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12/14/2023

How Long-Term Capital and Infrastructure Investing is Paving the Road to Sustainability

IFM Investors took to the stage at COP28 to discuss how infrastructure investors can help fill the investment gap to drive the energy transition forward. 
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David Neal, CEO of IFM Investors, a global institutional asset manager, was joined by John W.H. Denton AO, Stephanie Pfeifer OBE, and IFM’s Chief Strategy Officer Luba Nikulina. Together they explored the critical role infrastructure investors play in achieving global temperature goals through facilitating greater investment, increased collaboration and innovation and change to achieve net zero goals, while also highlighting that we have zero time to spare if we are to reach those goals.  

In this introduction, David Neal set the scene for

“IFM is a distinctively different investment manager, we’re wholly owned by long-term investors and that means we are completely focused on the generation of long-term, multi-decade investment returns.”
“As a result, we’re acutely aware that strong long-term investment returns require very strong, sustainable environmental and social systems.”

Long Term Capital

The panel begins with a deep dive into the role of long-term capital in accelerating the net zero transition. John Denton, who is the Secretary General of the International Chamber of Commerce (ICC), explains that for investors with a the primary goal of earning financial returns for beneficiaries and pensioners, investments need to be able to generate returns over the long-term. 

He said there needed to be a focus on the urgency of long-term investment, macroprudential regulation, and the Paris Agreement through the lens of the global south. He also notes that the biggest needs are currently in the emerging markets and developing countries. He says

“There will not be an energy transition without bringing those countries along as well.”

He also says,

“We’re trying to find solutions and we welcome new ideas, because frankly its private sector thinking and not necessarily government thinking on its own that will come up with the creative solutions to find investible opportunity or infrastructure.”  

Luba Nikulina also took the opportunity to expand on how infrastructure investors like IFM need to integrate decarbonisation goals into long term thinking. She says,

“When you make capex in an infrastructure asset it needs to last for decades, so infrastructure investors need to look decades ahead and understand the technology that will help us decarbonise.”
“Our clients all have horizons that cross generations and we hold assets for decades, so risks like climate change become really important when you’re looking to deliver long-term returns for working peoples’ retirement.”

Partnerships 

The panel then moves the discussion to the need for increased collaboration between all stakeholders to address the complex and converging issues in the transition, and unlock the capital required to achieve climate goals.  

Stephanie, the Chief Executive of IIGCC, discusses their = Net Zero Investment Framework. She breaks down its foundation, explaining that it assists in teaching individuals how to decarbonise portfolios, and provisioning implementation guides and modules for simpler asset classes. 

This is one of the most widely used methodologies, and is popular because of the flexibility it allows. The framework isn't solely about top down targets, but how you make an impact within asset classes and with assets to truly decarbonise the real economy, not just the number-per-year one. She says this,

“provides the opportunity for convergence through the flexibility of the framework.” 

Luba Nikulina also highlighted the need for investors to seek to collaborate,

“We need to collaborate given the level of systemic risk right now – we can still compete and collaborate.”

Innovation and Technology

Finally, the panel discusses the important of technology and innovation in energy transition. They talk about new and traditional infrastructure’s focus on the development of new technology paving the road to sustainability. 

Luba Nikulina, Chief Strategy Officer at IFM Investors, argues that there is a pressing need to think about where long-term capital gets invested in order to support new technologies. 

“To be able to genuinely transition, you need new technologies.” 

David Neal adds that,

“Capital expenditure in infrastructure assets has to last for decades, so we have to look ahead and become tech experts in order to predict what’s coming.”

The group wrapped the panel up  agreeing that experienced, long-term investors have a crucial role to play in not only investing in new energy sources and technologies but finding ways to transition the traditional infrastructure that forms the backbone of today’s society.

Find out more about this event here!

The Money Maze Podcast is Sponsored by IFM Investors, a global institutional asset manager whose purpose is to invest, protect and grow the long term retirement savings of working people. Owned by pension funds and inspired by their members, they invest in what matters!

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