There is a lot more to sustainability than simply owning or
investing in a wind farm. Simon Whistler,
UN Principles for Responsible Investment
emissions by 2030. It is important to know how you get there. Our role as an asset manager is to explain why some invest- ments contribute to reaching such goals. This brings numer- ous investment opportunities. In doing so, we have to de-risk. Which brings us, among other things, to the technological and regulatory risks mitigation debate. Even more so as there is a technological shift involved in the energy transition. I agree that there are many merchant plant investment oppor- tunities now, which does not mean there are no feed-in tariff regulated assets. Ultimately, we worked with industrial players to get comforta- ble with the risks, and how to mitigate them, to bring safe assets within the mandates granted by our investors. Whistler: That’s a great point about the way assets can be trans- formed. We are having more conversations with investors explicitly looking at decarbonising their assets if they can, how and by what year? Ultimately, it comes down to if it is going to be financially viable.
It is interesting because this is not just about investing, it is about ownership. How is the UN PRI working with asset owners to improve the impact of these assets? Whistler: A lot of it is focused on how investors engage with their assets. Ultimately, it’s what targets they put in place to manage those assets, such as reducing carbon emissions. Then
16 December – January 2023 portfolio institutional roundtable: Infrastructure
there is how do you engage on the social side, thinking about human rights when looking at the renewable supply chain. A lot of our focus is on engagement, understanding where you as an investor have leverage over assets and portfolio compa- nies, even where you might be in a minority position or how you work with your fellow investors on a particular deal. That is an important part of what we do. Vanstone: Railpen is a £37bn scheme and invests around £2bn to £3bn in infrastructure. Scarcity of assets in the renewable space has been a barrier for quite a while. Scale is another. We look at individual tickets of around £100m but some of the larger offshore wind and energy from waste assets are worth billions, so we need to partner with others. We have a preference not to have leverage. That’s another chal- lenge on scale, as it’s commonplace to have leverage in a num- ber of these assets now.
The other point is governance. If we have a small stake in an asset, from a governance perspective, our rights are limited. The alternative for us investing across the capital structure is to go in as part of the debt rather than being a minority equity investor that has little in the way of rights. Foucoin: PIC has a similar appetite for large ticket sizes of around £75m to £150m when we invest in infrastructure debt. Some constraints come from the supply side, and where to find investable transactions.
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