Infrastructure assets have improved their ESG reporting, but more focus on outcomes is needed
Source: GRESB Infrastructure Asset Assessment.
NOTE: Short-term targets are targets set for the current year (in this case 2022). Targets refer to Scope 1,2, and 3 GHG emissions.
Scope 1 = Direct emissions from sources owned or controlled by the entity. Scope 2 = Indirect emissions created by the generation of purchased energy. Scope 3 = All other indirect emissions as a result of the entity's activities through its entire value chain. 'Target met' indicates that the asset's reported GHG performance value for the current year matches its current year target.
In recent years, it has become increasingly common to consider ESG factors in all types of decision making across industries and sectors. The infrastructure sector is no different. As a result, infrastructure assets are getting better at setting up ESG policies, plans, systems, and disclosure – this is one of the key findings of GRESB’s latest Infrastructure Asset Assessment. The GI Hub collaborated closely with GRESB to develop bespoke data and analysis from this assessment for our Infrastructure Monitor 2022 report.
Our analysis reveals that infrastructure assets improved in all three pillars of ESG (environmental, social, and governance) in 2022 and that on average, assets score better in the environmental and social pillars. Scores in the governance pillar are lagging, primarily due to the typically low-scoring Certification aspect. On the other end of the spectrum, the two highest scoring aspects in 2022 were Energy and Health and Safety, maintaining their pole position from 2021.
Promisingly, the data also suggest that ESG objectives are gradually expanding beyond a narrow focus on energy and GHG emissions. In 2022, scores improved significantly for Waste and Biodiversity, which were two of the lowest-performing aspects in 2021. This reflects the rising prominence of these issues on ESG agendas, supported by increasing global action on this front (e.g. circular economy policies such as those led by the EU’s Circular Economy Action Plan, and the establishment of the Taskforce on Nature-related Financial Disclosures).
However, it is critical to underscore what ESG scores in the infrastructure sector do and do not capture. Currently, data generally reflect an entity’s ESG management approach (e.g. policies, plans, and systems) and transparency of reporting; they do not evaluate actual ESG outcomes. Thus, while improvements in ESG scores over time are encouraging because they indicate a willingness to improve the sustainability outcomes of infrastructure, the improvements do not themselves lead to improved sustainability outcomes.
However, we can look at data on targets for GHG emissions to gain some insight on progress toward decarbonisation as an outcome. Here, the data show that the share of infrastructure assets setting a long-term emission target (covering both direct and indirect emissions) increased from 18% in 2019 to 48% in 2022. This also is encouraging, but still more than half of the reporting assets currently do not have a long-term target. Moreover, of those that have set long-term targets, only 16% have a target of zero emissions. This means that overall, only 8% of infrastructure assets are targeting zero in the long-term.
The story is similar when looking at short-term targets. In 2022, less than half (48%) of infrastructure assets had a short-term GHG emission target and among them, only 12% had a target of zero emissions. Moreover, few infrastructure assets are currently meeting their targets. In 2022, only 20% of short-term targets were met. Overall, out of all infrastructure assets that reported in 2022, only 3% had a short term zero emissions target and met it.
These findings indicate that despite increased recognition of the need for infrastructure assets to reduce emissions, neither the level of target setting, nor the ambitions of the targets being set, nor the current performance on these targets are aligned with what is required to make infrastructure more sustainable.
While data such as this shed some light on progress towards ESG outcomes, evaluation of ESG outcomes of infrastructure are not currently available. The infrastructure sector must move towards measuring the positive and negative outcomes of infrastructure assets in terms of their impact on society and the environment, to better inform investment decisions and reduce infrastructure’s significant carbon footprint.