Infrastructure funds in particular in Europe will soon be subject to transparency and disclosure obligations aimed at promoting the integration of sustainability risks into the investment process. When coupled with new requirements for trustees of UK pension schemes on climate risk governance and reporting, ESG practices will become subject to ever sharper scrutiny from large investors. In the US, the Commodity Futures Trading Commission’s (CFTC) Climate-Related Market Risk Sub-committee earlier this month called on US regulators to "move urgently and decisively to measure, understand, and address" climate change risk to financial markets, and highlighted the need for financial innovation to help "channel more capital into technologies essential for the transition".
Frew said: "Energy transition is critical for all infrastructure companies. As energy users, infrastructure companies will see increasing pressure from investors, funders and governments, firstly to understand and report energy use, and secondly to pursue active decarbonisation of their business and supply chain. Energy transition is also an opportunity for infrastructure companies to play a leading role in decarbonising our built-environment and participate in the large and small projects needed to deliver carbon reduction and clean energy production."
"Stakeholder pressure will continue to fill the gap where governments may be inconsistent or slow to impose ESG requirements. This pressure will only increase as ESG takes a central part of the credit analysis for investors and funders," she said.
Collins said: "Companies ought to be taking steps to assess their own carbon footprint, as well as the carbon footprint of the processes, services and products they offer. This is often not straight-forward, and involves analysing the carbon cost of your supply chain. However, understanding your business’ carbon footprint is only the first step, and many companies are currently wrestling with how to decarbonise in a manner, and on a timeline, that is financially realistic for them."
"That said, it’s clear that the political, social and financial cost of carbon is increasing at pace, so a longer term view is needed – companies with a large carbon footprint will have to adapt or risk being phased out of the market by ‘greener’ competitors," he said.
Beyond the push towards greener finance, governments and businesses behind major projects are also beginning to make greater use of levers at their disposal to reward companies committed to lowering carbon emissions.
Collins said: "Tenderers for global infrastructure projects are increasingly having to demonstrate their own ‘low-carbon credentials’, as well as those of their tendered solutions. The use of the 'CO2 Performance Ladder' in the Netherlands is a fantastic example of how a low-carbon business can be rewarded by having a better chance of winning work than its higher-carbon competitors. Many government procurers, and large private procurers, already assess ‘carbon-factors’ in their procurements, or have plans to do so in the near future. Being a low-carbon business is becoming more than a good marketing tool – it is fast becoming essential to winning work."
A panel of Pinsent Masons experts will discuss how the infrastructure market is adapting to a lower-carbon world at a webinar on 24 September.