The Next Institutional Asset Class:
From Concept to Reality

Meeting the world’s growing infrastructure needs will require responsible development and significant capital. Transitioning sustainable infrastructure development into an institutional asset class can achieve this important goal.


 

Today, vast groups of people around the world lack access to basic infrastructure.

 

844+
Million

Clean water

Source: UNICEF

2+
Billion

Basic sanitation

Source: UNICEF

1+
Billion

Reliable electricity

Source: International Energy Agency

3.8
Billion

Internet access

Source: UN

 


Developed countries have significant infrastructure needs as well.

 

$500 Billion

is needed for infrastructure in the U.S. alone over the next 10 years.

Source: Global Infrastructure Hub

 

 

About 60%

of greenhouse gases result from infrastructure development
and use.

Source: CCCEP

 


The United Nations and other world leaders agree on the benefits of improving infrastructure responsibly.

 

Better development practices

Better economic growth

Reduced climate risk

 


Globally, there’s a critical investment gap in infrastructure.

 

$4.2 Trillion

Estimated annual investment worldwide through 2040

Source: Global Infrastructure Hub

 

$782 Billion

Estimated annual
investment shortfall

Source: Global Infrastructure Hub

 


Investors are waiting in the wings.

 

$60 Trillion

in assets are in long-term funds well-suited
for infrastructure investments.

Source: World Economic Forum

53%

of 2017 U.S. shareholder proposals focused
on sustainability.

Source: World Economic Forum

 

 


 

Scott Minerd

“We’ve reached an inflection point where doing right for the world and doing well for investors is converging.”

Scott Minerd
Chairman of Investments and Global CIO, Guggenheim Investments

 

 


In the Guggenheim Sustainable Development Quotient, we outlined the four attributes investors need to see in a project.

 

Compelling rates of return

Good governance characteristics

Environmental soundness

Positive
social impact

 


Measuring sustainability within this framework is the next critical step.

 

“Going forward, investors will require consistent methodologies and standards for infrastructure investments to be included in the sustainable development asset class.”

Anne Walsh
Chief Investment Officer, Fixed Income, Guggenheim Investments

Anne Walsh

 


Guggenheim and the WWF commissioned the Stanford Global Projects Center to study the evaluation of sustainable development. There were three key findings.

 

No single
tool or metric

has emerged as a global
industry standard.

Standards
vary widely

assessing as few as 6 criteria
or as many as 60.

More data
analysis

is needed in infrastructure sustainability reporting.

 


From here, those in the infrastructure sector must work together.

 

Align
metrics

to encourage wider adoption by investors.

Reduce
cost

of applying metrics for investors and project teams.

Enable
feedback loops

to demonstrate how metrics improve outcomes.

Improve
communication

between tools to enable reporting aggregation.

 

 




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.