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Investing in “High Road” Infrastructure

by Erin Shackelford

bridge

In light of the recent White House proposal on infrastructure, now may be a good time for investors to consider what makes infrastructure investment responsible, or “high road”.  The current proposal is reportedly focused on incentivizing private sector investment in infrastructure, rather than providing a large federal spending package or a revenue producing proposal, like increasing the gas tax.  With this framework, investors may see an uptick in infrastructure fund-raising.  Indeed, investors may have an opportunity at this moment to signal what kinds of infrastructure investments they consider investable.  Two recent publications may be helpful to those considering investments that both meet their long-term risk-return profile, and properly include consideration of relevant ESG factors and collateral community benefits.

Taking the High Road to More and Better Infrastructure in the United States, an NRDC publication, co-authored by IRI Director David Wood, defines “High Road Infrastructure” to include consideration of environmental, resilience, social, and economic standards.  From the report:

“Chronic underinvestment in infrastructure is a root cause of human-made disasters like the water crisis in Flint, the dangerous transit breakdowns burdening Washington’s Metro system, and collapsing bridges like the one Minneapolis saw in 2007.”

“Traditionally, developers think of their bottom line in one dimension: economic. However, to move infrastructure onto the High Road, the bottom line must expand to include four dimensions: economic, environmental, climate change resilience, and social. High Road projects must be transparently measured against specific, realistic, and enforceable standards that adequately address all four dimensions while ensuring that High Road elements are core and not superfluous features quickly jettisoned to reduce costs or increase near-term profits.”

Infrastructure Investment:  A Resource for Pension Trustees, is a short toolkit for investors, specifically created by the IRI’s Trustee Leadership Forum for Retirement Security for pension fund trustees.  This resource briefly explains public-private partnerships (P3s), and provides questions to ask about potential infrastructure investments. 

“Pension funds are in a position to demonstrate that there is demand from institutional investors for a stream of deals that bring community benefit and high standards along with return on investment. By taking a close look at infrastructure deals, demanding high standards throughout all phases of the deal (and for all contractors), and asking hard questions, pension trustees may help signal that there is demand for better deals.”

We invite you to review these tools, consider your long-term priorities, and examine this renewed push for infrastructure for investments that deliver the full breadth of benefits to our communities.

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