Sustainability factors driving infrastructure investments

The Infrastructure Sustainability Council of Australia (ISCA) has revealed that environmental, social & governance (ESG) factors are driving infrastructure upgrades in Australia.

Last year, Australia saw large loan facilities being deployed for the first time to drive ESG upgrades and improvements to major infrastructure assets.

The ISCA said in a statement that a recent development within the broader ESG movement is the rapid increase in the scale of Sustainability Linked Loans (SLLs).

SLLs offer explicit price incentives to borrowers or investors for environmental improvements.

“Companies that achieve their sustainability targets benefit from favourable interest rates, while a failure to do so will lead to higher rates. With SLLs, companies therefore have an incentive to align both financing and sustainability objectives,” the ISCA said.

“SLLs are driving significant environmental upgrades of corporate and infrastructure assets around the world.”

ANZ, Westpac and BNP Paribas banks have provided billions of dollars of SLLs to organisations such as Sydney Airport, Investa Commercial Property, Queensland Airport, Adelaide Airport and AGL.

“Communities, consumers and governments increasingly expect investors to allocate capital in a socially and environmentally responsible and ethical way, and be transparent about their investment practices,” the ISCA said.

The council stated that many organisations have developed their own internal policies and procedures to assess ESG risks and opportunities within its industry frameworks.

Research released by Bloomberg New Energy Finance in October 2019 showed that  the total amount of sustainability linked debt now exceeds USD1 trillion (AUD$1.5 trillion).

The ISCA stated that infrastructure investment by superannuation funds in Australia have a particularly strong ESG focus due to the long term nature of the assets and investment mandates.

“Investors measuring and reporting ESG performance will also proactively look to improve the performance of their assets,” The ISCA said.

“SLL’s can improve quality, performance and value through their focus on upgrades of existing assets.”

The council stated it expects that ESG screened investments will continue to grow in importance as organisations look to demonstrate their environmental, social, governance and commercial sustainability.

Clean Energy Finance Corp (CEFC) is also providing loans linked to ESG performance, including AUD100 million into MIRA’s Australian infrastructure platform to target lower carbon emissions and improved energy efficiency in assets including airports, electricity, port, rail and water, and AUD150 million to the IFM Australia Infrastructure Fund.

These two investors hold a portfolio of assets including ports, electricity networks, airports and water infrastructure.

CEFC also manages the Australian Recycling Investment Fund.

According to the ISCA, investments under an ‘ESG’, ‘sustainable’ or ‘ethical’ investment umbrella have moved into the mainstream over the past decade, and particularly in the last three years.

Sustainability linked debt comprises green, social and sustainability bonds which have been around for 10 years, and the more recent green and sustainability linked loans.

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Applications open for Australian Recycling Investment Fund

The Federal Government is inviting applications for the newly established Australian Recycling Investment Fund.

According to Environment Minister Sussan Ley, the fund will support projects that increase recycling rates, turn waste into valuable products and encourage innovation.

“Australians want to be confident that when we put things in our recycling bin, or deliver them to a collection centre, that they will be recycled and not dumped in landfill or simply sent overseas. That is why we committed to the Australian Recycling Investment Fund at the 2019 election, and today we are delivering,” Ms Ley said.

“Last month’s Meeting of Environment Ministers set a clear message about our commitment to a circular economy and a timetable for banning problem waste exports. Growing our recycling capacity is critical in that process and this scale of investment will make a real difference.”

The fund will be managed by the Clean Energy Finance Corporation, with funding offered as concessional loans.

The announcement follows criticism from Labor Assistant Environment Spokesman Josh Wilson, who said the Federal Government was not doing enough to build on the national waste strategy.

“We know the so-called recycling investment plan is predominantly bulked out with prepackaged or repackaged funds,” Mr Wilson said.

“The hundred million dollars in the Australian Recycling Investment Fund consists of nothing more than a fresh label on existing clean energy finance moneys.”

Finance Minister Mathias Cormann said the Federal Government had provided a direction to the CEFC Board to ensure the establishment of the fund.

“The Australian Recycling Investment Fund will provide the CEFC with the capacity to support waste and recycling technologies by making investments which attract private sector support, and by working with strategic financing partners to attract additional investments into this sector,” Mr Cormann said.

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Liberal Party releases waste and recycling policy

Prime Minister Scott Morrison has announced that if elected, the Liberal Government will invest $203 million to increase recycling and reduce waste, protect Australia’s biodiversity and restore waterways

Mr Morrison said he wants to ensure the protection of Australia’s environment for future generations.

“We will increase Australia’s recycling rates, tackle plastic waste and litter, accelerate work on new recycling schemes and continue action to halve food waste by 2030.”

The government’s waste and recycling initiatives include:

  • $100 million to develop the Australian Recycling Investment Fund to support the manufacturing of lower emissions and energy-efficient recycled content products including recycled content plastics, paper and pulp.
  • $20 million for a new Product Stewardship Investment Fund to accelerate work on new industry-led recycling schemes for batteries, electrical and electronic products, photovoltaic systems and plastic oil containers.
  • $20 million to find new and innovative solutions to plastic recycling and waste through the Cooperative Research Centres Projects grants program.
  • $16 million to support the Pacific Ocean Litter Project, working with neighbours in the Pacific to reduce plastics and other waste in the ocean.
  • Up to $5.8 million for a range of initiatives through the Environment Restoration Fund to support Clean Up Australia, Keep Australia Beautiful, the Australian Council of Recycling, Planet Ark, the Australian Packaging Covenant Organisation and OzHarvest.
  • Up to $5 million through the Environment Restoration Fund for Conservation Volunteers Australia to coordinate community campaigns to clean up plastic waste in beaches and rivers.
  • Continuing to work with state, territory and local governments on opportunities to get more recycled content into road construction – building on the funding provided to the Australian Road Research Board in the 2019-Budget.

Australian Council of Recycling (ACOR) CEO Pete Shmigel said the government’s new recycling policy was a win for the industry.

“With the kerbside recycling part of our sector under pressure, this package is an appropriate, awesome and advantageous investment in Australian recycling’s domestic sustainability now and into the future,” Mr Shmigel said.

“The Coalition has kicked one strongly through the policy posts that will result in less waste to landfill, recycling industry co-investment, community confidence in their efforts, value-adding jobs in regional centres and resource security in a competitive world.”

Mr Shmigel said the Labor Party’s recycling policy was also strong and substantial, with commitments in the areas of industry infrastructure, product stewardship and procurement.

“Australian voters, some 90 per cent of whom voluntarily participate in recycling, can be confident that both our major parties and the Greens have provided substantive policies for this election,” Mr Shmigel said.

“All three choices are positive and ACOR will compile a comparative scorecard based on its 10 point plan in the next week.”

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