Company: IFM Investors
Category: Real World Impact Initiative of the Year (shortlisted)
In the spirit of showcasing leadership and raising standards of responsible investment among all our signatories, we are pleased to publish case studies of all the winning and shortlisted entries for the PRI Awards 2019.
Project overview, objectives, and reasons for undertaking it
In 2018 the Australian Clean Energy Finance Corporation (CEFC) invested AU$150m in IFM Investors’ Australian Infrastructure portfolio, representing the first funding commitment by the CEFC to a core infrastructure fund. For its part, IFM committed to proactively reduce carbon emissions across its Australian infrastructure portfolio, which incorporates some of Australia’s leading infrastructure assets. As a result, IFM developed a Carbon Emission Reduction and Energy Efficiency Framework, which aims to help assets in transitioning to a low carbon economy by:
- Establishing an energy and emissions baseline.
- Developing targets for energy and carbon emission reductions with reference to science- based targets and associated emissions reduction initiatives.
- Including sustainable design principles in major capital works.
Emission reduction estimates prior to work commencing indicated that a 5% reduction in emissions across the portfolio would abate almost 55,000 tonnes of CO2-e annually – the equivalent to removing 14,775 cars from the road each year.
Importantly, the framework also aims to encourage IFM’s assets to identify and deploy energy efficiency opportunities and new technologies.
IFM reports its efforts to combat climate change via annual Carbon Footprint Reports, started in 2017. These reports provide carbon footprint data across IFM’s Australian and global infrastructure portfolios, aiming to quantify the portfolio’s impact on climate change and identify areas to further reduce climate change risks.
Financial scale of the project and impact
The project is a major initiative for IFM, which manages in excess of AU$14 billion in funds under management in Australian infrastructure. As of March 2019, emissions reduction targets have been established for Ausgrid, Melbourne Airport, Brisbane Airport, Northern Territory Airports, Port of Brisbane, NSW Ports and Southern Cross Station, comprising 90% of the Australian infrastructure portfolio value, and 98% of the portfolio’s total scope one and two emissions. The current emissions profile of the included assets is approximately 1.1 million tonnes of CO2-e per annum. IFM has established the following targets:
Asset Baseline year (FY) Target (FY) Emissions reduction
Asset 1 2017 8% by 2024 ~78,000 tCO2-e
Asset 2 2016 16% by 2024 ~13,000 tCO2-e
Asset 3 2017 25% by 2024 ~12,000 tCO2-e
Asset 4 2018 100% by 2030 ~7,000 tCO2-e
Asset 5 2018 24% by 2025 ~3,000 tCO2-e
Asset 6 2015 20% by 2024 ~500 tCO2-e
Asset 7 2018 26% by 2025 ~4,000 tCO2-e
IFM’s financial investment has been substantial. This includes employee time and the commissioning of a custom tool designed to help the assets measure and track emissions over time, plot their emissions trajectory and identify emissions reduction opportunities. The capex associated with the implementation of emissions reduction initiatives will be borne by the assets.
Project delivery and challenges overcome
The delivery of this project required a significant engagement effort and collaboration between IFM, the asset management teams and the boards of each asset. IFM has a majority ownership stake in two of the assets included in the scope of the project and only a minority ownership stake in the other assets. The first challenge, therefore, was to convince other asset owners of the importance of this project and the need to allocate future capex on energy and emissions reduction initiatives.
Following agreement, IFM set about multiple tasks:
- setting objectives;
- developing the project scope;
- engaging independent oversight and expertise;
- building a science-based target emissions reduction tool;
- and working with assets to establish individual emissions reduction targets and pathways.
One of the key challenges was the different maturity of understanding and resource capacity across the different assets. Some assets had already progressed energy and emissions initiatives, whereas others had not established baseline data. Some of the assets needed considerable support to complete the data input and modelling requirement.
In 2018 IFM invited teams from all its Australian assets to a full-day workshop, set up by the consultant, to explain the project and walk representatives through the use of the custom, science-based tool. IFM also provided consultant support for each asset, in addition to continuous access and support from IFM’s Asset management and responsible investment teams.
Other challenges included gaining access to underlying data, and then modelling and convincing the assets to establish targets they felt comfortable reporting publicly. Encouraging greater transparency and disclosure of data about the assets within IFM’s portfolio is a continuous challenge, particularly when IFM holds a minority ownership stake in most cases.
Measuring success and lessons learned
The project to deliver the first two objectives of the Carbon Emission Reduction and Energy Efficiency Framework has been successful. The deadline for establishing targets, April 2019, has been achieved and pathways have been established. Each asset has established a baseline, set specific targets and developed a plan for the implementation of initiatives.
In addition to helping to set targets, IFM has oversight of the annual emissions trajectory for each asset, as well as the timeline for the implementation of energy efficiency and reduction activities.
Using this, IFM’s asset management team will monitor and assess progress, engaging with assets to help ensure they remain on track. It will also be monitoring developments in relation to climate change policy and/or technology demand and pricing, in case opportunities arise to bring forward more expensive and/or innovative change options. For example, fuel switching and building on-site renewables.
One noteworthy benefit of the project has been the increased engagement and the stronger relationship between IFM and individual asset management teams. Many of the assets have said that it has been a unique experience to have an investor/owner interested in progressing a positive agenda to build long-term value, as opposed to cutting costs in the short term
IFM now has a much deeper understanding of each asset’s energy and emissions profiles, as well as the associated climate change risks and opportunities facing each asset. This has provided the firm with knowledge about all manner of new technologies and an understanding of what may become more viable over time to combat climate change challenges.
The knowledge and tools that have been developed for the Australian assets will now be transposed across IFM’s global infrastructure portfolio. While regional differences exist, the process is easily adaptable. IFM’s global assets are diverse and have a much higher carbon footprint than the Australian portfolio. As a result, the firm expects there will be even greater opportunity for change.