Infrastructure

• Asset alignment target: Set a 5-year target for increasing the percentage of AUM or financed emissions in material sectors that are ‘aligning’ or ‘aligned’ to a net zero pathway, or ‘achieving net zero’.
• Engagement threshold target: Set a short term (<5 years) engagement threshold target which ensures that at least 70% of financed emissions in material sectors are either assessed as ‘aligned’ to a net zero pathway or ‘achieving net zero’, or subject to engagement and stewardship actions.

As with all asset classes, the asset alignment target can be split into the five steps.

1. Setting the scope

Infrastructure alignment targets are recommended to incorporate equity and debt exposure held through direct or co-investments, listed and unlisted infrastructure funds, project finance or passive investments. It typically includes greenfield and brownfield investments in economic and social infrastructure.

Potential crossover with other asset classes is high; investors will need to assess which asset class methodology is most appropriate.

2. Assessing alignment

Investors are recommended to develop an approach to assessing the alignment of real estate within their portfolios using NZIF’s criteria.

Operational assets: For operational assets, investors are recommended to determine where an asset sits on the alignment maturity scale from achieving net zero to not aligning.

Greenfield assets: For greenfield assets, the highest status that can be achieved is ‘aligning’. To achieve ‘aligning’, greenfield assets are recommended to meet the ambition, targets, decarbonisation plan and climate governance criteria, as well as specific criteria relating to asset delivery and the construction phase.

Achieving net zero: Investments could be categorised as achieving net zero when:

• Emissions are being disclosed;
• Emissions performance is already at least equal to what is required by its sector/ regional pathway for the year 2050; and
• An operational model will maintain this performance.

Data

For both operational and greenfield assets, achieving emissions disclosure (and several other indicators) may take a significant period of time. Investors will need to use the best available data or estimates to address gaps and engage with companies, users and regulators to improve disclosure.

3. Setting the target

Once an approach to alignment has been established and a baseline assessment has been performed, investors are recommended to set:

• A 5-year target for increasing the percentage of AUM or financed emissions in material sectors that are ‘aligning’ or ‘aligned’ to a net zero pathway, or ‘achieving net zero’.

This target is encouraged to increase towards the goal of 100% of AUM or financed emissions to be net zero or aligned to a net zero pathway by 2040.

Targets are recommended to be set on a fund-by-fund basis by asset management but may also be set as an aggregate for the portfolio if more relevant.

It is recommended that the different types of infrastructure assets and the different levels of influence (e.g. meaningful influence, fund of funds, etc.) investors may have should be acknowledged in the target-setting stage.

4. Delivering the target

Investors may utilise multiple levers to inform their net zero investment strategy and to help infrastructure assets transition towards meeting the alignment criteria and achieving the asset alignment target. This includes portfolio construction strategies that include negative and positive screening approaches, and developing engagement strategies to encourage improved climate performance and increased asset alignment.

5. Monitoring the target

Investors are recommended to review and update targets, with portfolio alignment assessments and disclosures recommended to take place on at least a yearly basis.

See ‘Monitoring the targets’ in the across all asset classes section for more detail on disclosure and attribution analysis.

Case study

Implementing the Net Zero Investment Framework for infrastructure: Macquarie Asset Management