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OECD Green Talks LIVE - Green Infrastructure in the Decade for Delivery: Assessing Institutional Investment

Infrastructure, such as energy, water, transport and healthcare, is critical for socio-economic development and delivering global climate and development commitments. Yet, the infrastructure we need to meet these goals requires an additional annual investment of around USD 2.5-3 trillion globally. Governments cannot plug this gap alone - mobilising private capital is imperative.

The key role of institutional investors in infrastructure development has been long recognised. Infrastructure assets with their long-term, stable and often inflation-hedged revenues align well with the risk-return profile of long-term investors like pension funds and life insurance companies. But with over a decade spent on increasing institutional investment in infrastructure, where does the level of investment stand? How green are the infrastructure assets in institutional portfolios? And what are the levers to upscale investment?

On 14 January 2021, Dirk Röttgers and Aayush Tandon of the OECD Environment Directorate presented the key findings from the report "Green Infrastructure in the Decade for Delivery: Assessing Institutional Investment".

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OECD Green Talks LIVE - Green Infrastructure in the Decade for Delivery: Assessing Institutional Investment

  1. 1. Dirk RÖTTGERS and Aayush TANDON Green Finance and Investment Climate Water and Biodiversity Division, Environment Directorate Green Infrastructure in the Decade for Delivery ASSESSING INSTITUTIONAL INVESTMENT @OECD_ENV #GreenTalks OECD Green Talks: LIVE 14 January 2021
  2. 2. Overview and Scope How much can institutional investors invest in infrastructure ? How much have institutional investors invested in infrastructure, particularly green infrastructure ? What are the levers and policy options to shift and scale-up investment in green infrastructure? Guiding QUESTIONS G20+OECD AllInfrastructure PensionFunds Insurers SWFs AssetManagers SCOPE DATASOURCES Real Economy 2 max. USD 11.4 T USD 1.04 T (all) USD 340 B (green)
  3. 3. How much can Institutional Investors Invest in Infrastructure ? delineating ‘investable AUM’ *Based on quantitative limits imposed on investment through unlisted funds and direct project-level equity/debt on pension funds and insurance companies. Caveat: Unlisted funds are used to invest in private assets other than infrastructure. This in effect lowers the investable AUM for infrastructure. * 3
  4. 4. 4 How have Institutional Investors Invested in Infrastructure ? mapping the current investment landscape All(includinggreen) INFRASTRUCTUREINVESTMENT CROSS-BORDER SECTORS
  5. 5. Transition to online DATA Explorer
  6. 6. 6 How to Shift and Upscale Green Infrastructure Investment ? levers and policy prioritiesANALYTICALFRAMEWORK
  7. 7. 7
  8. 8. CountryDiagnostics 8 SectoralDeepDives Progress&Update 2022 Outlook informing mobilisation strategies and tracking progress
  9. 9. Thank you for joining the discussion! For more information, contact: Dirk.Rottgers@OECD.org Aayush.Tandon@OECD.org Access the report and data explorer: oe.cd/green-infra-dfd @OECD_ENV #GreenTalks
  10. 10. Annex
  11. 11. 11 Institutional Investment in Infrastructure filling data gaps Hierarchy of methods Regression-based predicted investments Averages based on other predicted values Averages based on available data Observed data Predicted private equity fund commitments based on AUM, country, sector, fund FE, etc. Direct equity investment based on predicted project sizes, avg. gearing ratios and avg. debt shares Deals of private equity funds based on the average of the categories available Stock-market holdings: No way to impute unavailable information Examples
  12. 12. 12 | Fund A’s weights by sector and country of fund A’s deals Observed deal values of fund A All deals of fund A Aggregation to country-sector level Estimated deal values of fund A Observed commitments to fund A Estimated commitment data for fund A Fund A’s called percentages All commitm ents to fund A Share of fund A’s residual value attributed to investors Share of fund A’s residual value attributed to investors by sector and country of asset Fund A’s called RVPI Step 1 Step 2 Step 3 Step 4
  13. 13. 13 Institutional Investment in Infrastructure investable AUM Quantitative limits prescribed Limits available in existing OECD work* Take relevant limits Look at relevant regulation/third party information Take relevant limits No limit prescribed/prudent person or similar principle Look at investment data and compile country wise lists of known PF/IC Information on infrastructure allocation targets known Take maximum known infrastructure allocation target Take maximum known infrastructure allocation (%) YES NO YES NO YES NO
  14. 14. 14 Observed/estimated value of investor’s investment in asset Investor commitment in fund (%) * Residual Value of fund Observed/estimated value of investor’s investment in asset Market cap. of company * shares held by investor (%) Observed fund NAV * units held by investor Book value of fund’s investment in asset Market cap. of company * shares held by investor (%) Market value of the fund * sectoral weight of underlying securities Unlisted Funds Direct Listed Securities Listed funds INVESTOR ASSET Institutional Investment in Infrastructure valuation techniques

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