Stockholm (NordSIP) – Sustainable infrastructure is one of the most promising fields for responsible investors. Not only is it the base upon which other investments can facilitate a carbon-neutral future, the scale of infrastructure projects is such that it provides large and stable long term investment opportunities. Moreover, infrastructure projects cover energy, transport, sanitation, healthcare and education, sectors which are perfectly aligned with the UN Sustainable Development Goals (SDGs).
However, progress has been slow and we remain far from closing the US$3 trillion a year sustainable infrastructure investment gap over the next 10 years. For institutional investors, the hurdle is their inability to verify which assets are genuinely sustainable. To tackle this challenge, the Finance to Accelerate the Sustainable Transition – Infrastructure (FAST-Infra) initiative proposes to establish a consistent, globally applicable labelling system for sustainable infrastructure assets to easily signal the sustainability of projects.
Following the publication of its draft sustainable infrastructure label, FAST-Infra invites feedback from all stakeholders on the FAST-Infra Sustainable Infrastructure Label (SI Label) until Tuesday, August 31st, 2021.
What is Fast-Infra?
FAST-Infra was conceived in early 2020 by Climate Policy Initiative (CPI), HSBC, the International Finance Corporation (IFC), OECD and the Global Infrastructure Facility under the auspices of President Macron’s One Planet Lab. It has now expanded to include close to 100 institutions, including most DFIs, NDBs, Governments, financial intermediaries, rating agencies, NGOs, among others. The leadership group of FAST-has includes representation from financial institutions (Macquarie, JPMorgan, BNP Paribas), institutional investors (Meridiam), consultants (Mazars) and other sectors.
“The overarching objective of FAST-Infra is to propose practical and inclusive solutions aimed at establishing sustainable infra as an asset class, at embedding sustainability across the life cycle of infrastructure projects and at crowding in private investment. We launched FAST-Infra as a collaborative platform, involving public and private sector participation,” Christian Deseglise, Head of Sustainable Finance and Investments, Global Banking and Markets at HSBC tells NordSIP. “This multi-stakeholder dimension is important: FAST-Infra is based on the premise that no single institution can remove the many barriers that have hindered the mobilization of finance. The working group on the FAST-Infra label is led by Macquarie and the Global Infrastructure Facility. HSBC is an active contributor in the working group.”
According to Robin Grenfell, Senior Manager at Green Investment Group, a part of Macquarie since 2017, creating an effective FI SI label that is user-friendly to the private sector and that is endorsed by the public sector “has involved a great deal of standards consolidation and stakeholder management.”
For the label to fulfil its function, Grenfell argues that investors have to buy in. “Once the FI SI label is fully approved, we are looking for asset owners and developers to self-declare that the assets that they own are sustainable infrastructure assets according to FAST-Infra’s SI documentation. So FAST-Infra is working with banks, asset managers, developers, development banks and export credit agencies to adopt the label and scale-up financing and investment into sustainable infrastructure,” Grenfell continues.
“When asset owners and developers self-declare their assets to be sustainable infrastructure, this will throw up a great deal of data. At the same time the FAST-Infra SI documentation will need to be updated annually. Hence FAST-Infra has asked for expressions of interest from organisations that would like to act as a FAST-Infra data repository, and/or as a FAST-Infra SI label secretariat,” Grenfell says.
“We also expect that a cottage industry of ‘verifiers’ will spring up; organisations offering to verify if infrastructure assets are in alignment with the FAST-Infra SI label documentation,” Grenfell adds.
The Benefits – Better Data & Financial Solutions
In fulfilling its stated goal the FAST-Infra label could play a crucial role in accelerating the sustainability revolution. Once standards are set by the industry and become homogenous across infrastructure products, private and public investors will have much better data to act upon.
“In addition to the Label, FAST-Infra is working on the development of a secure data and information platform to facilitate the origination and distribution of infrastructure loans to the institutional market. The platform we have in mind would assist information and data flow in the space,” Deseglise explains.
“It would provide a number of benefits in terms of deal flow accessibility and transparency. it would simplify processes and offer better monitoring, data analytics and reporting. We think such a platform can help catalyze the development of infra products and help countries, sub-national entities and sponsors to develop more quality projects by facilitating and streamlining their work,” Deseglise says. “It is an ambitious project which is developed by a multi-stakeholder group, led by IBM, Source, Refinitiv, and various other key partners. Together with the Label, this end to end platform, covering the life cycle of the project, is potentially transformative for the market, and has applicability globally.”
“Finally, FAST-Infra is also looking at financial solutions to encourage the development of investment-grade assets via various de-risking mechanisms: a power purchase agreement (PPA) or revenue guarantee, and an open managed co-lending portfolio programme (OMCPP), which builds on IFC’s successful MCPP,” Deseglise adds.
“We think the solutions advanced by FAST-Infra will prove critical components of the overall efforts to mobilize private capital to help finance sustainable infrastructure needs, particularly in the emerging and developing world,” Deseglise concludes.