Insights

The risk of default in airports has increased, as has the risk of bankruptcy. This piece was originally published in the Financial Times and the Wall Street Journal in April 2021. Can Covid Impact Long Term Investments? The impact of COVID-19 lockdowns on the airport sector highlights a dilemma about how investors approach the valuation of private, illiquid infrastructure assets:

The sensitivity of the value of unlisted infrastructure equity investments to changes in the discount rate is about 10% on average. This article was originally published in the Financial Times in April 2021. A Partial Inflation Hedge A return of inflation could unveil a significant risk exposure for investors in infrastructure. This asset class is often presented as an inflation

As more investors consider allocations to unlisted infrastructure, the need to bring the asset class into the mainstream of risk management, asset allocation and prudential regulation is increasing rapidly. Recent advances in data collection and asset pricing techniques now enable the evolution of fair market prices to be estimated.

In this contribution to the exposure draft consultation on the “Your Future, Your Super” package, we do not comment on the general approach taken by the regulator to benchmark MySuper products but solely focus on the choice of benchmark for the unlisted infrastructure asset class. We propose abandoning the use of listed equity indices to proxy investments made in the unlisted infrastructure equity asset class in the proposed performance tests of MySuper products. We argue that recent advances in data collection and innovation in asset pricing provide a robust and academically validated alternative to the currently proposed benchmark. This listed equity index (the FTSE Developed Core Index) is wholly inadequate because it is not representative of the universe or of the risks to which Superannuation products are exposed when investing in unlisted infrastructure. Instead, the infra300, an index built to be representative of the unlisted infrastructure universe, constitutes a robust and fair alternative that can benefit plan members and managers alike as well as meeting the prudential objectives of the regulator.

New research finds that ESG reporting schemes for infrastructure investors are not focused on measuring risks despite upcoming SFDR requirements to do so. A new publication of the EDHEC/Natixis Research Chair on ESG and infrastructure investment, “Towards a Scientific Approach to ESG for Infrastructure” reviews and maps major existing ESG schemes used by investors and finds that they are primarily

We explore the role of ESG issues in an investment context, namely how institutional investors should incorporate ESG elements into the financial management of their portfolios. A growing number of investors are pursuing ESG objectives to directly improve environmental and social outcomes.