News

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.

Pension Trustees Gather at Harvard

By Erin Shackelford

David Wood and Priya Mathur
IRI Director David Wood and CalPERS Trustee Priya Mathur discuss elevating the S in ESG.

 

Pension trustees gathered at the Harvard Kennedy School in June for the Trustee Leadership Forum for Retirement Security's Annual Convening.  The TLF hosted 60 trustees and welcomed guests from Canada, the Netherlands, the UK, and South Africa.  Running through the three days of convenings was a mission to elevate the "S in ESG", or, more specifically, how to protect people in investments.  Priya Mathur (CalPERS), David Wood (IRI), Jose Meijer (APB), and Hughes LeTourneau (CWC) all shed light on this topic and shared their work.  Collaboration was another theme that resonated, in particular around investment in "high road" infrastructure.  Thanks to our special guest speakers Jose Meijer, Michael McCarthy, representatives of the Diverse Asset Managers Initiative, and Massachusetts State Treasurer Deborah Goldberg.

And, next week, the TLF is looking forward to welcoming the National Council on Teacher Retirement to campus for their Annual Trustee Workshop.  We are excited to be co-hosting this event for the third time.  The NCTR Annual Trustee Workshop brings 70 teacher pension fund trustees together for three days of education and discussion.... Read more about Pension Trustees Gather at Harvard

New Research Center Builds on Capital Absorption Work

By Erin Shackelford

Center for Community Investment LogoLast week the Lincoln Institute of Land Policy announced the creation of a new research center focused on capital absorption

Since 2012, David Wood (IRI) and Katie Grace Deane (IRI) have collaborated with Robin Hacke, Marian Urquilla, and others, to develop and explore the concept of capital absorption, or the ability of places to attract and deploy capital in support of low and moderate income communities.  The formation of the Center for Community Investment is significant validation of this work.... Read more about New Research Center Builds on Capital Absorption Work

NEW IRI/RWJF Report Advances Capital Absorption Work With a Focus on Pioneering Health Institutions

By Erin Shackelford

When hospitals invest everybody wins.“What can communities do to make it easier to attract and deploy capital and leverage other assets to achieve their social goals?”  This question, central to the concept of capital absorption, is addressed in a new report which applies the concept to hospitals and health systems.  Released today, “Improving Community Health by Strengthening Community Investment:  Roles for Hospitals and Health Systems” is co-authored by Robin Hacke (Kresge) and IRI Assistant Director Katie Grace Deane.  With support from the Robert Wood Johnson Foundation, Hacke and Deane expand their work on capital absorption into the area of hospitals and health systems, examining how these institutions may be able to drive community health improvements by investing in the social determinants of health.... Read more about NEW IRI/RWJF Report Advances Capital Absorption Work With a Focus on Pioneering Health Institutions

Private Capital for Public Purpose: IRI Director David Wood’s HKS Course Returns

By Erin Shackelford

David WoodReturning HKS students with an interest in impacting investing and related efforts may wish to consider IRI Director Dr. David Wood's popular course “Private Capital for Public Purpose:  Impact Investing and Its Siblings”.  The course, which runs on Mondays and Wednesdays from 11:45 am to 1:00 pm, will examine types of investors, their social goals, investment strategies and vehicles, public policy, and ways to assess the impact of these investments.... Read more about Private Capital for Public Purpose: IRI Director David Wood’s HKS Course Returns

Investing in Small Cities: Capital Absorption in Massachusetts

by Katie Grace Deane

Capital and Collaboration Report CoverSmall cities across the state of Massachusetts, from Lawrence and Fall River to Chicopee and Pittsfield, are facing many of the same economic challenges we saw highlighted during the 2016 election across the Rust Belt and upper Midwest. Many of these “Gateway” or “Working” cities in Massachusetts were founded on a strong manufacturing base, which declined over the latter half of the 20th century, leaving behind economic stagnation and declining population. While many of these cities today are seeing increased attention as a result of their regional importance (Pittsfield and Springfield) or rising populations from immigration, they still lag the state averages in household income and educational attainment.... Read more about Investing in Small Cities: Capital Absorption in Massachusetts

Task Force on Climate-Related Financial Disclosures Recommendations Report Released

by Katie Grace Deane

This week, the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) released its long-awaited Recommendations report, presenting a broadly-applicable framework for climate-related financial disclosure across sectors and jurisdictions. The disclosure recommendations are intended to apply to both companies, who are the traditional focus of disclosure regimes, as well as investors, whether asset managers or asset owners.

The Task Force identified four areas of main focus for climate-related financial disclosures:

... Read more about Task Force on Climate-Related Financial Disclosures Recommendations Report Released

The Three Evergreen Challenges of Sustainable Investing

By Katie Grace Deane

Last week, USSIF released its most recent Trends report, identifying a $1.5 trillion increase since 2014 in assets invested by institutions taking environment, social and governance factors into account in their investment decision-making. Over the past two years, the industry has seen an increase in media coverage, and a spate of new products and new firms adopting the labels of responsible, sustainable, impact and related terms that point to a set of related practices.

Over the past year and a half, the IRI collaborated with the Institute for Sustainable Investing to investigate this new state of affairs, and understand how U.S. asset managers viewed the future growth of sustainable investing, which were defined as investments seeking market rate return alongside social and/or environmental impact. The report Sustainable Signals: The Asset Manager Perspective highlights a perception by asset managers that the field is at an inflection point, with general excitement over existing and perceived future growth, and ongoing questions over both the nature of diverse and occasionally unclear client demand and what sustainable investing can credibly deliver.... Read more about The Three Evergreen Challenges of Sustainable Investing

Why and How Might Investors Respond to Economic Inequality?

By Erin Shackelford

Why and How Might Investors Respond to Economic Inequality?Worrisome levels of economic inequality have received growing attention in recent years from a variety of sources and perspectives.  Prominently, the United Nations Development Programme has included “Reduced Inequalities” as one of seventeen Sustainable Development Goals (aka the SDGs), raising the profile of inequality as a pressing global issue.  The very real impacts of inequality on people and society, and, in turn, on growth and political stability, are increasingly hard to ignore.  And, while government action is certainly a key part of reducing economic inequality, private sector investment is implicated, as well. 

Calls to action like the UN’s SDGs provide an important opportunity for investors to examine how risks related to high levels of economic inequality may be embedded in their portfolio, and what they might do about it.

Drawing on recent research, a new discussion paper by IRI Director David Wood, written for the UN Principles for Responsible Investment, aims to aid investors as they seek to understand and address economic inequality.  With a summary of current thinking and questions to spark discussion, “Why and How Might Investors Respond to Economic Inequality” is a tool specifically written to prompt investors to think about their possible responses to this emergent risk, and the role their own investments may play in promoting, or mitigating, economic inequality.... Read more about Why and How Might Investors Respond to Economic Inequality?