Infrastructure is now a key part of many investors’ core strategy. The successful emergence of this asset class opens many important questions of risk management for pension plans, insurers or private wealth managers. Beyond the Thames Water debacle in the UK, private asset valuation practices are focusing the attention of regulators from the SEC to the FCA. Meanwhile, in the wake of the LDI crisis, the role of infrastructure investment in asset-liability management remains an open question. Finally, the recent sharp increase in extreme weather events illustrates the imperative to measure and benchmark the climate risks of infrastructure assets.

EDHEC Infra Days 2023 is the annual conference of the EDHEC Infra & Private Assets Research Institute and will be the opportunity to present the latest research on these key topics and the application of this research in an industry context over two days.

The first day will focus on academic work on the climate, social and financial risks of unlisted equity and private infrastructure debt investments. Many investors remain exposed to a concentrated portfolio of infrastructure assets and these risks can be very material for them, even if they seem low on average in some cases. Better risk measurement is possible thanks to cutting edge research developed at the Institute in 2023. This research provides relevant, conceptual, robust facts and data to the infrastructure investment community.

The second day, infraMetrics day, will be dedicated to our data solutions, applications drawn from the Institute’s research. Here again, interaction with the infrastructure investing community will be a core part of the seven workshops devoted to use cases for the financial and extra-financial infrastructure data available on the infraMetrics platform.

Programme overview

Day 1
Infrastructure Day – The Imperative of Risk Management

MORNING SESSIONS: ESG, FROM MEASUREMENT TO MATERIALTY

09:00 – 09:10 Introduction

Speaker: Frederic Blanc-Brude, Director, EDHEC Infra & Private Assets

09:10 – 09:40 Keynote: What Materiality of ESG Risk in Infrastructure Investments?

This opening keynote will focus on the role of ESG regulation and frameworks and whether they can provide useful information to investors in terms of risk. Understanding the materiality, and therefore the relevance, of ESG risks is central to making this information relevant to the investment process. ESG factors can contribute to volatility but may also be considered as drivers of the conditional liabilities of companies, including in regulated disclosures.

09:40 – 10:40 What ESG Risks Really Matter? The Social Acceptance of Infrastructure

This session will introduce brand new EDHEC research on the social acceptance of infrastructure activities and companies and show that material ESG risks can be detected and predicted using non-financial data. In contrast, numerous ESG topics have no predictive power when it comes to materiality. These findings invite a parsimonious, theory-based approach to integrating ESG into investment decisions, rather than relying on a laundry list of redundant indicators.

10:40–11:00 Break

11:00 – 12:00 Between a Rock and the Climate: Extreme Climate Risks, -54% or Losing $600bn

This session presents key findings of the EDHEC research program on climate risk in infrastructure investment: on the one hand, runaway climate change could lead to losses as large as half of the portfolio of some investors because of physical damage, on the other, a delayed transition, even if it achieved decarbonisation, would create a gigantic price and interest rate shock and could wipe out as much as $600bn of infrastructure asset value for the same investors. The identification and the deliberate mitigation of climate risks in the portfolio rest on the use of the correct classification of assets by TICCS taxonomy class to better diversify or exclude certain asset types.

Speaker: Darwin Marcelo, Project Director, EDHEC Infra & Private Assets

Panel:

Julien Touati, CEO, REED Management  

Declan O’Brien, Executive Director, Energy and Transport Transition Investments, UBS 

Carlos Sánchez, Senior Director, Climate Resilient Investment, WTW 

Matthew Jordan-Tank, Director, Sustainable Infrastructure Policy & Project Preparation at EBRD 

Diana Budiono, Senior Financial and Impact Risk Manager, Triodos Investment Management

Q&A session with audience

12:00 – 12:45  Climate Risk Measurement in Infrastructure

This session presents groundbreaking work on measuring climate risks at the asset level using a combination of models to estimate emissions, exposure to physical risk, and the valuation of climate risks in different climate scenarios. It highlights the importance of models to improve observable or reported data that suffers from  a range of methodological short-comings and inconsistencies. All reported emission data is the output of  the model. Thanks to a large dataset and the correct methodology, better climate data can be created that is homogenous across the assets in the portfolio.

Speaker: Darwin Marcelo, Project Director, EDHEC Infra & Private Assets

Q&A session with audience

12:45 – 14:00 Lunch

14:00–14:15 KEYNOTE: Decoding Risk and Returns. Measuring Alpha in Private Infrastructure Investments

Investments in private infrastructure are often intermediated by private funds. For prospective investors in these structures, it is imperative to assess the quality of their fund managers. This session will explain how the Direct Alpha Method can be used to dissect manager returns into systematic components driven by corresponding risks, as well as actual manager performance: Alpha. Any such decoding requires granular and accurate benchmarks and we will showcase our approach, utilizing EDHECinfra data for these purposes. 

Speaker: Ralph Eissler, Principal, Quantitative Research Group, Ares Management

14:15-15:00 How Diversified is your Infrastructure Portfolio?

This session focuses on a research paper that is published using monthly data and updated capital market assumptions. It shows that once the correlations are better known the role of infrastructure in the portfolio is clarified.

Speaker: Abhishek Gupta, Associate Director – Solutions, EDHEC Infra & Private Assets

Chair: François Berger, Executive Director, LTIIA

Q&A session with audience

15:00-15:45 Measuring Extreme Risks in Infrastructure Investments

Infrastructure is often presented as low risk but this can lead to misinterpreting the nature of these investments and how they may truly benefit investors. This session discusses the importance of measuring the volatility of infrastructure investments correctly to understand and benefit from their risk-adjusted profile. Using high-frequency data, it analyses the difference between multiple asset classes and the broad infrastructure market and shows that only when measuring the market volatility of infrastructure can the genuinely defensive qualities of the asset class be understood and used to the benefit of investors.

Speaker: Frederic Blanc-Brude, Director, EDHEC Infra & Private Assets

Chair: Avi Turetsky, Partner, Head of Ares Quantitative Research Group, Ares Management

Panel: 

Avi Turetsky, Partner and Head of the Quantitative Research Group, Ares Management

Gerald Wu, Portfolio Manager Infrastructure, LPPI

Gianluca Minella, Infrastructure Portfolio Strategy & Research Lead, ADIA

Amarik Ubi, Partner, Global Head of Infrastructure, Mercer Alternatives

Q&A session with audience

15:45-16:00 Break

16:00 – 17:00 Infrastructure as an Investment Solution

This new paper shows that infrastructure is also a useful contributor to ALM and LDI strategies but only if return correlations and exposures can be measured properly.

Speaker: Pierre Guillemin, CEO and founder, Prospective Valley SA

Chair: Jonathan Crowther, Head of LDI, Mercer

Panel: 

Bruce Phelps, Managing Director, Institutional Advisory & Solutions, PGIM

Thomas Liaudet, Partner, Global Head of GP Capital Advisory, Campbell Lutyens  

Marjia Simpraga, Infrastructure Strategist at Legal & General IM 

Jegor Tokarevich, CEO, SOF 

Lars Koehler, Executive Director, Mount Street Portfolio Advisors

17:00 – 18:00 Lessons from the Thames Water Scandal 

This session will present a new paper on the fundamental reasons for the Thames Water fiasco of 2023 and the perils for investors to enter an asset class like infrastructure without data about the risks and fair market value of such assets. It examines the triple failure of cost of capital regulation, appraisals, and uninformed investors who could not measure risk clearly.

• How tariff regulation sent the wrong message investors
• Safe and boring: myopic appraisals
• How investment structuring turned a water utility into a high-risk bet

Speaker: Tim Whittaker, Research Director, EDHEC Infra & Private Assets

18:00 – 19:00 Cocktail Reception 

DAY 2 – infraMetrics Day

The second day of the EDHEC Infra Days Conference – infraMetrics Day. It will be dedicated to our data solutions, applications drawn from the Institute’s research. Here again, interaction with the infrastructure investing community will be a core part of the seven workshops devoted to use cases for the financial and extra-financial infrastructure data available on the infraMetrics platform.

Workshop 1

Indices and Benchmarks

As the asset class has grown, it has become essential for direct investors, GPs and LPs to understand the dynamics of the market for unlisted infrastructure. Are valuations going up or down? Most investors are aware of where the market was 12 to 18 months ago, but often lack a contemporaneous view that would give them a forward-looking view of their investment case for infrastructure. Will infrastructure be replaced by bonds now that yields are durably higher? These questions and many more cannot be answered without representative market indices and benchmarks that capture market dynamics. Meanwhile, long term strategy benchmarks that look beyond the rate cycle can also be built for investors who want to hold infrastructure investments in perpetuity or to maturity. This workshop will present the indices and benchmark product of the infraMetrics platform and include use cases including:

> Capturing market dynamics with ESMA-regulated indices
> Customised portfolio and strategy benchmarks using TICCS
> Long-term Strategy Indices: investing across the cycle

Speakers:

• Frederic Blanc-Brude, Director, EDHEC Infra & Private Assets
• Abhishek Gupta, Associate Director – Solutions, EDHEC Infra & Private Assets
• Roundtable: use cases and industry applications of infraMetrics indices and benchmarks

Workshop 2

Valuation Tools for Infrastructure Equity Investments

As infrastructure becomes a larger and more omnipresent asset class, the requirement to have good data for frequent valuations increases all the time. Whether it is to transact in the secondary fund market, value pension rights or buyouts in DB funds and member investment choices in DC funds, for prudential and fiduciary reasons, the accurate and mark to market valuation of infrastructure equity investments is increasingly sensitive. The valuation tools of the infraMetrics platform allow building valuation metrics using the market method or the income method by granular segment and to customise them by asset-level risk factor exposures like leverage, size or profits and country. These valuation metrics are computed using large samples and a representative selection of assets, allowing users to access robust, yet granular data to build their own comps or benchmark acquisition or exit values. This workshop will present the unlisted infrastructure equity valuation tools of the infraMetrics platform including the following topics:

> What factors predict the market price of infrastructure companies

> Customising valuations: granular yet robust comparables

> Benchmarking cash flow forecasts with infraMetrics

Speaker:

• Abhishek Gupta, Associate Director – Solutions, EDHEC Infra & Private Assets
• Roundtable: use cases and industry applications of infraMetrics valuation tools

Workshop 3

infraMetrics for Debt Investors

Infrastructure debt has become a very attractive asset class and the opportunity for investors to get a different kind of exposure to infrastructure. However, the opacity of origination practices and the virtual absence of secondaries create valuation challenges for investors. This workshop will present the private debt indices, and debt valuation analytics product of the infraMetrics platform and focus on the following use cases.

> The perils of using the wrong inputs to value private infrastructure debt

> Credit spread dynamics: from patchy data to robust estimates of the market

> Measuring the performance of the asset class against IG corporate bonds

Speaker:

• Riazul Islam, Senior Researcher in Finance, EDHEC Infra & Private Assets
• Roundtable: use cases and industry applications of infraMetrics credit spread proxying and benchmarking tools

Workshop 4  

Climate Impact and Risk Data in infraMetrics

The climate and impacts and risks of infrastructure assets are a key point of focus but investors often lack the full picture of their level of impact or exposure to climate risks. While GPs or LPs may have carbon emission estimates for their own assets, they are not necessarily the result of a consistent model and cannot be compared to an industry average to understand the extent of the transition risk exposure. Likewise, physical risk estimates are often simplified to a ‘point on a map’ estimation and do not take into account the granularity of the terrain or the type of damage that different hazards can cause to an asset. Finally, climate data about today’s transition and physical risks are not very useful without a forward-looking view and a forward-looking value of these risks. This workshop will present the climate impact and risk metrics of the infraMetrics platform, including:

> The importance of improving data quality with emission models
> Benchmarking the climate impacts and risks of portfolios and strategies
> Building climate impact and risk proxies (Comps) for individual assets

Speaker:

Darwin Marcelo, Project Director, EDHEC Infra & Private Assets

Roundtable: use cases and industry applications of infraMetrics climate data

Workshop 5

TCFD Reporting and Beyond – A Customised Analysis of the Climate Risk of an Infrastructure Portfolio

Investors all need to report for TCFD by 2025 at the latest, but they seldom feel comfortable with the estimates of climate risk and impact that they have access to, including scenario-based valuations of infrastructure assets and benchmarks of their exposures to climate risks. With data from the investor’s portfolio about risk profile and the location of each asset, infraMetrics can be used to produce a dedicated report that covers the key metrics needed for TCFD at the asset, fund and portfolio levels. This information also allows investors to begin to manage the risks created by climate change for infrastructure investors, including the possibility of being unknowingly concentrated in highly exposed assets in some scenarios. This workshop will present the infraMetrics climate impact and risk estimation service, including:

> Service output and inputs from the investor
> Asset-level estimates of climate risk at the 2050 horizon
> Fund and portfolio level climate risk estimates and benchmarks

Speakers:

• Frederic Blanc-Brude, Director, EDHEC Infra & Private Assets
• Darwin Marcelo, Project Director, EDHEC Infra & Private Assets
• Roundtable: use cases and industry applications of infraMetrics climate data estimation service

Workshop 6

Measuring Social Impacts and Risks for Infrastructure Investments

Monthly Releases: a new batch of infraMetrics data is released on the tenth working day of each month. This includes
– Market indices [link] – Investor Peer Group benchmarks [link]

Quarterly releases: quarterly computations are released on the tenth working day of the first month of each quarter, including for:
– Infrastructure Fund Benchmarks [link] – Deal and asset valuation analytics [link] – AssetSearch data [link] – TICCS® Research Data [link]