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IIGCC expands net zero investment framework to include infrastructure

By Madeleine Saghir

The Institutional Investors Group on Climate Change aims to attract impact investors to the infrastructure sector.

The Institutional Investors Group on Climate Change has published a proposal on how to manage and align infrastructure portfolios with the goal of achieving global net zero emissions by 2050 or sooner. 

The IIGCC proposes that infrastructure be added to the other five asset classes that are part of the net zero investment framework of the Paris Aligned Investment Initiative, which the IIGCC created in 2019 to support investors in aligning their activities with the Paris Agreement goals. 

Listed equity, corporate fixed income, sovereign bonds, real estate and private equity are the asset classes already included in the framework, which is used by asset managers and owners that are PAII signatories.

“Infrastructure has a fundamental and unique role to play in driving the transition of the global economy to net zero thanks to the variety of real-world services it provides, including transport, energy and utilities, the long-term nature of assets and the opportunity to invest in climate solutions,” said IIGCC chief executive Stephanie Pfeifer.

The IIGCC guidance covers a range of issues that are specific to infrastructure assets and relate to their physical nature and direct real-world impact, the breadth of investors and of investment types and their long-life cycle emissions.

Investor opportunities

At Foresight Group, an alternative investor that focuses on sustainability, partner Nick Scullion agreed it was necessary to incorporate more asset classes into net zero analysis, and strategies to decarbonise the global economy.

He believes the expansion of the framework will open up this sector to more environmental and social impact investors, increasing investors’ investable universe.

Currently, the availability of transparent data and clear pathways to net zero is a key hurdle. However, Scullion said the inclusion of more asset classes in the IIGCC’s net zero framework would focus research into these sectors. He noted the expansion would also provide investors with clear metrics, targets and benchmarks against which a transition to net zero could be tracked, which should reduce the risk of greenwashing.

Mark Hempstead, managing director and Emea head of alternative investments at JPMorgan Private Bank, said that as opportunities increase across a broader subset of asset classes, investors would have more choice and more opportunity to consider, and potentially implement, these strategies across their portfolio.

“We are seeing this real-time with investment opportunities across various different focus areas within energy transition,” said Hempstead. “We see a lot in the area of private equity, but there are opportunities as well in public markets, in credit [and] in infrastructure. The breadth of opportunity continues to increase, and that is what is most exciting.”

The proposed infrastructure guidance is open for public consultation until 8 July 2022, with the final part expected to be published in the third quarter of 2022. 

 



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