The Business Case for Sustainable Infrastructure

Infrastructure investment can help long-term institutional investors reach their goals.


We believe infrastructure investment can help institutional investors reach their goals. Some of the potential benefits include attractive risk-adjusted returns, low correlation to other asset classes, stable cash yield, long-lived physical assets, barriers to entry for competitors, and a measure of inflation protection.

Investment Value Proposition Thesis

Global demand for infrastructure and a persistent low-yield environment make private investment in infrastructure an attractive risk-adjusted opportunity. Within the context of a global consensus for sustainability, long-term investors can maximize value by delivering sustainable infrastructure solutions, which may reduce risk, and enhance political and social feasibility. Infrastructure may provide attractive risk-adjusted returns with a measure of inflation protection.

Value and Sustainability Converge in the Long-Term

License to Operate

Consistent, transparent and verifable sustainability may enhance political and social feasibility of projects, enhancing access for projects and leading to planning and operational efficiencies.

Risk Mitigation

A commitment to sustainability may mitigate the risks of costs related to environmental remediation and decommissioning.

 

As the following chart illustrates, infrastructure investments may provide attractive returns, often with less volatility than conventional debt and equity vehicles.

Infrastructure Investments Have Provided Attractive Returns, Often with Relatively Low Volatility

Date Range 2003-2018* 

Infrastructure Investments Have Provided Attractive Returns

Source: Bloomberg, Guggenheim Investments. Data as of 12.07.18. *Note: data on infrastructure debt is since 2006. The index for U.S. infrastructure debt is the Markit iBoxx USD Infrastructure Index, the index for European infrastructure debt is the Markit iBoxx EUR Infrastructure Index. Europe Infrastructure Equity is represented by the Dow Jones Brookfield Europe Infrastructure Index. North America Infrastructure Equity is represented by the Dow Jones Brookfield North America Infrastructure Index. EM Infrastructure Equity is represented by the Dow Jones Brookfield Emerging Markets Infrastructure Index. US IG is represented by the Barclays US Aggregate Bond Index. US HY is represented by the Barclays US High Yield Index. US Equity is represented by the S&P 500. Global Equity is represented by the MSCI ACWI. Commodities is represented by the Bloomberg Commodity Index. EM Debt is represented by the J.P. Morgan EMBI Global Index. EM Equity is represented by the MSCI Emerging Markets index. Japan Equity is represented by the Nikkei Index. Europe Equity is represented by the Euro Stoxx 600 index. Europe IG is represented by the Barclays Euro-Aggregate Index. US Real Estate is represented by the Dow Jones U.S. Real Estate Index. Global Real Estate is represented by the Dow Jones Global ex-US Select Real Estate Securities Index. Cash is represented by the BAML US 3-Month Treasury Bill Index. Arctic Infrastructure figures are calculated by Guggenheim Partners, and is a weighted composite of North America, Europe, and emerging markets. Past performance does not guarantee future returns.

 

Infrastructure Investment

The Supply of Investable Capital




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.