The Four Attributes of the Guggenheim Sustainablity Quotient: Good Governance

All developments must be lawful, transparent, free of conflict and corruption, and partner with local governments.


Sustainable projects and the investment instruments that fund them will need good governance characteristics for institutional investors to make significant commitments for long-term funding. All developments must adhere to the laws and regulations of their local jurisdictions and must be transparent, demonstrably free of conflict and corruption, and fully compliant with the investment regulatory regime of the investor base. This attribute also acknowledges that local and national governments are essential partners in the development of the project and the success of the investment.

Within the broad imperative for good governance, Environmental, Social and Governance (ESG) principles should also be considered, specifically as they relate to security selection, valuation, and risk mitigation in the investment process. The governance criteria include ethical and accurate accounting, audit and disclosure practices, exemplary corporate behavior, and equitable board structures for the entities involved in the development project.

Infrastructure assets have useful lives that often exceed 50 or 100 years, making sustainability and the accounting of environmental or social externalities particularly critical.  Despite these facts, the field of infrastructure sustainability accounting and assessment tools is relatively underdeveloped compared to certain other, more mature asset classes.

Public sector regulatory guidelines are further along in their development and reception. Governments have been regulating infrastructure projects and measuring impacts and practices to ensure compliance with environmental or social standards for many decades, and these regulatory models have carried over to accepted project-level policies of international financial institutions supporting infrastructure investments across the developing world. Regulatory reviews have generally focused on the preservationist analysis of whether, what, and where to build. Infrastructure accounting tools and project rating systems generally pick up where public sector regulations end, but there is still work to be done to focus on management practices and sustainability performance indicators of operating assets.

 


Sustainablity Quotient

Environmental Soundness

Sustainablity Quotient

Social Impact




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.