Infrastructure is a unique asset class with a distinct set of financial risks. Infrastructure assets range from hospitals to communications networks and energy generation and distribution. They often involve long-term outlooks, large-scale developments, are project-based rather than company-focused, and have a changing risk profile depending on the stage of their development. These investments often require considerable fundraising prior to planning and construction and have potentially significant positive or negative impact on the environment and society as well as being impacted by environmental, social and governance (ESG) issues.
There are many areas in which investors can develop a responsible investment approach with the support of the PRI and other signatories. Aside from simply mitigating the downside risks from ESG issues, investors may wish to:
- Develop RFP processes that include clauses relating to specific ESG considerations
- Create a more robust due diligence process through the integration of ESG issues
- Train internal stakeholders on long term ESG trends
- Increase the potential value of an asset prior to exit through enhanced ESG management
About the work stream
Formally established in August 2011, the work stream aims to support signatories to develop responsible investment policies and processes in this asset class. While there is a strong business case for integrating ESG considerations into portfolio selection, due diligence, monitoring and management of infrastructure assets; further work is needed to disseminate these ideas among internal and external stakeholders. These ideas must also be driven right through the value chain from asset owner to developer. The work stream aims to assist investors in this process and by making best practice resources available to them in their specific fields.
There are two active working groups within this work stream. The Case Studies Working Group has been active since early-2011 and is currently producing a second compendium of case studies. While the first edition concentrated on the implementation of responsible investment processes, the second will contain concrete examples of how robust due diligence and monitoring on ESG issues can lead to better investment returns and vice-versa.
The Best Practice Working Group has three objectives: to map out different types of infrastructure asset stakeholder and best practice resources relating to the infrastructure investment value chain; to reach out to signatories and non-signatories to communicate ideas on emerging best practice; and to develop guidance documents in specific areas where responsible investment practices are lacking.
Resources listed may require PRI signatory extranet access.
General work stream documents
- Infrastructure Work Stream Discussion Paper (August 2011)
- ESG: finding alpha in infrastructure assets (November 2011)
- Incorporating ESG issues in due diligence (June 2011)
Previous PRI in Person sessions
- The road ahead: why should you consider ESG issues while making infrastructure investments? (September 2011)
- Responsible Investment in Infrastructure (October 2010)
- Responsible investment in infrastructure: A compendium of case studies (also available in French) (March 2012)
Online discussion group
- The PRI has established a LinkedIn discussion group for investors interested in infrastructure and responsible investment. This is an informal forum where members can exchange information about specific areas of infrastructure investment and start new discussions on topics that interest them. The group is private so please contact Archie Beeching to receive an invitation to join.
WORK STREAM MANAGER