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Why AMP Capital’s infrastructure fund is topping the global league tables

ADIT, one of the longest-running infrastructure funds globally, topped its peer group and was named the best infrastructure fund overall for ESG performance globally.



AMP Capital’s Diversified Infrastructure Trust (ADIT) has for the second year in a row topped GRESB Infrastructure’s rankings as the best-in-class fund globally for its environmental, social and governance (ESG) performance. 

GRESB assesses the ESG performance of real assets such as roads and railways around the world. Its score combines an assessment of the ESG performance of the underlying fund and its assets.
 
ADIT, one of the longest-running infrastructure funds globally, topped its peer group and was named the best infrastructure fund overall for ESG performance globally.

Michael Cummings, AMP Capital Head of Australia and New Zealand Infrastructure Equity Funds, says Australian investors were among the earliest adopters of infrastructure as an asset class. This is in part thanks to our relatively sophisticated superannuation system, which constantly scours the world for investment-grade assets.

As a result, fund managers have a vested interest in ESG issues, in the knowledge that these factors can play a part in the overall performance of a fund and its assets. 

“We look at ESG from two angles. One is an ethical point of view, to ensure we are investing responsibly. The harder commercial angle is evidence over many years that shows a correlation between companies that perform better as an investment and an ESG perspective over time,” says Cummings. 

Not only did ADIT top GRESB Infrastructure’s league table this year and last year, some of the assets it holds also performed well according to GRESB Infrastructure’s criteria.

For instance, ADIT has a substantial interest in Melbourne Airport, which was named as the second-best global airport according to GRESB Infrastructure’s rankings. 

“We’re very focused on identifying assets with good income and ESG attributes,” says Cummings.

The ADIT team spends countless hours doing due diligence on the assets in which it invests and talking to boards and management teams to assess their financial and ESG credentials. 

Assessing how an airport addresses these factors is complex given its carbon footprint and issues such as noise pollution. So the team is looking for assets and managers that are the best in the world in managing these elements.

Similarly, it might be assumed a wind farm rates well on GRESB Infrastructure’s scores. However, simply being a renewable source of energy is not enough. The AMP Capital team is looking for assets like wind farms that also manage ESG issues such as community consultation in the best possible way.

“We spend a lot of time on boards of these assets and invest ensuring governance is best practice. We have a team of 70 people across the world and we're constantly talking about how we can apply learnings from one asset, for instance Melbourne Airport, to other assets in which we have an interest,” Cummings explains.

Having a social licence to operate is essential when managing an infrastructure asset, which is one of the reasons why ESG issues are so important in this space.

“No matter whether it’s an airport, electricity business, hospital or student housing, if you don't have the support of the local and wider community, regulators will step in. So maintaining a social licence is something infrastructure companies have to excel at over a long period,” says Cummings.

“For example, Melbourne Airport is looking to develop another runway, which involves negotiating with the community, the local council, Melbourne City Council, the Victorian state government as well as the Commonwealth. So stakeholder management is extremely important,” he adds. 

Regulatory risk is one consideration for infrastructure investors. “We are not worried about regulation that goes through due process and consultation. We do get concerned about short-term political interference in those processes,” Cummings notes.

While changing laws affecting infrastructure is one consideration for self-managed super fund (SMSF) investors, it remains an asset class many trustees are considering. One way of accessing infrastructure is AMP Capital’s Core Infrastructure Fund (CIF), which invests in ADIT.
 
"What's unique about CIF is that it gives retail investors access to assets like airports they wouldn't be able to get anywhere else,” he adds.

Infrastructure is, however, a relatively illiquid investment, which is a consideration for SMSF investors. One way to get around this is to invest in managed funds that invest in infrastructure assets which are listed on a stock exchange, such as AMP Capital’s Global Infrastructure Securities Fund (Unhedged), which is an Active ETF available on the ASX under the ticker code GLIN

These are just some of the factors SMSF investors should take into account when making decisions about how much of their portfolio to allocate to infrastructure as an asset class, a sector that’s set to continue to grow and mature over time. 
Funds related to this article: Core Infrastructure Fund

Access to a high quality diversified portfolio of unlisted and listed infrastructure assets across energy and utilities, transport and social sectors, both within Australia and across global markets.

The Fund aims for diversification by investing across infrastructure assets, sectors and geographic locations, with asset allocation targeting 50% to unlisted assets and 50% to listed securities.

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