to meet their country’s infrastructure needs.
  • Americans are overwhelmingly supportive (61%) of private investment in infrastructure if it means the country gets what’s needed with only 6% disagreeing.
  • Unlike most other countries, Americans would give higher priority to economic infrastructure (47%) over social infrastructure (27%). This compares to the global country average of 35% and 42% respectively.
  • In terms of specific infrastructure sectors, Americans would prioritize investment in water supply and sewerage (48%), the local road network (43%), major road networks (42%), solar (37%) and wind energy (31%).

Spotlight on Great Britain

  • In Britain, 35% are satisfied with their country’s infrastructure, compared to 26% who are dissatisfied.
  • 79% agree that investing in infrastructure will create new jobs and boost the economy, yet 64% believe that ‘not enough is being done’ to meet infrastructure needs.
  • Britons are overwhelmingly supportive (61%) of private investment in infrastructure if it means the country gets what’s needed with only 9% disagreeing.
  • In terms of specific infrastructure sectors, four of the top five priorities for investment are climate-related with flood defences (44%), solar energy (38%), wind energy (38%), and EV charging (37%) heading the list along with rail infrastructure (37%).
  • When making decisions about how to invest in infrastructure, 51% of Britons would give higher priority to considering the environmental impacts compared to 21% who would prioritize economic impacts.

Catalysing Hydrogen Investment – New Report

GIIA, in collaboration with global engineering and consultancy firm Arup, have launched a new report exploring how to enable greater investment in the hydrogen sector.

The report, based on a survey of GIIA investor members, found that 90% of participants believe hydrogen will play a role in the future energy system and 70% believe it will be important for some applications by 2030, and yet only 16% of those surveyed have already concluded deals or are currently engaged in hydrogen-related infrastructure transactions.

It goes on to explore the discrepancy between the role investors think hydrogen will play and the current landscape to identify what the barriers to investment are for this technology, looking at production, adoption in end-use applications, and the transport and storage of hydrogen.

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

“GIIA members currently own and manage nearly US$1tn of infrastructure assets on six continents, $4bn of which is hydrogen infrastructure. There has been impressive growth seen in investment in renewables, and we estimate that at any given point in time there is at least US$200bn of new capital ready to invest in infrastructure. This is a positive indicator of investor appetite to kickstart a global effort to reach our climate goals. To meet society’s growing future energy needs whilst decarbonising the global economy, we need to combine government funds with private capital so we can achieve much, much more, and faster.”

Filippo Gaddo, Head of Economics, Arup, said:

“The findings show that investors are keen and poised to support the decarbonisation of the energy sector and they believe that hydrogen will have a significant role to play. Whilst our research has identified a number of barriers to investment, it also shows that there are many enablers that governments and regulators can consider which will, if implemented appropriately for their unique circumstances, enable private sector investment in hydrogen infrastructure.”

Click here to view the full report – 

GIIA Net Zero Conference

GIIA’s Net Zero Conference, held on September 29th, brought together a range of expert voices including investors, policy makers and leading thinkers in the sector to look at the challenges and opportunities facing infrastructure investors.

We were delighted to welcome more than 150 guests, both in person and joining virtually, for this event. A recording of the event will be available for members who were unable to attend, so please do check our website and social media accounts for this in coming days.

Special thanks to our Major Sponsor and Host, Ashurst and to Event Partners Arup and KPMG.

And to all of our panelists and special guests

 Panel 1: Moderated by KPMG, the discussion will look ahead to COP26 and the major issues facing the infrastructure investor community.
·   Simon Virley, Vice Chair & Head of Energy and Natural Resources, KPMG
·   Bridget Beals, Partner & Co-Head of Climate Risk and Decarbonisation Strategy, KPMG
·   Valeria Rosati, Senior Partner, Vantage Infrastructure
·   Nick Mabey, Chief Executive, E3G
Panel 2: Moderated by Ashurst, this expert panel will explore the nature and scale of investment needed to achieve Net Zero, the obstacles to be overcome, and the role and opportunities for private investors.
·   Michael Burns, Partner & Global Co-Head of Energy, Ashurst
·   Naomi Horton, Partner, Ashurst
·   Ed Clarke, Co-Founder & Managing Director, Infracapital
·   Mark Caines, Partner, Flint Global
Fireside Chat with Emma Howard Boyd, CBE, Chair, UK Environment Agency & Interim Chair, Green Finance Institute hosted by Gaby Jones, Partner, Ashurst.
Panel 3: Moderated by Arup, this session will take a deeper dive into the future of Hydrogen and discuss the findings of a new report produced by Arup and GIIA.
·   Filippo Gaddo, Director, Energy Investor Advisory Team, Arup
·   Nick Ash, Associate Director, Arup
·   Jaroslava Korpanec, Managing Director, Allianz Capital Partners
·   Chris Train, UK Green Gas Champion, Gas Goes Green