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.
“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 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.
Small 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
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:
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
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.