Infrastructure investment key to climate solution

Few investors have material exposure to initiatives designed to mitigate global warming

Investors are being urged to increase their allocation to sustainable infrastructure for there to be any hope of mitigating the impact of climate change.

According to Dublin-based fund manager KBI Global Investors (KBIGI), the need for infrastructure investment to tackle climate issues and safeguard the world’s resources has now reached a ‘critical point’.

However, despite climate change being 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, the firm said.

Population growth, ageing and depleted assets, and rapidly expanding cities mean the need for infrastructure investment to safeguard the world’s most critical resources is now of paramount importance.

Investment in these key areas is expected to account for almost half of all future infrastructure investment by 2030 – around $38 trillion – based on an aggregation of industry forecasts.

However, KBIGI said the necessary infrastructure spend will be greater and more imminent and believes this is no longer a ‘2050 transition story’.

Fears have already mounted that achieving a 1.5 degree increase in global warming by 2050 may already be unachievable, with common consensus now being we are on course for as much as 3 degrees warming.

According to KBIGI, decarbonisation may be the best chance of meeting these goals, while policymakers must also tackle the need to adapt existing infrastructure to rising sea levels, severe heatwaves, droughts and devastating floods.

Colm O’Connor, senior portfolio manager of global sustainable infrastructure strategy at KBIGI, 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.”