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