Investors called to drive reduction in infrastructure emissions
Investors must work harder, both individually and together, to advance portfolio-level net-zero targets in the infrastructure sector, according to two leading voices in the sector.
Marie Lam-Frendo, who leads the G20’s Global Infrastructure Hub, a not-for-profit organisation to help deliver sustainable infrastructure, said that too few infrastructure assets currently have zero-emissions targets — especially outside of renewables — and that investors have a critical role to play to rectify this.
“Certainly, investors are not passive actors,” she said, adding that asset owners such as pension funds, insurance companies, and sovereign funds should fully commit to redirecting their capital toward renewable energy and sustainable projects, and to providing transparent data on the financial and environmental performance of assets.
“It’s impossible to overstate the impact these two actions would have in demonstrating that sustainable infrastructure is not only impactful but also financially viable, and in further motivating the infrastructure market to reconsider strategies and transition toward more sustainable practices,” she said.
In Asia and beyond, the growing momentum for setting zero-emission targets in the renewable sector — where the practice has been increasing since 2019 — is not matched in other sectors, where progress to commit to zero-emissions targets is still at an early stage, according to Frendo.
World Bank analysis of greenfield projects in emerging markets estimates a pipeline of $1.2 trillion in “investable” infrastructure projects across sustainable infrastructure, well short of the $2.6 trillion dollars required annually through 2030 to meet the UN’s Sustainable Development Goals and stay on path to a net-zero society by 2050.
FALLING BEHIND
Lam-Frendo pointed to data from the Global Real Estate Sustainability Board (GRESB), showing that 39% of renewable assets now have zero-emissions targets. By contrast, only 9% of transport assets, 7% of social infrastructure assets, and 7% of water infrastructure assets currently have zero-emissions targets.
Joss Blamire, director of infrastructure at GRESB, agreed that tangible commitments from investors were required as soon as possible, given the long lead time required to adopt emissions-reducing measures in the sector.
“Transitioning to net-zero emission technologies often requires substantial upfront investments in energy infrastructure, research and development, and technology deployment. Our main message is that more investment is needed to meet overall sustainability goals for all asset classes, whether directed towards new investments or existing developments,” he said.
But Blamire noted that net-zero targets could be more widespread than GRESB data suggest, since the existing assessment section on greenhouse gas targets focuses on reported emissions rather than net-zero targets. Changes to GRESB’s assessment methodology this year mean participants will be asked for the first time whether they have set net-zero targets for the assets they own, which Blamire hopes will give a more detailed picture of the extent of net-zero targets across infrastructure sectors.
“We will have a clearer picture on performance in terms of setting net-zero targets when results are released in October,” he said.
The infrastructure industry is the world’s leading emitter of greenhouse gases, responsible for more than 79% of global greenhouse gases and consuming 60% of the world’s materials, according to the GIH.
STAGNANT ALLOCATIONS
Lam-Frendo said that private investment in infrastructure had been stagnant for nearly a decade, and estimated that the global sector’s investment gap has grown to $3 trillion annually. She noted that decarbonisation frameworks were vital to facilitate capital flow into the sector’s assets, even those that haven’t been decarbonized or will be difficult to decarbonise.
“Performance against targets is only part of the picture — not least because there is no guarantee that assets considered ‘green’ today will remain so in future,” she added.
“As well as demonstrating performance on climate targets, we need to align infrastructure to climate transition pathways that evolve to address climate concerns over the decades to come, and we need to continue addressing the many other blockers to mobilising private capital,” she said.