Investors are still not focussed enough on sustainable future investments, instead looking the past, according to Dublin-based investment specialists KBI Global Investors (KBIGI).
Ageing and depleted assets, population growth, rapidly expanding cities and greater societal and economic demand mean the need for infrastructure investment in the provision of our most critical resources (food, water and energy) has reached a critical point. And despite a rise in interest in ESG investments - particularly around millennials - asset owners still need to increase allocation to investments such as sustainable infrastructure if we are to mitigate impact of climate change
KBIGI launched its Global Sustainable Infrastructure Strategy in 2017 and this forecast investment was a pivotal, long-term underpinning for the firm's investment thesis around sustainable infrastructure. Today, however, the conversation has rapidly moved forward, KBIGI points.
KBIGI's view is that achieving a 1.5 degree increase in global warming by 2050 may already be unachievable. The Dublin-based firm believes that the necessary infrastructure spend will be greater and more imminent. And despite climate change being dubbed the "number one concern for investors", few asset owners have material exposure to initiatives designed to mitigate and adapt to the inevitability of global warming.
Colm O'Connor, senior portfolio manager on the firm's Global Sustainable Infrastructure strategy, said: "For infrastructure investors, there is an opportunity to invest in companies at the forefront of these endeavours, and we believe demand will rapidly accelerate. Fiduciary duties and obligations may at the same time further accelerate this trend as they seek to move away from fossil fuel investment, shifting their focus to sustainable investments.
"We were amongst the earliest investors to recognise the inherent source of alpha from investing in companies providing solutions to sustainability challenges related to the provision of food, energy, water and the mitigation of and adaptation to the impacts of climate change - and it is why KBI Global Investors believe strongly that asset owners are underinvested in the future and over invested in the past."
O'Connor adds that improving regulation with a focus on sustainable energy policies and energy independence will provide a "long-term tailwind", but even where this support is lacking, economics is driving decarbonisation.
"At least seven coal companies have filed for bankruptcy protection this year, and dozens of coal plants have closed over the last few years. The waning demand for coal comes as consumers shift to cleaner and cheaper sources of power such as natural gas and renewables," he said.