August 01, 2022
New Study Finds a Common Reporting Approach for ESG Data Use in Infrastructure Investment Remains an Unfulfilled Goal
NEW YORK, NY – Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, and World Wildlife Fund (WWF) today released the results of a global survey on the collecting, reporting and application of environmental, social and governance (ESG) data in infrastructure projects. “Testing Industry Attitudes Toward a Common Reporting Approach for ESG Data Use in Infrastructure Investment,” conducted by KPMG Advisory N.V. and Mott MacDonald, takes the unique approach of surveying both ESG data users and data preparers to explore whether an industrywide standard approach to measuring ESG in infrastructure investment is desired and how this might be achieved.
The survey is part of an ongoing collaboration between Guggenheim and WWF to better understand the parameters of sustainable infrastructure. Through this collaboration, Guggenheim and WWF aim to support the United Nations (UN) Sustainable Development Goals (SDGs) by contributing to the development of a possible framework for enabling future infrastructure to be sustainable and resilient and protecting the natural assets that benefit society and economies. The collaboration recognizes that, given the significant need for global investment in infrastructure, it is imperative that investors are enabled to evaluate the sustainability and resiliency of infrastructure projects.
The survey results demonstrate that both data users and data preparers are looking for well-defined and consistent metrics, standards and reporting frameworks for ESG. The output suggests that the market sees value in convergence on an industry-tailored set of metrics for ESG data, but with almost 40 different frameworks currently in use by respondents, there is significant divergence in current ESG standards. According to the survey results, both data users and data providers believe that, apart from standardization and simplification, there are two mechanisms that may improve measurable integration of ESG into infrastructure investment: government regulation regarding ESG disclosures and pressure from investors and lenders.
In a joint letter accompanying the report, Scott Minerd, chairman of Guggenheim Investments and Guggenheim Partners global chief investment officer, and Carter Roberts, president & CEO of WWF, wrote:
“If infrastructure projects could clearly outline compelling financial return propositions and ecosystem benefits, they could tap into the institutional capital they need to achieve the UN SDGs, facilitate the growth of developing countries, and upgrade the existing stock of aging capital assets around the world. The key to unlocking this capital is an agreed-upon set of standards that would certify a project as sustainable … We agree with the authors of this report, who conclude that ‘the time for action is now.’ Trends in climate change and the COVID-19 crisis have led to an awakening in the finance sector of its roles and responsibilities in securing a healthy and stable planet and global economy. Meanwhile, governments have also stepped up their regulatory activism in this area. In the near future, we expect to see crucial developments in this space.”
The goal of the survey and interviews was to fill remaining gaps in understanding of industry perspectives on the use of ESG data, including standards and principles, in infrastructure development. The survey methodology consisted of three major components: a desktop review to set the foundation for the project, an industry survey, and industry interviews. The industry survey and interviews were focused on identifying the key challenges of infrastructure for ESG data users and data preparers. Further, they investigated whether and how the industry should move toward more standardization of ESG metrics and reporting. The survey and interviews were conducted between January and March 2022, and the survey received 50 responses overall, including 31 data users and 19 data preparers.
The takeaways that emerged from this study are that it is time to take action on ESG data in infrastructure and work toward a standard set of metrics to be used universally. The key to achieving consistency will be common industry-accepted definitions of “E,” “S” and “G.” The urgency to address emerging and evolving risks related to ESG and the speed of regulators around the globe introducing new mandatory requirements suggest a rapid evolutionary pace for ESG in the investor community.
The results of the survey demonstrate that progress is being made toward internationally recognized standards for establishing the sustainability of infrastructure projects. First, there is a wide range of frameworks, labels and principles in use across the marketplace to assess sustainability. In addition, both data preparers and data users agree there would be value in convergence toward a standardized baseline set of ESG metrics in the infrastructure asset life cycle. Nevertheless, the results of this project also show that efforts to improve reporting standards and metrics remain insufficient.
The 41-page report, which includes details on the survey and the interviews, is available now.
For more information, please visit https://www.guggenheiminvestments.com/sustainability.
About Guggenheim Investments
Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with more than $228 billion1 in total assets across fixed income, equity, and alternative strategies. We focus on the return and risk needs of insurance companies, corporate and public pension funds, sovereign wealth funds, endowments and foundations, consultants, wealth managers, and high-net-worth investors. Our 250+ investment professionals perform rigorous research to understand market trends and identify undervalued opportunities in areas that are often complex and underfollowed. This approach to investment management has enabled us to deliver innovative strategies providing diversification opportunities and attractive long-term results.
About World Wildlife Fund (WWF)
WWF is one of the world’s leading conservation organizations, working for 60 years in nearly 100 countries to help people and nature thrive. With the support of 1.3 million members in the United States and more than 5 million members worldwide, WWF is dedicated to delivering science-based solutions to preserve the diversity and abundance of life on Earth, halt the degradation of the environment, and combat the climate crisis. Visit worldwildlife.org to learn more; follow @WWFNews on Twitter to keep up with the latest conservation news; and sign up for our newsletter and news alerts here.
1Guggenheim Investments assets under management are as of 6.30.2022. The assets include leverage of $18.3bn for assets under management. Guggenheim Investments represents the following affiliated investment management businesses: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Fund Management (Europe) Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management.
Investing involves risk, including the possible loss of principal. Infrastructure investments may be subject to a variety of risks, not all of which can be foreseen or quantified, including operating, economic, environmental, commercial, currency, regulatory, political and financial risks. Investing in a specific sector such as infrastructure is more volatile than investing in a broadly diversified portfolio, as there is a greater risk due to the concentration of holdings in issuers of similar offerings. Sustainability requirements may limit available investments, which could hinder performance when compared to strategies with no such requirements.
This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC, or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.
© 2022, Guggenheim Investments and World Wildlife Fund, Inc. No part of this article may be reproduced in any form in any other publication, without express written permission of Guggenheim Investments, or World Wildlife Fund.