LPs’ rush to be green today stopping assets being green tomorrow
It’s no secret that investors across the world are embracing energy transition investing. What’s perhaps less well known is that, in their rush to be green today, some investors are actually not committing enough capital to decarbonising assets for tomorrow.

Noting that about 90 percent of the capital committed towards net zero flows to the power sector, both Teresa O’Flynn, co-head of infrastructure at Ara Partners, and Shami Nissan, Actis’s head of sustainability, noted that LPs have been reluctant to deploy capital to decarbonise sectors like industry.

“If you think about infrastructure, 50 percent of the infrastructure that exists today will be around in 2050. So, there’s no way to achieve net zero if you don’t go from brown to green,” O’Flynn told members of the Infrastructure Investor Network at the Global Summit in Berlin on Monday.

Some LPs, however, are in a rush to get to net zero.

“There’s a reluctance to embrace [brown to green] because that results in an initial increase in [LPs’] carbon footprint,” O’Flynn explained, concluding: “Being net zero today is at odds with decarbonisation.”

Some long-term thinking is needed, it seems.

No support for greenwashers
Greenwashing may be on the rise simply because there will be more transparency in the future, according to Afolabi Oliver, from Aksia. This somewhat optimistic notion concluded Monday’s panel that sought to answer the following question: Is greenwashing prevalent across infrastructure?

Ulla Agesen from NIO also saw the positive, arguing that many infrastructure owners were ahead on ESG as it provides a license to operate. “There are some that are overdoing it a little bit in terms of how good they think they are on ESG matters, but I think many are actually doing quite well,” she said.

According to Sarah Miller, from Redington, there was still work to be done. She noted that she has seen investment committee papers where the ESG section is completely blank. “If you are greenwashing, you’re not doing your ESG integration or your ESG properly and therefore you’re not doing your financial due diligence properly.

“If those assets don’t have transition plans or plans to operate in a net-zero economy, then they’re not good investments for you.”

Take that, laggards.

Swinging the AXA on pay
It’s an important consideration for any fund manager: how do you secure buy-in from your investment and asset management teams when it comes to achieving ESG targets?

Isabelle Scemama, CEO of AXA IM – Alts, was the focus of our final keynote fireside chat on Monday, and said that her firm has explicitly tied the team’s compensation to ESG outcomes.

When asked if hitting ESG targets affects pay, Scemama said that there is a “real correlation between financial performance and environmental performance” at her firm.

The manager has environmental KPIs at both the global and individual levels, she said, with team members’ compensation indexed based on whether these are met or not. Individual goals have been in place for some time, while the global goals are in their second year, she added.

Walking the talk, then.