13 July 2023  |  Toronto

Global Insight Series: Building Canadian Digital Infrastructure

On June 7th, Winnipeg, Canada hosted DIF Capital Partners’ “Global Digital Insights Forum”, where we brought together our global team of in-house digital experts, industry advisors, and portfolio company leadership to share market insights, best practices and discuss the long-term outlook for the digital sector.

As a leading global mid-market infrastructure manager, DIF is proud to have a proven track record of investing in and scaling up digital infrastructure platforms globally. This includes our investment activities in Canada, where we are building out the rural fiber network in Manitoba and Saskatchewan. Here our investments in Valley Fiber and RFNOW enjoy tremendous support from our government and First Nations partners.

As part of our Global Insights Series, DIF published “Building Canadian Digital Infrastructure”, a report summarizing the key takeaways and insights from the event. The themes addressed in the report include:

  • The internet has become the fourth utility, and fiber is the fastest way to access it. However, not all fiber is created equal, and finding market niches is critical to achieving superior risk-adjusted returns. DIF has accordingly built a thesis that the economic model for rural fiber boasts significant advantages, and is executing on this thesis across strategic markets globally, including in the Canadian Prairies.
  • To build a successful rural network locally, it is important to be first to market, take a strategic and disciplined approach to pricing, provide a superior customer experience and leverage network-build capex to target both residences and commercial premises.
  • The advantages of rural fiber broadband are twofold. Market demand for greater speed and bandwidth means fiber broadband provides inflation-protected recurring revenue, future-proofing operators’ need to meet increasing demand. The attractive demographics and economics in key rural markets complement the first-mover advantage and lower competitive intensity, resulting in a utility-like, defensive and simple business model.

The report can be downloaded here: DIF Global Insight Series – Building Canadian Digital Infrastructure (June 2023)

Global Insights Series
13 December 2022  |  Schiphol

Infrastructure investors must see the wood for the trees when it comes to ESG impact | blog

There is no doubt that the environmental, social and governance (ESG) impacts of infrastructure investments are of increasing interest to regulators, investors and civil society. That is good news, but it’s also important this impact is understood in a holistic way, telling the full story of the infrastructure project we fund.

Currently, much of the debate with LPs on ESG impact is focused on managing and minimising the adverse impacts that all infrastructure projects have. New rules such as the EU’s Sustainable Finance Disclosure Regulations (SFDR), rightly, demand transparency and accountability in areas such as reducing emissions, improving health and safety or decreasing biodiversity loss.

That is much needed, but focusing on the minimisation of harm also risks failing to see the wood for the trees.

Intrinsic benefits

For those who work in our sector the connection between infrastructure investment, economic growth and societal benefits is very clear.

The hospital and school investments we make improve health and enrich education. Fiber networks get thousands online to close the digital divide. Clean energy assets are laying the foundations for the low-carbon economy and roadbuilding enables millions of drivers to travel more quickly, safely and efficiently.

Across the world, infrastructure is helping in achieve the challenges of the UN Sustainable Development Goals (SDGs).

So just as we should not solely use a traditional cost/benefit analysis to narrowly focus on just the financial viability of an asset; we should not use ESG analysis to solely focus on reducing harm. That risks overlooking the wider inherent benefits our sector creates.

Measuring positive outcomes

To address this challenge and showcase promising practices my firm, DIF Capital Partners, has worked with specialist sustainability consultants to develop an ‘Intrinsic Benefits Tool’.

The aim of the tool is to provide both a sector- and country-level analysis for each sector we invest in that identifies the intrinsic benefits an investment might provide.

It is based on impact metrics developed by UNEP-FI and its scores measure both positive and negative impacts that can be linked back to the SDGs. It also considers each country’s specific needs or issues. A school investment in a country lacking teaching capabilities, for instance, would score higher than a similar investment in a country with abundant education facilities.

For example, we used the tool when considering our investment in Airtower, a US wireless company providing the next generation wifi networks. It helped show how these networks enable first responders such as ambulance drivers to deal with emergencies, contributing to SDG 3 (Good Health & Well-being), build smart, sustainable cities (SDG 11) and use cloud migration to reduce the need for emissions-intensive local servers (SDG 13).

It provided a similar role for our investment in Greener, a market leader in mobile battery solutions in the Netherlands, showing that Greener contributes positively to SDG 9 (Industry, innovation, and infrastructure), SDG 11 (Sustainable cities and communities), and SDG 13 (Climate action) by supplying clean energy and mitigating the impacts of climate change.

The tool is part of a holistic attempt to understand ESG risks and opportunities in our investment process which also includes a screening mechanism during pre-investment, and active monitoring and management of an investee’s potential negative impacts throughout our ownership.

A brighter infrastructure investing picture

We live in a world where megatrends such as digitisation, energy transition, urbanisation and consumption continue to foster demand for infrastructure investing. But it is also a world where projects must continuously report on their environmental and social impacts, and show they align with public policy goals such as the SDGs.

As the sector beds in systems and standards to allow that to happen we must strike an appropriate balance between how we are generating and reporting financial returns, the action we are taking to minimize negative impacts, but also the wider long-term public benefits that are being delivered by our hospitals, schools, networks and other infrastructure too.

Frank Siblesz is Head of ESG at DIF Capital Partners

17 October 2022  |  

Getting up to net-zero speed

When DIF became a signatory to the Net Zero Asset Managers (“NZAM”) initiative in 2021, we put a dot on the horizon. But it is clear we must put our foot on the accelerator if we – and the wider infrastructure sector – are to reach that horizon before too much damage is done to our planet or our portfolio investments.

The race to transition to a low carbon economy has never felt more urgent. Over the last five years, 21% of our portfolio investments surveyed on our bespoke ESG engagement process ‘ESG Path’ responded they have been affected by extreme weather events, such as wildfires and flooding although financial impact of such events has not yet been material.

The world’s dependence on Russian oil and gas in recent months has further heightened the need to develop a diversified set of alternative energy sources and capabilities for resilient energy system of the future.

But the net-zero transition doesn’t mean flipping a green switch or investing only in companies that are already green. It means bringing significant capital and deep operational expertise to bear on infrastructure that can form the basis of a Net Zero future.

What is DIF doing?

One year on from our net zero commitment, we are putting a strong focus on pragmatism, transparency and “doing what we say we are going to do”.

We focus on delivering targets, tools, strategy and planning for each of our portfolio investments that will take us as rapidly as possible to that dot on the horizon.

Providing targets and tools

We are not just setting targets for the distant future of 2050. This month, as part of our NZAM commitments, we have published an interim target for 70% of our assets under management to be aligning with net zero by 2030.

This means that in just over seven years, the vast majority of our portfolio companies will have set their own decarbonisation path to Net Zero, will disclose GHG emissions and have clear allocated management responsibility for their reduction pathways.

This is no easy task, so DIF is providing specialist tools and guidance required. For example, there was a 150% increase in the portfolio companies using our greenhouse gas emissions tool to calculate their carbon footprint last year.

Evolving our investment strategy

To reach our Net Zero horizon, we are evolving a broader approach to sustainable infrastructure that invests not only in real assets, but also in those companies along the value chain accelerating the transition to a net zero and more connected economy.

Our new DIF VII and CIF III funds are good examples of this, as they focus on sectors such as energy transition and digitisation.

We see significant amounts of institutional capital flow into those sectors, demonstrating a maturity that is key to achieving the scale and pace needed to build a net zero economy.

Preparing for the rocky road ahead

The next step after setting the interim target for 2030 is to develop Net Zero business plans with each of our portfolio companies.

These business plans must be based on science and must have both management and shareholder support in order to be credible. These are challenges the entire infrastructure sector must confront.

It may not be a smooth road, but we cannot dally. As the impacts of climate change continue to grow, we must get up to speed quickly to manage the risks and seize the opportunities it presents.

Frank Siblesz, Head of ESG