ESG Investing discussion
Moderated by Matthew Brundle, EVORA Global with:
Georgia Hall, Maple-Brown Abbott
Guy MacKenzie, Blackrock
Infrastructure Allocations discussion
Moderated by Anish Butani, bfinance, with:
David Bentley, ATLAS Infrastructure
Thomas Symons, WTW
Listed Infrastructure: Real-world impact and sustainable goals - summary of panel discussions
Investors are becoming increasingly aware of the real-world impact of their choices and infrastructure is playing a growing role in delivering the sustainability objectives they are now pursuing more vigorously, an audience at the GLIO Investing in Infrastructure Seminar heard in January.
“We have seen an increase in exposure to real assets, within that listed real assets and within that listed infrastructure,” Tom Symons of WTW told a panel on the Importance of Infrastructure Allocation, moderated by Anish Butani of bfinance.
Investors are conscious of the effects that capital allocation can have on local communities and on users of infrastructure investments. “As sustainability and ESG considerations very much come to the fore of client and investor considerations and discussions, infrastructure in its broadest sense, and listed infrastructure in its most liquid sense, plays a really important part to tangibly impact and deliver on sustainability objectives of all investors,” Symons said.
As more investors move into the infrastructure space, it is becoming more difficult to find “good quality assets at a good price,” said fellow panel member David Bentley of ATLAS Infrastructure, and some more sophisticated investors were using the listed infrastructure market “quite opportunistically” to take advantage of irrational market movements.
But while listed infrastructure may have seemed “unsexy” while it lagged booming tech stocks a couple of years ago, Bentley said listed infrastructure had solid attractions.
“We are sowing the seed,” he said. “The great thing about listed infrastructure over the past 12 months is that it has done what it was supposed to do. Cash flows have held up really well.”
While Bentley highlighted that the listed infrastructure market can exhibit short-term volatility, over the longer-term listed mirrored unlisted infrastructure performance. Symons added: “Over the long term, we value that stable NAV (net asset value) growth and income generation as long-term investors.”
With disclosure on sustainability becoming central to investors’ decisions, “there is a whole range of positive reasons why holding a listed infrastructure allocation now makes sense for the future, specifically from a sustainability standpoint,” he said.
However, it is important to scrutinise how companies execute the targets they set, said Georgia Hall of Maple-Brown Abbott.
“Greenwashing is a risk to us as investors and it is also not good in terms of sustainability outcomes,” she told a panel on ESG in Infrastructure Investing.
“I won’t pretend it’s all been perfect, but we have certainly made positive steps forward,” she said.
Much of this greater emphasis on ESG had come from clients, said Guy MacKenzie of BlackRock.
“Clients are more and more asking for sustainable solutions,” he said. “It becomes part of your fiduciary responsibility, to not just be looking for returns but to be adhering to an entire investment objective and strategy, which in many cases will also include sustainability.”
“It’s been a big transformation, I would say, in a very short period of time,” MacKenzie added.
Looking to the future, he noted that the listed markets are not always rational in the short term and trade on sentiment, with some significant sentiment swings last year. “I hope to see further sentiment swings going forward because that’s precisely what creates alpha opportunities for active managers.”
But he added, “Over a longer-term view that sustainable, resilient cash flow profile is what is really going to come through.”
Hall also urged a longer view, noting that ESG performance indices are point-in-time ratings, or pieces of data. “We need to think a little bit more long-term about the role of listed infrastructure,” she said, and investment decisions should not be taken without considering “what the next few years hold.”
And what, asked moderator Matthew Brundle of EVORA Global, were the panel members’ top tips for successful navigation of their ESG journey?
Mackenzie stressed the need for “a clear set of principles, and sticking to those principles.”
For Hall it was vital never to take a statement, commitment or target at face value: “Really look under the hood.”