2017 GRESB Infrastructure Results - New York
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2017 GRESB Infrastructure Results presentation, presented on 10 October in New York, hosted by J.P. Morgan Asset Management
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2017 GRESB Infrastructure Results - New York
- 1. 2017 GRESB RESULTS N o r t h A m e r i c a
- 2. AGENDA 1. Welcome – JPMorgan Asset Management 2. GRESB Infrastructure – Background and Perspective • Dan Winters, GRESB 3. ESG and Business Value • Alex Black, Alinda Capital Partners • Margaret Cederoth, WSP • Amanda Wallace, JPMorgan Asset Management 4. GRESB Infrastructure - 2017 Results | Sector Leaders 5. Closing Remarks • Thomas Baade-Mathiesen, Altanova October 10, 2017 8am – 10am
- 4. More ESG focus Long-term investment in illiquid assets Importance for society Regulatory environment Investors want to understand the non-financial risks that impact risk-adjusted returns and long-term reputation Sustainable infrastructure source of deal flow Anticipating changing regulations and developments Opportunities
- 5. GRESB INFRASTRUCTURE :: FOUNDING MEMBERS INVESTOR | FUND MANAGER| ASSET OPERATOR | COMPANY MEMBERS PARTNERS
- 6. R E A L A S S E T S $ ESGPERFORMANCE ENTERPRISE PORTFOLIO ASSET I N S T I T U T I O N A L I N V E S T O R S Capital market DEBTEQUITYInvestor Objectives Common Metrics • global comparisons Proper Context • design / development • operations and maintenance Meaningful Output • decision integration • stakeholder reporting
- 7. GRESB ASSESSMENTS ESG Performance Data ESG Analytics ESG Analytics Investor perspective
- 8. FUND ASSESSMENT ASSET ASSESSMENT GRESB SCORE ASSET FUND SCORE GRESB SCORE FUND Funds with ≥25% asset participation 30% 70% GRESB INFRASTRUCTURE two complimentary assessments
- 9. 1. 2. 3.Validation Objective Scoring Peer Benchmarking
- 10. PERSPECTIVE GRESB Real Estate 2009 - 2017
- 11. 198 850
- 12. 50 2012 251 2012 42 2012 94 2012 6 2012 204 11 3 433 124 Globally diversified 9 66 GRESB Real Estate 2012 - 2017
- 15. GRESB Score GRESB participants (density) 2012 n=445 0 20 40 60 80 100 2017 n=823
- 16. 0 100 80 60 40 20 2010 2017201620152014201320122011 52 100 First-year 8-year 75 100 Consistent Engagement Drives Improvement
- 17. Behavioral Economics COMPLIANCE CURIOSITY COMPETITION RISK MANAGEMENT BUSINESS VALUE YEARS 1 - 3 YEARS 2 - 5 YEARS 3+
- 18. Behavioral Economics COMPLIANCE CURIOSITY COMPETITION RISK MANAGEMENT BUSINESS VALUE YEARS 1 - 3 YEARS 2 - 5 YEARS 3+ ???What stage are you?
- 19. Business Value of ESG - Discussion -
- 20. Bottom Line Impacts ESG Approach Access to Capital Cost Savings Productivit y Revenue Growth License to Operate Reputatio n Insuranc e Talent Management Risk Managemen t Transparency around how a company manages ESG risks and opportunities is part of its overall business value proposition. Q: How can we measure the impact? 0903c02a81792630
- 21. Policies & Leadership 1 32 4 5 76 Risk Assessment & Monitoring 8 9 33.50% 33.75% 33.75% Engagement & Communications FUND ASSESSMENT FUND SCORE GRESB Performance Indicators 10 Private Equity Funds
- 22. Management Policy & Disclosure Risks & Opportunities Monitoring & EMS Performance Indicators Stakeholder Engagement Implementation Certifications & Awards ASSET ASSESSMENT GRESB SCORE ASSET Asset Investments
- 23. ESG Case Study: EmiTel Alex Black Partner, Head of Portfolio Management STRICTLY CONFIDENTIAL
- 24. Strictly Private & Confidential Proactive ESG management – post acquisition New management processes introduced and/or enhanced: ESG strategy integrated into the annual 5-year strategic plan process ESG issues incorporated into performance measurement ESG incorporated into enterprise risk assessments Monthly report includes ESG section and KPIs Investment decisions balance financial benefits and environmental impact EmiTel proactively liaises with local communities as appropriate
- 25. Strictly Private & Confidential Environmental Management Policy -- expansion / implementation Focus points Electromagnetic fields Atmosphere and climate protection Soil and water pollution Biodiversity and protection of habitats Waste Cooperation with suppliers Energy optimization projects Activities increasing environmental awareness among employees
- 26. Strictly Private & Confidential Energy Efficiency 5-year plan includes $10MM capital to reduce energy consumption Targeting 1%+ per annum reduction in energy consumption Day-to-day work includes preforming energy audits and real time monitoring $2MM of capital projects in 2016: 9 air conditioning modernization projects 3 waste heat recovery projects 1 LED lighting replacement project Energy efficient transmitters Building ventilation modernization 2014 2015 2016 Energy consumption (GWh) 71,1 70,6 70,0 Change vs 2014 -0,7% -1,6% Power consumption reduction 2014 - 2016
- 27. 2016 Emissions generated R407c (mTCO2e) 492 R410A (mTCO2e) 357 Emissions avoided R407c (mTCO2e) 89 R410A (mTCO2e) 58 Emissions generated SOx (kg) 343 NOx (kg) 752 Greenhouse gas emissions Pollutant emissions Strictly Private & Confidential ESG KPIs Greenhouse gas emission monitoring sources and amounts completed in 2016 Periodic inspections of technical devices Modernize obsolete air conditioning equipment, limiting emissions Objective setting -- 2021 targets Emission reductions • Greenhouse gas [10%] • Pollutants [7%] Generated waste reduction [5%] Engage habitat protection on our sites Pollution data gathered
- 28. Strictly Private & Confidential Development of social issues Human Resources policies EmiTel introduced an anti-discrimination and diversity policy Introduced 3rd party auditor, who validates EmiTel’s HR adherence In 2016, Emitel received 2nd place in the European Health and Safety Best Practices Contest Encouraging healthy lifestyle and physical activity among employees (Heath & Safety week – quarterly event, competition of EmiTeams, trekking events) Health and safety education (Health & Safety newsletters e-mailed to employees each month, articles published in EmiTime) Focus on employee growth Start of EmiAcademy (workshops, trainings, simulation games)
- 29. Strictly Private & Confidential Proactive Cybersecurity 2015 IT audit completed -- led to: Coherent process of managing security Clarifying responsibilities Introduction of engaging external experts to test IT vulnerability 2016 EmiTel proceeded with ISMS implementation (Information Security Management Process) 2017 EmiTel ordered another Deloitte Advisor audit -- led to: Determine EmiTel’s cybersecurity strategy Evaluate cybersecurity disciplines / set maturity level Define top priorities + action roadmap • Identity and Access Management • Program Governance and Operating Structure • Risk Analytics and Reporting • Security Operations and Monitoring • Awareness and Training
- 30. 30 ESG Management Improvement – 2017 GRESB Results Strictly Private & Confidential
- 31. 31 California High-Speed Rail: Overview “High-speed rail is the most sustainable transportation option for keeping California moving in the 21st century. It is integral to supporting the State’s leading sustainability and climate change policies.” Jeff Morales, former Chief Executive Officer
- 32. 32 • 99% of construction waste diverted from landfill (44,000 tons) • 40% reduction in air emissions with clean construction equipment • High-performance stations planning to achieve net-zero energy and LEED Platinum certification • 100% renewable energy for rail operation • Over 1200 acres of natural habitat protected • 68 of 318 small businesses under contract located in disadvantaged communities • By 2030, high-speed rail is projected to have cumulatively avoided between 2.1—2.8 MMTCO2e of GHG emissions, equivalent to taking half a million cars off the road for one year. Sustainability Highlights and Achievements http://www.hsr.ca.gov/Programs/Green_Practices/index.html Global Reporting Initiative (GRI) G4 Core Reporting Guidelines
- 33. At a glance 33
- 34. GRESB Performance Relative to Peers
- 35. 35 2017 GRESB Infrastructure Results – CHSR Project Year-over-year GRESB score improvement Remained #1 in North America for transportation systems Achieved #1 in North America for infrastructure assets Top 10% globally #15 out of 160 overall
- 36. 36 • Demonstrates the value proposition of sustainability • Provides useful information to key stakeholders • Increases transparency surrounding ESG policies and performance • Provides platform for dialog and common understanding with potential investors • Authority will announce an Early Train Operator, illustrating the transition from infrastructure planning to rail operations • Major procurements will continue to include ESG requirements and disclosure requests Business value of GRESB Future plans / next steps
- 38. Assets Funds1051 1051 AMERICAS 39 Assets 7 Funds EMEA 91 Assets 28 Funds ASIA PACIFIC 28 Assets 11 Funds Globally diversified 18 Funds TOTAL 158 Assets 64 Funds
- 39. 2017 GLOBAL AVERAGE 201 6 51 GRESB SCORE FUND GRESB MODEL - FUND
- 40. FUND ASSESSMENT ASSET ASSESSMENT GRESB SCORE ASSET GRESB SCORE FUND 30% 70% 67 Funds with ≥25% asset participation 29 FUNDS
- 41. 2016 2017 Management Policy & Disclosure Risks & Opportunities Implementation Monitoring & EMS Stakeholder Engagement Performance Indicators Certifications & Awards
- 42. 13 AIRPORTS 12 TOLL ROAD OPERATIONS 7 WATER SYSTEMS 9 TELECOMMUNICATION 11 PORTS 22 ENERGY TRANSMISSION 27 ENERGY GENERATION (UTILITY SCALE) 11 SOCIAL 15 ENERGY GENERATION (DISTRIBUTED) 56 49 36 54 48 28 54 43 24
- 43. 43 Average GRESB SCORE GRESB MODEL - ASSET 2017 GLOBAL AVERAGE 201 6 AustraliaNorth America EuropeAsia
- 44. Inclusion of ESG Risks/Opportunities - Fund Analysis of collected ESG information TRACK REAL TIME PERFORMANCE TRACK PERFORMANCE AGAINST TARGETS ANALYZE PERFORMANCE TRENDS OVER TIME COMPARE PERFORMANCE TO PEERS OR BENCHMARKS 67% 52% 53% 52%
- 45. Inclusion of ESG Risks/Opportunities - Fund Processes in which ESG is included SCREENING DUE DILIGENCE INVESTMENT DECISION MAKING OTHER 22% 91% 83% 86%
- 46. Asset Impact Assessments Types of assessments performed (% participants) SOCIAL 23% HEALTH 26% ENVIRONMENTAL 54% COMMUNITY NEEDS 11% HUMAN RIGHTS 7%
- 47. Harvard Business School Institutional investor use of ESG data 1. Financial materiality to investment performance • European bias (vs US) 2. Proxy for management quality • reputation / legal / regulatory risk factors 3. Integration into investment process(es) • Barrier is data comparability across industry sectors 4. ESG data analytical uses • Adjustment to valuation model • Idiosyncratic / systematic risk analysis • Negative / positive investment screening 2017 survey of 400+ investment portfolio managers
- 48. GRESB Investor Member Survey 94% 35% 100% Use GRESB data in their investment process Set specific targets in terms of GRESB performance Consider their managers to be moderately to fully prepared to meet ESG requirements
- 49. 2017 GRESB Infrastructure Sector Leaders Private Equity Fund Manager Airport Operations Telecommunication Utility Scale Renewable Power Distributed Renewable Power Maritime Ports Toll Road Operations Energy Transmission Energy Generation Water Systems
- 50. Q&A
- 52. The value of sustainability Infrastructure and the GRESB framework Thomas Baade-Mathiesen, VP of Business Development, tbm@altanova.io
- 53. How projects add value Revenue Intangible Costs Risk Upside Downside More certain Less certain
- 54. Revenue Intangible Costs Risk Product Innovation Market Share Higher Price Differentiation Stakeholder Loyalty Talent Attraction & Retention Eco - Efficiency Asset Efficiency Insurance Supply Chain Input Price Volatility Resilience Upside Downside More certain Less certain
- 55. Business model innovation License to operate First mover advantage Using this lens creates higher investor value through
- 56. Revenue Intangible Costs Risk Product Innovation Market Share Higher Price Differentiation Stakeholder Loyalty Talent Attraction & Retention Eco - Efficiency Asset Efficiency Insurance Supply Chain Input Price Volatility Resilience Upside Downside More certain Less certain Making more $ Ensuring future $ Spending less $ More reliable $
- 57. Things we don’t put a value on Externalitie s Internalized Intangibles Valuation, Materiality Policy (internal) Ecosystem services (EP&L) Policy (external)
- 58. Ocean Tomo S&P 500 market cap study 197 5 201 5 17% 84%
- 59. RO I
- 61. Revenue Intangible Costs Risk Product Innovation Market Share Higher Price Differentiation Stakeholder Loyalty Talent Attraction & Retention Eco - Efficiency Asset Efficiency Insurance Supply Chain Input Price Volatility Resilience
- 63. Thomas Baade-Mathiesen VP of Business Development tbm@altanova.io Thank you!
- 64. 2017 GRESB RESULTS N o r t h A m e r i c a
Editor's Notes
- Start: We at GRESB are glad that we can present to an audience that is not frenetically checking their scores on their phones. That’s why we want to share 4 key insights with you right away
- Infra needs capital, globally: USD89 trillion in infrastructure investments needed until 2030 (IEA) USD15-20 trillion in maintenance backlog by 2013(McKinsey) USD 8 trillion for a transition to a low carbon economy.
- There has been a lot of interest in infrastructure investments the last couple of years. Increased often direct investment in infrastructure, has also created more awareness of ESG risks around this long term investments With ever-longer investment horizons, infrastructure investors increasingly require detailed information on non-financial indicators that may pose risks and provide opportunities to their infrastructure allocations. 2030 Sustainable development Goals UN Regulation provides minimum performance requirements
- A group of leading infrastructure investors saw the need for a consistent global sustainability framework for the infrastructure sector and together with GRESB in 2015 launched GRESB Infrastructure: a global sustainability benchmark for infrastructure funds and assets. The 10 founding members are part of the Infrastructure Advisory Board and have been actively involved in the inaugural infrastructure Assessment in 2016 and further development. But we see more and more responsible investors. More focus than ever on environmental, social, and governance performance across all asset classes, including Infrastructure They urge to: Increase pace of transition Increase green investments
- Capital-market driven, developed in close collaboration with the industry Common metrics – allows for global comparisons Investment cycle – design, site procurement, development, operations & maintenance Output – allows for integration in investment process
- Ultimately GRESB is a communication framework. Our process to connect industry stakeholders Central in this process is data quality, both at the company/fund level and at the portfolio level
- Two complimentary assessments: Fund Assessment concise, Asset Assessment more detailed. Link between the two, underlying investments in funds participate in the Asset Assessment. To achieve an overall GRESB Score Funds at least 25% of underlying investments should participate in the Asset Assessment Overall GRESB score is based for 30% fund score and 70% on average score of assets combined weight x average score ASSET ASSESSMENT Who participates Infrastructure companies or similar entities dedicated to the operation of infrastructure Large or small entities Entities with one / more business activities Entities that operate one / more assets/projects Sector coverage Energy generation Energy transmission, distribution & storage Telecommunication Water Resource Management Waste treatment and disposal Transportation Social “Other”
- Scoring methodology document online (Reference Guide also) Most indicators, except for table structures such as the performance indicators, consist of three sections. - Basic yes/no question that will give a score for a yes answer. - Optional selection of additional elements to increase the score. - Optional provision of evidence. If evidence is accepted this will significantly increase the score. Peer Benchmarking (sectors etc.) Peer groups consist of participants with similar business activities. If assets with several different (unrelated) business activities participate in one submission. It is not very likely that there will be peers. Small entities subject to the same ESG management and with performance information that can be aggregated, can participate in one submission.
- A lot has changed since we started GRESB Most of you have been on this journey with us for a lot of years and might remember; others have joined the movement in recent years. I am sure some of you in the audience have been at the very first official GRESB launch in 2012. Back then we started with just 198 participating entities, a number that we were very proud of back then. Today we have global and regional launch event in all six continents and we have grown the number of participants to 850. Back then we also asked you very different questions. CalPERS mandates GRESB for its real asset investments Objective: begin gathering actual data to carbon footprint full real asset portfolio Blackrock’s real asset platform joins GRESB Leading banks incorporate ESG into lending :: GRESB Debt ESG has Momentum New 2017 US participants = <#> <Gross Asset Value> IREI Editorial Board Meeting | ESG Means Business
- We want to track these targets on a global level we need more people in the sample On the listed side we can track exactly what our coverage is public disclosure
- We want to track these targets on a global level we need more people in the sample On the listed side we can track exactly what our coverage is public disclosure
- Flow of GRESB Scores
- This is a density plot of gresb scores over time for the past 5 years. You tell me what market transformation should look like but I think we can show that we are on the right track. Now lets take the next step together.
- Strong Industry Support 67 Institutional Investor members and their fiduciaries - $17 Trillion AUM 175 members from leading private equity firms and REITs globally 16 industry association members worldwide 75 solution providers, data providers and product manufacturer members
- Strong Industry Support 67 Institutional Investor members and their fiduciaries - $17 Trillion AUM 175 members from leading private equity firms and REITs globally 16 industry association members worldwide 75 solution providers, data providers and product manufacturer members
- 4d03c02a8003d6ba
- FUND ASSESSMENT Who participates Infrastructure (equity) funds and portfolios Focus on operational assets Sector specific / diversified Single region focus / diversified 10 Indicators (Questions) Around three topic Summary of Entity Assets First time participants list their investments, 2016 participants update the table. Include assets that were part of the portfolio for at least 6 months in the reporting year or operational for at least 6 months. Participants can optionally include all assets. Fraction of asset value is standard weighting approach. If weights can not be provided, participants can choose to use equal weighting or an other method. Provide context on weighting. Weights in the table must some up to 100%.
- 2016: Indicators were equally weighted within Aspects. Aspect and indicator weighting is indicative. We have slightly re-weighted the aspects to better reflect the importance of the different aspects Certifications & awards down from 7,5 & to 5% Implementation up from 7,5% to 9% Risks & Opportunities up from 10% to 11%
- The nation’s first high-speed rail system Transforming California by delivering zero-emissions transportation By 2030, high-speed rail is projected to have cumulatively avoided between approximately 2.1 and 2.8 million metric tons of GHG emissions, equivalent to taking half a million cars off the road for one year By 2040, the system will reduce vehicle miles traveled by car in the state by almost 10 million miles every day Sustainability framework was developed because HSR wanted to be a sustainable/positive presence in the state and local communities. Set out to embed sustainability throughout design, construction and (future) operations.
- Sustainability framework was developed because HSR wanted to be a sustainable/positive presence in the state and local communities. Set out to embed sustainability throughout design, construction and (future) operations. California High-Speed Rail Authority Policy Directive on Sustainability California 2013 Building Energy Efficiency Standards 2010 California Green Building Standards Code (CalGreen), Title 24, Part 11 California Long-term Energy Efficiency Strategic Plan MOU with the California Energy Commission UIC Low Carbon Rail Transport Challenge APTA Sustainability Commitment
- Construction site photos are always a good rorschach-esque moment. Sustainability folks see concrete, for which we have mix designs and understand the fly ash content, as well as how far and what type of truck delivered it. We can find the record of the piece of equipment sitting there, as well as those cranes in the background. We know how the formwork is reused and disposed of. The Safety officer would give insight into the placement of the porta johns and make sure anyone on the pergola was wearing a harness to work at height. What does an investor see? What is an investor looking at when they review GRESB results.
- High scores for Management, Policy & Disclosure, Implementation, and Stakeholder Engagement Engaging with stakeholders and having strong management structure and policy in place is critically important for HSR to achieve sustainability and community benefit objectives.
- Leader among peers in five core categories: Policy & Disclosure; Risks & Opportunities; Implementation; Performance Indicators; and Stakeholder Engagement High scores for Management, Policy & Disclosure, Implementation, and Stakeholder Engagement Engaging with stakeholders and having strong management structure and policy in place is critically important for HSR to achieve sustainability and community benefit objectives.
- In 2017: 224 responding entities of which 64 funds and 160 assets (29 out 60 funds participated with underlying assets), spread over 24 countries Increase of 21%, 2016 51 funds (+25%) and 134 assets (+19%)
- This graph looks at overall GRESB scores, consisting of the score for the Fund Assessment and weighted average score of the underlying assets. Only 29 of the 60 participating funds had at least 25% of assets that participated, the minimum threshold to get the overall GRESB score The average score is 51 out of 100, up from 33 last year showing a significant increase in performance of 55% It still is relatively low, reflecting both low coverage of assets and low asset scores, although both the number of participating funds with their assets went up (2329) as well as their average score
- The 29 funds that participated with >25% assets have a higher average fund score 67
- GRESB ASPECTS If we look at the scores per aspect, results show improvements across all aspects, with the exception of implementation, which explains the significant on increase of 54% if GRESB score for assets Not a lot of assets can report on performance indicators or use organizational or project level sustainability ratings or certifications. Reporting on Performance Indicators is yet to be common practice in Infrastructure.
- Average Scores per key asset sector
- In this chart we plot the ASSET scores on the dimensions of management and policy and implementation and measurement. The average asset score is 43 which is a great improvements from last year 28, an increase of nearly 54% Average score for Implementation & Measurement (34) lag behind Management & Policy 952) indicating improvement is needed in operational performance and implementation actions, to effectively meet ESG objectives. There is some regional differences. Assets that are diversified over region scored highest, …. Australia and New Zealand was the strongest performing continent. No surprise, that ESG management is most mature in the most mature infrastructure market
- While a high percentage of funds (88%), collect ESG information, there is a wide disparity in the actions funds take to track and analyze ESG performance of their investments.
- The nature of Infrastructure Investments, typically long term with largely defined cash flow, means a thorough ESG review before making an invesment is fundamental for effective management Leading up to actual analysis if ESG data - tracking
- Only 58% of participants undertake any form of impact assessment for the asset investments. This seems quite low considering the fixed location of infrastructure assets and vulnerability to environmental risks.
- Investors care. Earlier this year GRESB conducted a survey among our Investor members. The results show that they are demanding greater transparency on the ESG performance of real asset portfolio. GRESB is investor-driven. Investors using GRESB data can make better informed decisions on where and how they want to allocate their capital, and on what material ESG topics they need to engage with their managers. Increasingly (?) they are not just requiring companies and funds to not just list those risks, but explain how they're managing them, and if this is in line with their targets And they all agree that you are (fully) prepared to meet their disclosure demands.
- Start: We at GRESB are glad that we can present to an audience that is not frenetically checking their scores on their phones. That’s why we want to share 4 key insights with you right away
- Start: We at GRESB are glad that we can present to an audience that is not frenetically checking their scores on their phones. That’s why we want to share 4 key insights with you right away