Energy transition and security has become the dominant issue in the infrastructure sector following the ongoing energy crisis across much of Europe, according to Melbourne-headquartered investment manager IFM Investors.
Speaking at a media briefing, European head of infrastructure Deepa Bharadwaj said: “Globally, now I think energy transition energy and security has become the prevailing theme. The war in Ukraine and dependence on Russian gas has driven home the need for Europe and UK to think about energy security.”
As well as an increase in offshore wind projects, the firm cited green hydrogen as an area of increased activity, in part due to heavy investment from Germany and France. IFM entered the space in May 2022 when portfolio company Buckeye acquired Bear Head Energy, which is developing a green-hydrogen and ammonia production and storage facility in Canada.
At UK level, the key message from the meeting was the need to increase private capital commitments to meet the UK’s emissions targets. Executive director Gregg McClymont said: “So certain is the need for large volumes of capital in the UK to deliver its emissions reduction targets, and given the state of the public finances, there’s a great appetite to bring in long term capital.”
He suggested encouragement from government for DC pension funds to come together to address the issue as a viable approach.
When asked about ESG, the firm cited increased attention on social sustainability as a key trend.
Commenting on IFM’s approach to the issue, Bharadwaj explained that the firm’s initial focus had been on diversity and inclusion within their portfolio companies, and it was now paying more attention to supply chain issues and labour relationships.
“When you’re investing in an asset, you’re not investing in the asset alone. It’s the community, the network that builds around it,” she said.
When asked if social sustainability considerations could be a decisive factor in IFM’s allocation decision-making, Bharadwaj said it was a “very important consideration”.
She added that it would “never want to invest into an asset that is going to have poor relations with the community or an asset that doesn’t follow good labour practices”.
Strategy head Luba Nikulina added: “Social [sustainability] is absolutely important to us. And we aren’t doing it because of any moral convictions. We are doing it because, financially, it’s the right thing to do for our assets.”
Nikulina became IFM’s first chief strategy officer last September when she joined from consultant WTW. Following her arrival, she spoke of her mandate to give LPs access to decarbonisation-related investments.