The Missing Link: Listed Infrastructure Neglected in ESG and Sustainable Strategies

ESG and sustainable investing should prove the dominant investment theme of the next decade. Unfortunately, today’s most popular ESG strategies are underexposed to the very asset class, infrastructure, that will build the backbone of our energy transition, lead our environmental stewardship, and enable economic growth with a far more efficient carbon footprint. We find and elaborate in this paper that:

• The top global ESG funds have 5% exposure to global listed infrastructure, even though its companies will invest trillions in capital to enable the clean energy transition and lead the sustainability initiatives that investors care about most.
• Clean-tech ETFs, which offer exposure to sustainability, also tend to over-allocate to commoditized industries with a history of volatile earnings and returns.
• An integrated ESG approach to listed infrastructure, an asset class with steady rates of return and clear ESG themes, Economic Growth Projections (%), 2021