A group of global institutional infrastructure investors representing US$1.5 trillion in capital funds has launched a global sustainability benchmark for infrastructure assets.
The investors have partnered with Global Real Estate Sustainability Benchmark to establish the GRESB Infrastructure framework, with the aim of encouraging more capital to flow into sustainable infrastructure and raise the standards of existing projects worldwide.
Australia’s property sector has been one of the leaders in the GRESB property sector assessments and rankings.
- See our story Aussies top the charts in GRESB again
Here the Infrastructure Sustainability Council of Australia has developed a tool to rate the sustainability performance of infrastructure assets.
ISCA chairman David Singleton told The Fifth Estate the organisation was still working out what the new GRESB rankings would mean for Australian projects and assets.
“There is quite a bit of activity in the international space, where things are moving very quickly,” Mr Singleton said.
He believes the launch of the new ratings framework is related to the acquisition of GRESB by the US Green Building Council in October last year.
One of the differences between projects that have gained ISCA ratings and the information relied on for the current GRESB ratings in the property sector, he said, was that the property assessment was “more about how asset managers are doing their job”.
“In property [asset managers] can use a rating like Green Star to show they are doing a great job.”
The current IS tools provide a similar assessment of whether an asset is well designed and constructed in terms of sustainability, and a new tool for sustainability in asset operation is currently being piloted, he said.
“The IS tool would set Australian infrastructure assets up very well with regard to a global infrastructure rating survey such as GRESB.”
However, Mr Singleton said the details of the actual survey that would be used had not been finalised, and so “no one really knows how their assets will perform”.
“We would however be confident that projects we have rated highly will do well.”
GRESB chief operating officer Chris Pyke said that with public sector financial resources under stress in many parts of the world, there was a clear need for innovative private-sector financing strategies.
“A significant number of institutional investors are beginning to act on this global opportunity. For example, US pension giant CalPERS and Australian-based QIC have recently announced their intention to increase investment in infrastructure,” he said.
“Increasing interest in infrastructure investment coincides with increasing recognition of the relevance of environmental, social, and governance information in managing investment risk and return. This has translated into grounding demand for ESG information across multiple investment classes… For infrastructure investments such information is particularly relevant, as capital commitments can span decades – understanding long-term risk is thus critical.”
GRESB said the new benchmark would provide investors with an industry-wide assessment and process for evaluating the sustainability performance of assets, and a framework for collecting and comparing key environmental, social and governance indicators, and related performance metrics. This data in turn will also assist funds to complete their own ESG reporting obligations.
The assessment categories currently under development include management, management systems, policy and disclosure, climate change risk and resiliency, using natural resources, waste and pollution, land use and biodiversity, and stakeholder engagement.
GRESB is inviting infrastructure managers, operators, companies, consultants and stakeholders to join formal working groups to provide feedback on the assessment, and will also be holding a formal annual consultation period to obtain feedback from stakeholders and participants.
Investors involved in the GRESB Infrastructure launch include AIMCo, APG, ATP, Aviva Investors, CalPERS, Mirova, Ontario Teachers’ Pension Plan and PGGM.
CalPERS – the US’s largest public pension fund (which just announced a divestment from thermal coal) – said it was looking forward to work with GRESB to gain insight into current and prospective infrastructure assets.
“GRESB has an established and global track record in assessing and evaluating social and environmental factors, which will shed more light on sustainability considerations for investors to understand and manage,” CalPERS chief executive Anne Stausboll said.
“Utilising this platform gives CalPERS a process for implementing our investment beliefs, enabling us to better understand and navigate the multi-faceted risks and opportunities of our portfolio.”
Mr Singleton said in the Australian context, there was no hard evidence yet that infrastructure sustainability ratings were helpful in attracting and retaining private sector investment.
“There are glimmers of that,” he said. “That’s our end goal, but it’s a much more elusive goal than in buildings. The connectivity between the sustainability of an asset and the uses users get from it is [for some assets] a lot less obvious.”
There were exceptions, he said, such as the Gold Coast Light Rail and North West Rail PPP projects, which attracted significant private investment from the Plenary Group.
Mr Singleton said GRESB ratings for infrastructure could also assist with the development of an “intellectual argument” for why individuals should be able to nominate for their superannuation to be invested in local projects that are meaningful to them. This is a discussion he said was underway within the Infrastructure Forum of the Academy of Science and Engineering, where he is chairman.
“People are aware of the credentials of GRESB in the property space,” he said.
He said ISCA becoming involved with the initiative could in turn make it more believable as “something to be relied on” for Australian investors.
The first assessments under the GRESB Infrastructure framework are expected to be announced in the first quarter of 2016.