Infratil prioritises sustainability in investments, boosting ESG goals

“Infratil has a high conviction approach to investment and this applies to sustainability, too,” says Tong.

Infratil, one of the world’s first listed infrastructure funds when it appeared on the NZX in 1994, maintains that sustainability is one of the important drivers of superior long-term returns.

Jason Boyes, Infratil chief executive, says investors don’t see an either/or with shareholder returns and sustainability — they want both. “We are very much focused on managing ESG well and delivering good financial returns.”

Over the past 30 years Infratil, the third largest local stock on the NZX on market capitalisation, has returned more than 18% a year to shareholders.

Boyes says “we recently did a survey amongst retail investors at our national roadshow and a quarter of the respondents highlighted sustainability as one of the topics they were most interested about — nearly as many as dividends.

“According to a recent Responsible Investment Association Australasia survey, almost 80% of New Zealanders expect their investment — for example, KiwiSaver — to be managed ethically and responsibly.

“Recognising this, over the last two years we have increased our efforts on how we disclose ESG data,” Boyes says.

Infratil now sits in the S&P/ASX 300 Index with its associated ESG indices and exchange-traded funds. “Managing ESG well and reporting information our investors want opens doors to other pools of capital,” says Tong

The focus on sustainability helps Infratil to secure attractively priced capital needed for growth. Beyond that, continually improving ESG performance has enduring positive impacts — opportunities for decent, skilled work; driving decarbonisation, providing the things society needs; and supporting communities through philanthropic initiatives, Tong says.

Infratil now has a globally diversified portfolio of 13 companies spanning four sectors — digital, renewable energy, healthcare and Wellington Airport (a stake of 66%).

The airport last year was rated by the Netherlands-based ESG agency GRESB as the fifth best in the world for sustainability, and second in Oceania.

Infratil has also invested in Silicon Valley ClearVision Ventures, a private investment firm dedicated to supporting early stage companies focused on clean tech and clean energy. This includes battery recycling, EV charging networks and technology that supports sustainable infrastructure such as water treatment.

In the digital space, Infratil has a 48% stake in CDC data centres; 99.9% in One New Zealand (formerly Vodafone); 53% in UK-based Kao Data’s four centres $560m; and 20% of mobile tower company Fortysouth.

Digital connection is now a pillar of the fund, making up 62% of the portfolio.

Infratil has a global presence in renewable energy with 51% in the locally-based Manawa; 37% in US-based Longroad Energy; 40% in Europe-based Galileo; 73% in Australian-based Mint Renewables; and 95% in Singapore-based solar, wind and energy storage Gurin Energy.

With a globally ageing population, Infratil has invested in the healthcare sector. It has 58% of Australian Qscan; 50% of RetireAustralia; and 50.3% of locally-based RHCNZ Medical Imaging Group.

Infratil reports the emissions performance of its investment portfolio through market-standard metrics, providing stakeholders with information to understand the emissions and climate-related characteristics of the portfolio.

Infratil’s weighted average carbon intensity (Waci) decreased 18% and economic emissions intensity (Eei) was down 21% in the 2024 financial year. Waci compares emissions to revenue and Eei emissions to the fair value of investments.

The improvements to Waci and Eei reflected emissions reduction in all investment sectors except digital which grew during the year with the increase in One New Zealand ownership.

At the end of September, Infratil’s Waci in US dollars was 47.9 compared with the S&P 500 Net Zero Paris-aligned ESG Index of 66. The Eei was 2.7 with the index sitting at 17.

Infratil, a member of the NZ Climate Leaders Coalition, became the first financial institution in New Zealand to achieve Science Based Targets initiative (SBTi) validation for its climate targets.

One of Infratil’s biggest opportunities in combating climate change is renewable energy and the portfolio companies collectively have a development pipeline that has increased from 30GW in the 2023 financial year to 50GW in 2024 — about five times New Zealand’s current installed generation.

In its latest Sustainability Report, Infratil said the renewable sources like solar and wind are not only sustainable but they are also amongst the most cost-effective new forms of energy generation.

Wind and solar costs have fallen 65% and 80% respectively in the last decade or so. Companies are also able to decarbonise through advancement in technology and design that enable energy efficiency gains and significant cost savings.

Infratil has plenty of sustainable initiatives under way within its investment portfolio.

Renewable energy generator Manawa has issued green bonds which contribute to projects with clear environmental benefits.

This broadens the pool of potential investors who get disclosures of the underlying assets.

Green bonds can have a slightly better pricing than vanilla bonds.

Wellington Airport, one of the most mature companies in the Infratil portfolio in terms of sustainability, has converted $100m of existing bank facilities into sustainability linked loans.

This means the airport’s lending will be charged a lower interest rate and line fee for achieving agreed sustainability goals and a higher rate if those goals are not met.

Over the past year, the airport has been selected as the hub for Air New Zealand’s all-electric commercial service.

The first demonstrator is flying cargo across the Cook Strait to Marlborough Airport next year.

Wellington Airport and Air New Zealand have collaborated on a hydrogen trial for charging ground service equipment, and has received its first shipment of sustainable aviation fuel to help lower carbon emissions.

The airport is publishing annual mandatory Climate Related Disclosures detailing its plans to address physical risks such as storm surges and extreme weather events. To make its infrastructure even more resilient, the airport will be renewing its southern seawall facing the rugged Cook Strait and first built more than 50 years ago.

As well as protecting the airport from erosion and flooding, the seawall safeguards Moa Point Road, a road tunnel, stormwater systems and major pipes moving most of Wellington’s sewage.

Gurin Energy is helping to decarbonise Asia. In a joint venture, Gurin is advancing plans to provide low-carbon electricity from Indonesia to Singapore.

Gurin has completed its first project in the Philippines — the 75MW Palauig Solar Power Plant to power 35,500 homes, and it plans develop Japan’s largest battery energy storage system with capacity of 500MW and storage of up to 2GWh.

Kao Data runs its centres on renewable power from a wind farm in Kent and uses hydrotreated vegetable oil (HVO) as back-up generation fuel instead of diesel.

HVO is one of the cleanest biofuels on the market, it has a storage life 10 times greater than standard diesel, and offers resilient year-round performance in low and high temperatures. Qscan and RHCNZ Medical Imaging Group are expanding health services to reach more people.

One of Australia’s leading medical, diagnostic imaging providers, Qscan has introduced artificial intelligence and cloud technology to enhance productivity and efficiency, reduce wait times and deliver higher quality care to more people.

Qscan this year opened its first facility on the Sunshine Coast and its Mackay operation is now providing diagnostic imaging services to remote Queensland communities.

About 40% of men diagnosed with prostate cancer in Queensland live in regional areas and only 20% detect the cancer early.

RHC has opened a clinic in Whangārei “where people have access to world class technology outside of the metropolitan area,” says Tong.

Longroad Energy is one of the founding sponsors of agrivoltaics research in Hawaii to crops grow under or between the solar panels.

One lease has been signed with Hawaii’s largest hydroponic lettuce producer with the aim of supplying greens to public schools.

One New Zealand has established an e-waste strategy which is diverting tonnes of equipment and used devices from landfill.

One NZ has a goal of recycling at least 95% of its network waste, which it exceeded in the 2024 financial year.

Redundant equipment is separated into different waste streams including old computer equipment, circuit boards, copper cables, lead batteries and other metals which are processed for reusing, reselling or recycling. Some of the recycled devices are provided to schools for their digital programmes.

So, is New Zealand doing enough to reduce carbon emissions? Boyes says business has a key role to play and stay the course. “I’m heartened by what I see. The electricity sector is focused on decarbonisation and fund managers are thinking more deeply about the broader impacts of their investments.

“Business is doing a good job, but domestically I’d feel a lot better if the decarbonisation of transport wasn’t slowing down. “Electric vehicle adoption is a good opportunity for New Zealand,” says Boyes.

● Infratil is an advertising sponsor of the Herald’s Sustainable Business & Finance report