Valuing Sustainability in Infrastructure Investments: Market Status, Barriers and Opportunities - A Landscape Analysis

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March 2019
World Wide Fund For Nature (WWF)

This report assesses the current landscape of environmental, social, and governance (ESG) integration in the infrastructure investment space. The assessment includes an overview of tools available to support investors and other actors in evaluating and quantifying ESG criteria and incorporating them into the infrastructure development and investment process. The report draws on insights gained from interviews, desk research, and a stakeholder workshop held in June 2018 to analyse current practices for integrating ESG criteria into investment decisions and to identify barriers to further integration of ESG in the infrastructure sector. Finally, the report identifies key opportunities to facilitate ESG integration among the infrastructure investment community, and to increase the adoption of the existing tools and standards.

The report focuses primarily on the needs of private investors, due to: 1) the growing role of private investors in infrastructure investment; 2) increased pressure on private investors to demonstrate sustainable or responsible investment practices in line with sustainability goals; and 3) the role of private investors as drivers of mainstreaming the inclusion of ESG considerations across all asset classes. In particular, the report focuses on private equity investors due to their unique opportunities to influence the sustainability of infrastructure through direct ownership and stewardship of assets. However, the report’s findings on the availability of ESG tools and opportunities to incorporate ESG into different stages of infrastructure development may also be pertinent to other private and public sector investors, procuring entities, and infrastructure owners or operators.

Given the range of ESG frameworks for other investment classes yet lack of cohesive guidance on how these apply to infrastructure, this report intends to offer infrastructure investors an overview of the benefits of ESG integration, to describe current practices for integrating ESG into infrastructure investment decisions, and to identify available tools and standards that support ESG integration. The report’s secondary purpose is to provide ESG tool developers with an understanding of the investment community’s remaining needs to enable further tool customization and to expand the market.

This report is complemented by a Guidance note on integrating ESG-factors into financial models for infrastructure investments.