Thoughts from a panel discussion with CEO Gaby Amiel at SuperReturn Global Infrastructure 2021.
In September 2021, Sennen CEO Gaby Amiel attended SuperReturn Global Infrastructure - a conference and networking event for investors in the renewable infrastructure industry. Alongside speakers from leading investment funds, Gaby spoke on panel discussions around ESG and sustainability. Here are his key thoughts from the event.
“At Sennen, we help a number of clients to organise and enact their strategy on Environmental, Social and Governance (ESG) reporting. With the energy transition and global efforts to offset climate change underway, the question that’s starting to be asked is: what’s under the bonnet of the renewables that people are investing in?” says Gaby. Indeed, the focus of the ongoing ESG discussion has turned to what’s happening in supply chains. It appears that it’s time that investors need to start thinking differently about ESG.
Companies are increasingly under pressure to prove that their investments are sustainable, that their renewables are working out their supply chain issues. “The urgency of climate commitment means that, as renewables mature and grow so rapidly across the world, it’s important that we can answer questions about how sustainable they truly are,” Gaby explains. “They’re not inherently sustainable just because they’re renewables. ESG has an important role in answering those questions.”
Are the starting points for projects in developing countries different from those in developed countries, for example? Financiers can get comfortable with projects in different locations, as long as they meet their standards for the region and they have a consistent pattern across projects. The S in ESG is much more important in emerging markets. Major wind projects have been stopped because they haven’t been approved by locals. It seems obvious that reputational damage for investors is much higher in emerging markets if ESG standards aren’t met.
“We have come a long way already,” Gaby tells us. “When I was first in the industry, you could fly as much as you wanted if the green company you worked for offset it. But it’s not like that now, there’s a stronger sense of responsibility. There are lots of encouraging things happening, such as investors developing a fully recyclable blade for wind turbines. At Sennen, we work with a lot of offshore wind farms. We witness how much attention is going on diesel being burnt to get out to offshore turbines. It’s a big part of lifetime emissions, so it has to be curbed.”
To tackle these issues, here are some of the practicalities of what Sennen is trying to do with our clients and what’s happening across the market. Companies are reacting to the Sustainable Finance Disclosure Regulation (SFDR) by preparing to collect data and start making reports in response to that legislation. There’s both a challenge and an opportunity around that process for asset managers and owners to get closer to their assets and look at how much they understand about those assets within their portfolios.
“Some clients have thought about their ESG strategy broadly before - whether to be a light green or dark green fund in terms of reporting, for example. They may have set out some themes to collect data on and report on, or had a think about ‘good’ sustainable projects from an ESG perspective,” says Gaby. “But the first challenge comes with deciding on which data sets they want to accumulate and where that data comes from. In most cases, they want it to come from asset managers in the services supply chain, whether internal or external. The real danger is that asset managers become overwhelmed by data requests - and the quality of the data becomes less reliable. We need to think about what’s reasonable for companies to generate by looking at their processes and operations as they are and try to make reasonable requests.”
The second challenge is around structuring that data and processing it to determine key KPIs. “What we find at Sennen is that the E element of ESG is related directly to the assets in the portfolio, while the S and G elements tend to be linked to stakeholders or service providers. We’re looking at how to store and report on all of this information in a carefully built relational database structure.”
With renewable projects there’s the big upfront impact of manufacturing and construction. “Of course, we don’t want to impede construction until processes are perfect, but there is a data capture process to think about. As there are carbon and social implications, data must be gathered and put together with lifecycle data, so we’ve got the full picture of the impact of the project across time,” Gaby explains. “Once we have all this information, we have a really powerful data set. Then we can look at ESG data like we can look at financial data for investment. When following a robust methodology, we should end up with benchmarks at the point of acquisition, construction and at further milestones throughout the lifecycle. We can actually say at what point in the lifecycle does the asset become carbon neutral or positive and look at the lifetime diversity impact of a project. We can communicate positively and confidently about what the impact of renewables is, which will help the growth of renewables worldwide.”