Making investments in infrastructure debt impactful
Apr 11, 2023
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Chief Market Strategist, Investment Director for Infrastructure Debt, and ESG Specialist discuss sustainable investing in infrastructure debt, emphasizing challenges in aligning sustainability objectives with risk returns, navigating regulatory changes, and exploring innovations in ESG integration for infrastructure investments. They highlight the advantages of infrastructure debt as an asset class and recommend engaging with BNP Parivah Asset Management for investment perspectives.
Investing in infrastructure debt focuses on sustainability beyond obvious assets like solar plants, with a strategy encompassing transitioning utilities and hydrogen.
Regulatory requirements like SFDR and EU taxonomy necessitate alignment with sustainable investment criteria, leading to enhanced reporting standards and impact assessments.
Deep dives
Sustainability in Infrastructure Debt
Investing in infrastructure debt offers resilience through economic cycles, especially with inflation-linked revenues. The strategy focuses on less obvious sustainable assets like transitioning utilities, hydrogen, and carbon capture. Origination capabilities play a key role in identifying these assets, requiring strong sustainability expertise and partnerships with organizations like BNP Commercial Investment Bank.
Regulatory Challenges and Reporting
Asset managers face evolving regulatory requirements like SFDR and EU taxonomy, necessitating alignment with sustainable investment criteria. Integration of ESG assessments and independent expert evaluations are fundamental practices undertaken before SFDR regulations were in place. Enhanced reporting standards including principal adverse impacts and impact reports cater to rising investor expectations for reliable sustainability data.
Future of ESG Integration and Impact Investing
Infrastructure investments present significant potential for impacting the transition to a low carbon economy by providing essential services like clean energy production and storage solutions. BNP Paribas Asset Management adheres to impact principles outlined by the IFC's OPIM framework. Emerging trends in infrastructure investing include green hydrogen, carbon capture, and discussions on non-decarbonized projects and natural capital investments, indicating a dynamic future in ESG and sustainable investing.
Making investments in infrastructure debt impactful from a sustainability angle requires a perspective that goes beyond an attractive risk-return ratio and obvious green infrastructure assets such as solar plants. On this Talking Heads podcast, Daniel Morris, Chief Market Strategist, Investment Director for Infrastructure Debt Stephanie Passet and ESG Specialist and Lead on Private Assets Maxence Foucault discuss the ins and outs of sustainable investing in infrastructure debt[1] in an environment where definitions are still being finetuned and the regulatory framework continues to evolve.