Understanding climate change risk in an infrastructure context

Building resilient infrastructure

Equitix has made more than 360 investments in core infrastructure assets across six sectors: energy, transport, social infrastructure, environmental services, digital infrastructure and network utilities. These assets are located in more than 20 countries on 4 continents.

Known for its commitment to sustainability and innovation, Equitix focuses on responsible, long-term investment to create value for its investors as well as communities served. Equitix aims to drive the development of resilient infrastructure that meets society’s evolving needs by leveraging its extensive expertise and strategic partnerships. This includes consideration of the long-term shifts in climate patterns, which are likely to escalate physical climate risks worldwide. Investors are increasingly interested in understanding the impact of such risks on asset performance, as well as the opportunity to build resilience over the long-term.

To this extent, Equitix sought support from Mott MacDonald to conduct a PCRA. The assessment provided a high-level and long-term overview of the physical climate risks most relevant to assets in Equitix’s portfolio. For assets identified as being potentially more vulnerable to the identified climate risks, a more comprehensive analysis was undertaken to help advise on the necessary resilience measures to manage these risks.

As a responsible investor with a long-term investment horizon, Equitix recognised the need to go beyond mere reporting or isolated climate resilience measures. Instead, it sought to integrate decision-making frameworks across the investment lifecycle as well as upskill investment and asset management teams in integrating climate resilience in their decisions. This approach involves setting appropriate metrics and targets to drive positive interventions at both project and portfolio levels.

Mott MacDonald’s role in the PCRA process highlighted the need for wider asset and sustainability performance data availability, accuracy and ownership. This is crucial for providing meaningful indicators to measure the effectiveness of interventions. By adopting a holistic approach to data, Equitix can better position itself in response to evolving regulatory and client requirements.

Our strategic approach

Mott MacDonald undertook a comprehensive process to complete the PCRA, by aligning it with a representative portfolio investment horizon of 2050 and a worst-case scenario of ‘RCP 8.5’, reflecting a high greenhouse gas (GHG) emissions scenario.

The PCRA began with a scoping exercise across the entire portfolio which involved agreeing on climate hazards, scenarios, time horizons, data sources, and the overall approach, followed by screening assets based on financial materiality.
Next, a detailed portfolio-level climate risk and vulnerability screening was conducted for selected assets to assess their specific vulnerabilities to climate risks.

Finally, a comprehensive analysis was conducted on a sub-set of asset locations, combining climate vulnerability, scenario analysis, and mitigation measures for assets with the highest physical climate risk scores. This helped to develop an initial analysis of asset mitigation measures and resilience to future climate impacts. Consequently, we provided Equitix with a clear understanding of the physical climate risks its priority projects may face to inform the development of tailored resilience strategies to mitigate these risks.

To support Equitix’s staff to engage with the findings of this assessment, we developed an interactive, easy-to-use dashboard. Key features of the dashboard include the ability to:

• Explore high-level sector trends related to climate risks
• Deep dive into 50 prioritised projects
• Understand climate risk across the entire portfolio

Delivering sustainable value

We delivered a solution that provided genuine benefits to Equitix through a tailored, collaborative and pragmatic approach to the PCRA. This work has supported Equitix in developing a key aspect of its portfolio-wide climate risk and opportunity framework, which is aligned to the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).

The prioritised list of assets selected from a combination of climate and financial criteria means that Equitix is now able to start the integration of resilience-based thinking throughout the investment lifecycle with the intention of actively considering climate impacts as part of investment and asset management decision making.  This is an integral part of Equitix’s commitment to being a responsible and sustainable investor.