Case study by AMP Capital Investors

AMP Capital Investors (AMP Capital) is one of the world’s longest standing infrastructure investors with over two decades investment management experience in utilities, transport and social infrastructure across Australia, New Zealand, China, India, the United Kingdom, Europe and the Americas. The team actively sources global investment opportunities for its managed funds and customised separate account mandates. It also utilises on the ground specialist asset managers who are responsible for active management of these investments throughout their lifecycle.

Key findings

  • Following development of ESG policy and process framework, access to specialist resources will enable investment teams to consider a comprehensive range of ESG factors.
  • Building in-house ESG expertise can augment organisational capacity and more effectively manage costs relating to ESG analysis.
  • Continuous improvement of tools and availability of resources is essential to strengthen the quality of ESG consideration.

The quandary of specialist ESG knowledge

AMP Capital’s infrastructure investment team recognises that ESG issues can impact the long term performance of its investment portfolios. As a result, they are considered throughout the lifecycle of the investment process; from identification of new investment opportunities to the active management of assets.

Not surprisingly (or uncommon to other PRI signatories), the biggest challenge faced by investment teams when integrating ESG factors in the investment process, is possessing the specialist knowledge required to navigate through increasingly complex issues such as climate change, evolving environmental legislation, rapid industrialisation, demographic shifts and trends, natural resource depletion and shifting societal sensitivities.

While infrastructure investments share some common characteristics, the specific risks relating to each investment opportunity can be quite unique and may vary greatly between subsectors, regions and individual projects.

Policy guidelines and checklists can be an effective means to canvass common ESG risk factors, however, there is the danger that they may be too generic to capture the unique risks factors inherent in each specific investment opportunity.

“The quality of investment decisions and ownership practices are enhanced by specialist resources that assist an investment team to navigate through a complex array of ESG factors.”

Alison Cunniffe (ESG & Sustainability Manager, Infrastructure) AMP Capital Investors

Infrastructure ESG Toolbox

The Infrastructure ESG Toolbox was designed to address the need for specialist knowledge relating to multifaceted ESG factors across a diverse range of sub-sectors and regions of the global investment landscape. The Toolbox’s resources supplement existing investment policies and are utilised throughout investment decision making and ongoing asset management activities, such as:

  • due diligence of new investment opportunities;
  • completing internal ESG audits for existing assets;
  • assessing the ESG practices of an investee company’s supply chain;
  • integrating ESG practices in strategic planning and operations;
  • managing ESG specific issues that arise as a board director.

The Toolbox comprises a collection of internationally recognised best practice guidelines and sector/ issue specific resources, designed to assist the infrastructure investment team in dealing with ESG issues of varying materiality. The Toolbox is organised into sector, region and ESG specific sections to provide intuitive navigation to resources of relevance. Sources of information include:

  • internationally recognised best practice codes and guidelines;
  • ESG specific frameworks and checklists (both external and proprietary resources);
  • contemporary thought leadership and research papers;
  • in-house proprietary research and insights;
  • government, regulator and community stakeholder portals;
  • on-line training resources.

To ensure the ESG toolbox continues to evolve, each new due diligence process, internal ESG asset audit or active management activity feeds into it. It is this continuous refinement that ensures coverage of a comprehensive range of ESG related issues and reflects the increasing sophistication of ESG consideration and integration techniques, not to mention changing industry trends and standards, regulatory requirements and social sensitivities.

While the development of an ESG policy will address how it can be integrated into existing investment practices, it is the development of tools and access to knowledgeable resources that will determine the quality of ESG analysis and ultimately its impact.