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Why engage with borrowers on ESG?

24/11/2017

Engaging with borrowers on material ESG issues in private infrastructure debt investment can encourage greater disclosure and transparency, and could lead to improved outcomes for investors.

It is becoming widely recognised that environmental, social and governance (ESG) factors could have a material impact on long-term investment outcomes and as such play an important role in the investment process.

Given the long economic lives of many infrastructure assets, private infrastructure debt can be very long dated in nature. It is therefore vital that lenders fully evaluate, mitigate where possible, and price all risks which have the potential to impact on the performance of the investment – including ESG risks.

As part of a new initiative by the Principles for Responsible Investment (PRI) to explore and clarify how ESG engagement is an integral part of responsible investing in fixed income, we contributed a case study on ‘ESG engagement in private infrastructure debt’ that explains:

  • Why engage with borrowers: our motivations for engaging with borrowers and why we believe ESG engagement is particularly effective in private infrastructure debt investment
  • Best practice: how we engage with borrowers on ESG issues both prior to and through the lifecycle of an investment
  • Engagement in action: how our ESG engagement in private infrastructure debt investment improved outcomes for the borrower and our clients

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.

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