Positive signs for infrastructure on all ESG measures but more progress is still needed.
Infrastructure assets are improving their ESG (environmental, social, and governance) scores and becoming more transparent when it comes to disclosing the impact infrastructure has on the environment, according to a new report from the Global Infrastructure Hub.
In partnership with GRESB, the global ESG benchmark for real estate and infrastructure, the Global Infrastructure Hub has published a supplement to its latest Infrastructure Monitor report which highlights the ESG factors in infrastructure.
The supplementary report, Environmental, social, and governance (ESG) factors in infrastructure, reveals that in 2022, infrastructure assets improved their ESG scores in all three pillars of ESG and were the most transparent in ESG disclosure among the alternative asset classes. While the improvements are encouraging, they do not necessarily lead to improved sustainability outcomes, the report says.
Key findings outlined in the supplement are that infrastructure assets are getting better at setting up ESG policies, plans, systems and disclosure, which indicates a willingness to improve the sustainability outcomes of infrastructure. Although more infrastructure assets are setting GHG emission targets, still less than half have such targets and very few have a zero target. The supplementary report reveals that in 2022, very few infrastructure assets had short-term zero targets and met them.
In 2022, the ESG scores of infrastructure assets improved across all three pillars of ESG (environmental, social, and governance). On average, assets score better in the environmental and social pillars, while scores in the governance pillar are lagging. This is primarily due to the certification aspect of governance, which assesses the asset’s achievement and/or maintenance of ESG-related certifications and awards. The relatively low score for this aspect reflects the inherent difficulty and cost of obtaining ESG certification. Certifications typically involve lengthy application and verification processes, often for a fee.
To inform better investment decisions and reduce infrastructure’s significant carbon footprint, the infrastructure sector must capture data on the ESG outcomes of infrastructure assets.
Currently, and across the majority of data providers, data on ESG in infrastructure generally reflect an entity’s ESG management approach (e.g. policies, plans, and systems) and transparency of reporting.
Some quantitative performance data (such as data on GHG emissions) are collected, but evaluations of the ESG outcomes of infrastructure are not available because of the difficulty of assessing performance in the absence of clear and agreed indicators and a standardised framework and also due to the voluntary reporting structure currently in place yielding very small sample sizes.
GRESB is currently working with the industry to capture data to address these issues and help close this critical data gap.