Are ESG comparisons fair

What does sustainability mean in the context of infrastructure and why is it so important?

Most LPs view infrastructure as a long-term and low risk investment. That is what they are looking for from this asset class. But that can only be achieved if there is a long-term approach to the underlying risks.

In its broadest form, sustainability simply means taking a long-term view of the envi­ronmental, social and financial context in which your asset is operating. Although own­ing trophy assets has its attraction for some, investing in infrastructure isn’t about owning steel and concrete! Longevity and predicta­bility of outcomes is key and anything that undermines that longevity and predictability should be seen as a material risk.

Take ports, for example. Although it’s not an area where we invest, the investment rationale is typically predicated on an expansion in global trade, with local factors over­laid. But how much consideration do LPs give to the fact that ports – especially when including the emissions of the shipping traf­fic using their facilities – are some of the most polluting assets in the world? How much time is spent considering contingency plans for rising sea levels?

There is a real risk that either these as­sets are going to be worthless at some point or else you are going to have to pour a whole load more concrete to keep them above sea level. With such examples, long-term sustainability has to be called into question – which then begs broader questions around the level of growth in global trade, potential benefits of limiting the distances goods are transported, and so on.

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