The Guggenheim Sustainability Quotient For Institutional Investors

We believe an infrastructure or development project must be engineered to contain the four key attributes of our Sustainability Quotient at their inception before capital is committed.


At its core, sustainable development means investing in safe, reliable infrastructure and financing projects that will power our world, feed our people, and foster growth in ways that preserve and protect our environment. Without sufficient infrastructure, economic growth is constrained, energy production and utilization is inefficient, and the quality of life for society at large is degraded.


Video: The Sustainable Development Quotient

The importance of transitioning sustainable development into an institutional asset class.


The world’s infrastructure needs are significant, with large parts of the world lacking access to the basic necessities of human life. An estimated 663 million people lack access to clean water, 2.4 billion people lack access to basic sanitation, and 1.1 billion people lack access to reliable electricity. US $4.5 trillion is needed annually to fulfill the 17 United Nations Sustainable Development Goals (SDGs) from now until 2030, with a current annual shortfall of US $2.5 trillion. The necessity for upgrading infrastructure in the developed world is also significant: In the United States alone, the funding gap for new infrastructure needs is an estimated $144 billion per year through 2025, according to the American Society of Civil Engineers.

Meeting the world’s infrastructure investment needs will require a finance approach that blends contributions from both the public and private sectors. Institutional investors with long investment horizons are becoming more interested in sustainable development opportunities, but the sector is still evolving into a bona fide institutional asset class. The challenge in making this transition from individual project finance investments to a category of investments with shared attributes and standards is that it lacks a set of organizing principles and measurements. What attributes must an infrastructure investment possess in order for it to be considered sustainable? How are these attributes measured to ensure that the project possesses them? 

The Sustainablity Quotient

Guggenheim has developed a model for establishing the attributes of a sustainable investment called The Sustainability Quotient. In this construct, an infrastructure or development project must be engineered to contain the four key attributes of our Sustainability Quotient at their inception before capital is committed. We believe that by seeking investments that demonstrate the four attributes in our Sustainability Quotient it is possible to achieve the true north of investing with committed capital from institutional investors.

The Sustainablity Quotient

 




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, including environmental, social, and governance (ESG) obligations may limit available investments, which could hinder performance when compared to strategies with no such requirements.




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Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management.