Enhancing sustainable infrastructure is one of today’s great challenges. The purpose of Infrastructure is to provide a public service to society and thereby to improve life conditions for local communities. As such, it is strongly interlinked with both its environmental and societal immediate surroundings. The long-term consequences of non-sustainable infrastructure can be severe on many levels, environmentally, financially or reputational.
The opportunity, not to say the duty of infrastructure investors is hence, to ensure that new infrastructure assets will be built sustainably, resilient to external challenges and with a long-term view. Sustainable infrastructure should have at least a net neutral, at best, a net positive impact on the environment, economy and society. This means, over its entire lifetime sustainable infrastructure is required to remain equitable for the economy and society, viable for the environment and the economy as well as acceptable for society and the environment. B Capital is committed to invest only where these three components of sustainability are ensured.
Considering ESG is in the long-term financial interest of investors
Sustainability is often broken down into environmental (E), social (S) and governance (G) factors. ESG risks and opportunities can have a significant impact on the business case and the financial results of infrastructure assets if and when they materialise. Throughout the entire investment cycle - from development to construction to operations all the way through to the decommissioning phase - infrastructure assets face all kinds of ESG risks and may have all kinds of positive impacts. These will vary depending on asset type, sector, size, geographic location and stage in the life cycle. Some of them may originate outside the asset but impact its technical ability to operate (e.g. heavy storms or floods due to temperature risk, increased water scarcity) and/or its legal ability to operate or its profitability due to changing regulations, tariffs). Other issues may be caused by the asset itself and impact its surrounding environment and communities (e.g. water effluent, quality of life of the communities around it, labor conditions, etc.).
Early integration of ESG considerations is an important component of the assessment of investment opportunities, as it minimizes future risks and creates opportunities. In any case, the materiality, likelihood and potential monetary consequence of such risks and opportunities need to be assessed, and mitigated, if needed. To this end, B Capital has integrated a sustainability due diligence in its standard investment process and thoroughly ensures ongoing monitoring, reporting and improvement during operations. It is part of its investment culture.
B Capital strives towards always achieving one or several of the 17 UN sustainable development goals (SDGs) in everything it is doing. To this end and in this context, it engages in and promotes a variety of sustainability-oriented initiatives of the infrastructure industry. Amongst others B Capital:
- is a signatory of the UN PRI (Principles of Responsible Investment);
- is a member of GRESB, an investor-led initiative providing a framework to measure performance along ESG criteria based on self-reported data that is validated, scored and benchmarked amongst peers;
- developed an ESG due diligence tool (ESG DD Tool) for direct infrastructure investing with and for GRESB;
- was invited by GIZ to participate in an international “Solutions Lab – scalability of sustainable infrastructure” of 25 experts with a broad variety of backgrounds, which offers guidance to policy makes and the G20 talks;
- wrote an article for GIZ on “Sustainable Infrastructure – a Business Case”, (2018/2019).
- wrote an article for the WWF: “Guidance Note: Integrating ESG factors into financial models for infrastructure investments”, (2019);
- enabled the International Institute for Sustainable Development IISD, to undertake a pilot project, evaluating and integrating sustainability risks and opportunities in a systemic financial model by applying the IISD’s Sustainable Asset Valuation (SAVi) methodology to a German onshore wind farm (2018-2020).