15. Sustainable Infrastructure Investments Katharina Schneider-Roos
CEO, Global Infrastructure Basel (GIB) Foundation
Basil Oberholzer
Project Manager, Financial Services, GIB Foundation
Investments in infrastructure—such as transport networks, waste recycling plants, drinking water and wastewater treatment facilities, and electricity generation plants—provide the backbone for economic and social development. According to the OECD, demand for infrastructure investments will amount to more than USD70 trillion, equivalent to 3.5% of predicted global GDP, by 2030. In financing this enormous demand for infrastructure, private capital plays an increasingly important role, both in Switzerland and abroad. Certain characteristics of infrastructure projects make them attractive investment opportunities for a growing number of private investors. The main reasons are the following: •• Attractive returns (see Figure 19) combined with high and stable cash flows. The EBITDA1 of global infrastructure investments exceeds 7.5% p.a. (AMP Capital, 2014). •• Performance is resilient to economic cycles and in some cases linked to inflation (Af2i and J.P. Morgan Asset Management, 2011). •• Low correlation with other asset classes, such as equities, bonds, and commodities (Credit Suisse, 2010). •• Competitive advantages due to high market entry barriers. Determining factors of the appeal of this asset class lie in a) the choice of a project, b) the quality of a project, and c) the associated risk. If consideration is also given to ESG criteria as complementary factors in the planning, construction, and operation of infrastructure projects, the basis for making a decision on these three aspects can be improved and the attraction increased even further. In order to apply ESG criteria, such as resource and energy efficiency, to an infrastructure project, key ESG areas for the project need to be identified along with their requirements, feasibility, and potential (ESG Handbook, 2015). The ESG criteria vary depending on the location and type of project and should be integrated into project development as early as possible so as to 116
