Foreword

An abstract of the goals and objectives of Stanford Global Projects Center’s Sustainability Standards for Infrastructure Investors report.


Sustainability and Environmental, Social and Governance (ESG) standards, reporting tools, ratings certifications and accounting systems are becoming a familiar part of the investment industry. Reporting standards, metric systems, and ratings have been developed and continue to evolve across a myriad of public and private asset classes to give investors useful information about the sustainability performance and practices of the investment opportunities before them. The challenge amid this proliferation of approaches is to identify common ground so investors can have a consistent approach across asset classes. As leading infrastructure investors Guggenheim noted the challenge was particularly acute in the infrastructure investment space.

To begin to address this challenge, WWF and Guggenheim Partners commissioned members of the Stanford Global Projects Center to identify and analyze the various metrics that have been established by multiple organizations to assess the sustainability of infrastructure investments. The purpose of the study is to assess the state of the practice for sustainability standards and rating or accounting systems for infrastructure investment, providing all investors a practical guide. Sustainability assessment has been an important factor in infrastructure in many developed economies for some time, but this was largely limited to regulatory compliance and permitting. Recently, though, investor-oriented standards and project rating programs have been developed to support investors in the sector, and these are the focus of this study. This review was accomplished via detailed assessments of each of the metric systems included in the study supplemented by interviews with the developers of those standards and industry practitioners.

In the table below, the standards studied are categorized as Project Screening methods or Accounting Tools.

Sustainability Standard Summary Information

Sustainability Standard Summary Information

As outlined in the table, the Project Screening category is used for standards focused on the detailed review and scoring of individual infrastructure projects. The accounting tool category describes general or tailored standards to report sustainability information.

As the metric and reporting industry continues to develop in the sector, those specific indicators and metrics that emerge as international standards will enable wider adoption by more diversified investors. In the meantime, rating and accounting tool developers for the industry will likely continue to evolve their offerings, and pioneering investors in the industry will likely continue to experiment with different tools available towards a goal of more comprehensive, standardized reporting of sustainable investment metrics. For any asset class, and especially infrastructure, this will be a vitally important endeavor. We hope to be a leader in the discussion that helps to converge both approaches and terminology to infrastructure investment.

At its core, sustainable development means investing in safe and reliable infrastructure to power our world, feed our people, and foster growth in ways that preserve and protect our environment. It is becoming clear that before infrastructure investing can successfully transition to an institutional asset class, there must be consistent methodologies for determining its sustainability. The fruits of this project will make a significant contribution toward achieving that objective.

 




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, Guggenheim Real Estate, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management.