Environmental, social and corporate governance (ESG) considerations are critical to infrastructure investments, but there is a danger that investors become “obsessed with frameworks”, according to Nick Grant, head of asset management for infrastructure investments at First State Investments.
Presenting on the topic ESG and responsible infrastructure investments at the IPE Real Assets & Infrastructure Conference in Brussels this week, Grant said investors agree ESG is a very important hot topic and is “core to what we do”.
But, he said, there was a danger in “chasing the score” through benchmarks so that the industry “loses sight with what ESG is trying to do”.
He said investors should focus on a smaller number of practical policies that can be clearly followed by staff working on the frontline of infrastructure assets rather than “elaborate frameworks that few people understand”.
He said: “Unless you engage with the frontline it would be difficult to deliver ESG effectively.”
Grant’s presentation was followed by a panel discussion, moderated by Rick Walters, infrastructure director at real assets ESG benchmark provider GRESB.
Panel members were David Bentley, a partner at ATLAS Infrastructure; Matthew Jordan-Tank, a director at Sustainable Infrastructure Policy and Project Preparation, European Bank for Reconstruction and Development; and Olivier Rousseau, an executive director at Fonds de réserve pour les retraites (FRR).
Bentley said ATLAS, which was established in 2017, ensures all financial metrics, ESG and governance frameworks are incorporated into its strategies from the start.
For Jordan-Tank, “ESG is core to our mandate, not just a framework”. He said ESG is important, not just a mantra but how the projects are scored, adding that it only engages with companies that work within the core of ESG.
Rousseau said the first thing FRR considers is what type of projects the money will be invested in. “The project must be intrinsically ‘E’. We look at who is applying the other two letters [SG] and do due diligence.”
Asked the most frustrating thing about ESG, Bentley said the fact that “we are still talking about it” suggests investors are still not doing it.
According to Grant, the most frustrating thing about ESG is the “disconnect” between what is said and what should be done.
There is no sustainability in infrastructure if ESG is not done, “it should be a normal course of action”, Jordan-Tank said.
