What are the various methods and attitudes that infrastructure funds have been taking towards ESG, and do they need resetting? That was a key theme of a webinar hosted recently by Sennen on “ESG Hype vs Reality – sharing learnings from infrastructure investing and beyond”.
There is a debate about what ESG priorities should be and whether they need revising.
Watch the full debate between Gaby Amiel from Sennen, Tomas Freyman from Grant Thornton UK, David Thomas from GRESB, Parul Gupta from Arabesque and Lily Crompton from Foresight Group.
According to Tomas, there has been a healthy ‘popping’ of the ESG marketing bubble. He takes the stance that energy security trumps sustainability (the ‘E’ component), and that we are regretting not having a balanced energy mix, in light of the Russia-Ukraine conflict.
We have to make sure that corporates, funds and stakeholders look at ESG from a value creation perspective. And not that it’s a cost or a box ticking exercise.Tomas Freyman from Grant Thornton
Parul elaborates on two aspects. She highlights how branding and marketing are often considered to be greenwashing in the world of ESG. She says that dependence on fossil fuels is linked to government decision-making and we need a long-term strategy to tackle what lies ahead.
If we just think in the short term, then we’ll all be talking about the same conflicts in years to come and there’s no chance for us to stick to something that can potentially allow the next generation to live a decent life. I think we just have to balance these short and long term priorities and everybody has to take part.Parul Gupta from Arabesque
Parul goes on to talk about regulations, and how they positively affect our current state, as they’re bringing frameworks together and asking the right questions.
We need governments as well as the practitioners to come together and agree that it may not be perfect. But as they say, perfect is not the enemy of good, so let’s start with something.Parul Gupta from Arabesque
Gaby starts his argument by saying that the war in Ukraine has thrown a spotlight on energy security to the point that Security could be added as a second S in ESG: ESSG.
Security is enhanced by renewable energy, by nuclear and by fossil fuels that are not imported from countries on which we can’t depend. The fundamental issue we’ve got is an over-dependence on fossil fuels. All the different technologies that we can and could be investing in can really improve our position there. Bringing on security next to sustainability is fundamental.Gaby Amiel from Sennen
For David, one of the key principles that he follows at GRESB when they’re updating their own growth standards is ensuring they align with industry frameworks and standards. That’s one of the key pillars that they’ve published in their vision for the years to come. What that means is that they are continuously reviewing the latest frameworks, standards and regulations, to adapt their offering and to fit in with the issues that are materially most important to their infrastructure participants.
Over time this should help support alignment on the key issues between standard-setters, international and national frameworks and regulations. Of course this is an ongoing process which takes time, but it is a key consideration for our work to update the standards every single year and it’s very much essential to our thinking, when we’re updating supporting products as well.David Thomas from GRESB
According to Lily, some industries are definitely pushing for a formalised and joined-up approach to standard setting. She cites the financial services sector where the IFRS (International Financial Reporting Standards) has set up the International Sustainability Standards Board. Their role is to develop a baseline of sustainability-related standards so that everyone is on the same page.
I think it’s great that independent frameworks are starting to look outside of themselves and how they can support industries in streamlining their approach to reporting. As someone who has worked with funds and assets, I think it’s really important that when we’re setting our own internal reporting frameworks, we’re aligning with those that we may in the future have to report into. In that way we are streamlining our KPIs and the performance that we’re expecting across all of our assets.Lily Crompton from Foresight Group