2017 GRESB Infrastructure Results - New York

Editor's Notes

• #3: 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
• #4: 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.
• #5: 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
• #6: 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
• #7: 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
• #8: 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
• #9: 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”
• #10: 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.
• #12: 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
• #13: 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
• #14: 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
• #15: Flow of GRESB Scores
• #16: 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.
• #18: 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
• #19: 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
• #21: 4d03c02a8003d6ba
• #22: 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%.
• #23: 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%
• #32: 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.
• #33: 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
• #34: 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.
• #35: 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.
• #36: 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.
• #39: 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%)
• #40: 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 (2329) as well as their average score
• #41: The 29 funds that participated with >25% assets have a higher average fund score 67
• #42: 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.
• #43: Average Scores per key asset sector
• #44: 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
• #45: 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.
• #46: 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
• #47: 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.
• #49: 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.
• #51: 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
• #52: 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