By Fiona Reynolds (FT Adviser)
To avoid precarious climate change impacts, global infrastructure investments approximating $90trn are needed, according to a recent report by the Global Commission on the Economy and Climate. Increased infrastructure investments are also being considered by the G20 and OECD, and if done properly can foster economic growth through increased productivity and efficiency in addition to addressing economic challenges. A recent study by Preqin has shown that the majority of investors in infrastructure feel that this type of investment has met or exceeded their expectations (89% of responses) and that they are currently below their target allocation to infrastructure (63%). Regarding global opportunities, China has demonstrated strong structural growth through its efforts to reduce air pollution by encouraging people to use gas as opposed to alternative fuel types, and Chinese gas distribution firms have been experiencing returns of about 20 percent. Meanwhile, Japan has seen port volume expansion as well as robust rail volumes, and OECD countries maintain the most favourable regulatory and legislative frameworks for public infrastructure procurement. In light of current investment needs, Principles for Responsible Investment has launched a new infrastructure workstream that will involve a series of initiatives to support and guide infrastructure investors on implementing robust, responsible investment strategies. This workstream will also ensure the consideration of environmental, social and governance (ESG) factors in investment decision-making, to increase the value and future revenue of investments.