What are the Sustainability Standards for Infrastructure Investors?
The answer depends on who you ask, according to a new Stanford study
By Robert Ludke, Handshake
What gets measured can be managed. Especially in the performance-oriented world of investment, metrics are needed, as much for sustainability as financial return. Before infrastructure investing can successfully transition to an institutional asset class, there must be consistent methodologies for determining its sustainability.
As the infrastructure asset class has grown and developed over the last fifteen years, institutional investors, asset managers, developers, designers and public sector sponsors have noted that infrastructure is profoundly impactful to our climate, natural environment, and societies, and that the asset class is a natural union between long-term investing and sustainability.
Despite infrastructure’s importance, the field of infrastructure sustainability accounting and assessment tools is relatively underdeveloped compared to certain other, more mature asset classes.
To bring greater understanding to this important topic, Guggenheim Partners and World Wildlife Fund (WWF) partnered with the Stanford Global Projects Center to analyze the various screening and accounting tools to assess the sustainability of infrastructure investments.
Research Approach
“State of Practice” looked at 13 different screening and accounting tools. The accounting tools, generally, are broad standards for reporting performance against specific indicators or sustainable development goals. The screening tools are more focused on the review or verification of information at the project level, culminating in a project rating or total score against a series of sustainability standards.
• Screening/Rating: ENVISION, SuRe, CEEQUAL, GRESB, Equator Principles, ISCA
• Accounting Tools: UN SDGs, SASB, GHG Protocol, TCFD, CDC Protocol
Many of the standards included in this study fall along a spectrum in the degree to which they facilitate the aggregation of results at the portfolio level and the degree of verification
they require for certification. Figure 1 is another subjective assessment of a subset of the various metric systems included in this study along two axis. The first axis illustrates the degree to which verification is required in the rating process for individual projects. The second axis is illustrative of the degree to which the metric system enables the aggregation of results.
Will a Unifying Sustainability Rating and Framework Emerge?
That question is at the heart of this research and is commonly debated in terms of market share – once one tool or rating scheme is adopted en masse by large institutional investors will it become the de facto industry standard? This may eventually occur, but infrastructure likely will remain a difficult asset class to commoditize, for sustainability reporting and otherwise.
The Immediate Future
As the metric and reporting industry continues to develop in the sector, those specific indicators and metrics that emerge as international standards will enable wider adoption by more diversified investors.
In the meantime, rating and accounting tool developers for the industry will continue to evolve their offerings, and pioneering investors in the industry will continue experimenting with different tools in the hopes of reaching more comprehensive, standardized reporting of sustainable investment metrics.
Next Steps
With this report in hand, the authors who commissioned the study hope to continue building a community of interest to continue the research and identify practical applications for the research. The authors are looking for advocates of all types: investors, planners, scientists. The next phase of research is to analyze specific projects or sites targeted for infrastructure investments with the goal of understanding the capacity of these tools to both predict and improve asset sustainability and performance.