GRESB and B Capital Partners AG joined forces to pilot an ESG due diligence tool for infrastructure asset investments with the goal to develop a standard process to improve both the quality and efficiency of ESG due diligence.
B Capital Partners developed a pilot ESG Infrastructure Asset Investment Due Diligence Tool using the GRESB Infrastructure Asset Assessment as a basis. The tool has two goals:
- for GRESB to offer investors and managers a high quality, on demand ESG due diligence service, supported by its proven platform and processes, in the context of e.g. acquiring new assets or regular assessments of assets for revaluation in annual financial statements, and
- contributing to an international ESG due diligence assessment standard by making the tool available as open source, encouraging feedback to improve it further.
It is only when the results of ESG assessments are integrated into the business case that they get the appropriate attention. Integrating ESG factors in the due diligence will help to better understand the business in general and investment risks in particular, which in turn enable investors to reduce, mitigate or control certain risks, improve the overall risk/return profile and maximize long-term investment returns.
There is currently no internationally accepted ESG-assessment standard for the ESG due diligence of infrastructure assets. This leaves investors to largely judge for themselves what they want to integrate in their evaluations, how to find the data for it, how to quantify the risks and opportunities, and how to publish and use the results.
In order to address this problem, B Capital Partners and GRESB conducted an ESG-due diligence pilot on the basis of 10 plus years of infrastructure due diligence experience. During the pilot, the GRESB Infrastructure Asset Assessment was modified to reflect the change of focus from benchmarking to due diligence and adapted to a checklist form. The checklist supports the ESG due diligence process and ensures all ESG risks and opportunities associated with the asset in question are identified. The most material “red-flag” issues are then summarized in the “red-flag” report together with potential mitigation measures.
In the future, GRESB plans to integrate this service into its existing, proven platform for ESG Assessment. This will simplify and standardize the process of ESG due diligence for the entire industry – addressing the lack of specific ESG due diligence knowledge and resources among investors.
Features of the service are expected to include: online, on demand availability for data input, validation of the submitted data, constantly available “punch lists” and red flag reports, which point to the most material ESG findings, as well as scoring and benchmarking against GRESB’s ever growing database of infrastructure assets, and standardized reporting systems.
Once the ESG due diligence document is online, all participants of the infrastructure and investment industry are invited to use the open source standard. The feedback from the industry will be used to refine the methodology and lay the basis for a widely accepted and transparent ESG due diligence standard for infrastructure asset investments.
Going forward GRESB will build the Due Diligence Assessment into its online portal and offer this as an online support service.
In the meantime, please contact us if you have any comments or queries.
B Capital Partners AG is an independent infrastructure investment firm, based in Zurich, Switzerland. It is a pioneer in the European infrastructure investment space with well over CHF 2bn of asset advised on or invested on behalf of its clients. Since 2003, its mission is to support institutional investors and family offices in their allocations to, and out of the infrastructure asset class (equity and debt).
GRESB is the environmental, social and governance (ESG) benchmark for real assets. Working in collaboration with the industry, GRESB defines the global standard for sustainability performance in real assets, providing standardized and validated ESG data to the capital markets.