As investors consider the climate risks of their portfolio, transition risk looms large as it impacts all assets at least within one sector at the same time. In parallel to pledges to decarbonise in real terms, the impact of transition risk on asset values remains an important question of financial materiality for investors in infrastructure.
As always with asset prices, it’s all relative: the ones that are more exposed to certain risks relative to other assets will see their value impacted the most. This is why benchmarking the carbon footprint of infrastructure companies is the best way to understand how exposed to transition risk any given portfolio might be.
infraMetrics now includes asset-level and index-level carbon intensity data to do just that. For instance, the table below shows that on a scope 1 and 2 basis, the infra300 index is much more carbon intensive than a pure transport strategy. That’s because the infra300 includes assets from all sectors, including power assets and utilities, which have a higher scope 2.
Aggregating Asset-Level Data at the Index Level (Scopes 1 + 2)
|Climate Impact (baseline)||2021||2022||2021||2022|
|Carbon Intensity of Revenues (WACI*)||tCO2/$m||26.4||25.4||107||97|
|Carbon Intensity of EVIC||tCO2/$m||3.2||3.3||15.1||13|
|Carbon Intensity per $ invested (Equity)||tCO2/$m||8.5||9.1||38.3||40.9|
*Weighted average carbon intensity **Transport infrastructure investment universe worldwide (IC60 – c.240 assets)
Within transport, there are also some significant differences, as the next table shows: some road projects are far above the average scope 1, 2 and 3 metrics for the sector, indicating that they are more exposed to transition risk. While this difference of exposure may not be fully reflected in asset prices today, it should certainly enter into investors’ appreciation of the risk profile of their portfolio.
Average tCO2/$m Revenues + Several Road Projects
|Company||Average*||Autovia del Camino (A-12)||M-45 Motorway||Connect M1-A1||A65 Toll Road|
*115 roads in 27 countries