Why invest in green infrastructure?

👀 Reading time: 8 minutes

The European Union has clearly announced its ambitions to achieve carbon neutrality by 2050. One of the keys to change lies in sustainable investment. According to the SFDR regulation, this is "an investment in an economic activity that contributes to an environmental objective […] or an investment in an economic activity that contributes to a social objective […], provided that these investments do not cause significant harm to any of these objectives and that the companies in which the investments are made apply good governance practices […]". Therefore, the development of green infrastructure is crucial for the future of the planet and the success of the Green Deal.

A little context...

Before discussing the subject of investments in green infrastructure in more detail, let's put it into context! To increase the scope of ESG (Environment, Social, and Governance) criteria, Europe and France have established a regulatory framework that has been strengthened over the years.

• First of all, with the European taxonomy, Europe defines and promotes sustainable economic activities by taking into account major objectives such as climate change mitigation and adaptation.
• In 2021, the Sustainable Finance Disclosure Regulation (SFDR) comes into force, which, through new measures, adds transparency to the financial market in terms of environmental, social, and governance (ESG) criteria.
• In addition to these measures, Europe is also implementing the Corporate Sustainability Reporting Directive (CSRD), which strengthens sustainability reporting requirements.
• France, to support this approach, enacted Article 173 of the Ecological Transition Act in 2015 to encourage responsible investment and institutional investors to report on their climate risk management and the carbon share of their portfolios.
• The Energy-Climate Act, for its part, aims to gradually phase out fossil fuels and further integrate the development of renewable energies.
• In 2019, France also implemented the PACTE law, or action plan for business growth and transformation to strengthen the CSR (Corporate Social Responsibility) policy in companies.

What are the challenges of the ecological transition?

🔢 Energy transition figures

– France will reach 22.2% renewable energy in its gross final energy consumption in 2023, compared to 20.5% in 2022.
– According to the share of gross final energy consumption produced from renewable sources, France occupies the 15th position in 2022, just behind Germany.

Key figures for renewable energies – 2024 Edition

Improving tomorrow requires a profound transformation of society. What does that mean?Through political, economic, and environmental strategies, we must change current models by transposing them towards more sustainable concepts. To reduce our dependence on fossil fuels, green infrastructure plays a fundamental role! How? By producing renewable energy on our territory, they promote its energy independence and, as a result, limit the need for imports of oil, gas, or coal, which are often subject to sharp price fluctuations and major geopolitical risks. Ecological and economical, green infrastructure meets the national challenges of reducing greenhouse gas emissions, while diversifying its energy production (energy mix).

How to invest in green infrastructure?

🔢 ESG investment figures

– $38 trillion represents the amount of ESG funds under management worldwide in 2023, a 53% increase compared to the previous year.
– 50% of investors believe that ESG criteria help to better identify companies that perform well over the long term.
– 25% of global investment assets should be invested according to ESG criteria by 2025.

10 key figures on ESG investment in 2024

As a reminder, an investment is considered sustainable when it contributes positively to an environmental or social objective, follows good governance practices, and follows the Do No Significant Harm (DNSH) principle. Investing in green infrastructure meets these criteria! Financial players, who have clearly understood the need to support the transition to a more sustainable economy, are innovating with several financial solutions such as crowdfunding, sustainable bank accounts, and sustainable investment funds.

These green practices aim to raise awareness of change and encourage people to prefer innovations with a low carbon footprint to fossil fuels.

Crowdfunding

Crowdfunding, also known as crowdfunding, is an innovative solution that allows projects to be financed through the direct mobilization of citizens. Through online platforms – such as Enerfip – which act as intermediaries, project leaders promote their innovations and raise funds from a wide audience of investors. A great alternative to traditional channels, this financing solution encourages citizen involvement and the development of projects dedicated to the energy transition.

Green bank accounts

🌿 Are you familiar with the LDDS?

This is an investment whose interest rate is set by the State, taking inflation into account. Your money remains available and you can withdraw it if necessary. The difference compared to other savings accounts? Banks must use the sums collected under the LDDS to grant loans for improving the energy performance of housing, at attractive rates.

Sustainable and Solidarity Development Savings Account (LDDS)

Savings products that combine profitability and environmental commitment, bank savings accounts are designed to allow savers to support responsible projects. Unlike traditional savings accounts, they guarantee that the funds collected are invested in initiatives with a positive impact and ethical values.

🍃 Are you familiar with the energy transition savings account?

Set up by the Energy Transition Bank, the energy transition savings account is a savings product dedicated to financing projects that contribute to the ecological development of your region and ensures the traceability of the use of your funds, the territoriality of the action and the short financing circuit.

Energy transition savings account

Sustainable funds

The International Energy Agency is projecting increasing investments in energy, moving from $2 trillion per year to $5 trillion per year by 2030. These figures reflect the importance of investing in sustainable infrastructure, which is both a green and attractive investment. With this in mind, Enerfip Gestion is developing two investment themes in alternative asset classes to support the development of French and European SMEs, with, on the one hand, traditional debt and, on the other, private equity, in renewable energy infrastructure and in the capital of the companies that develop them.

As a mission-driven company, we focus on financing projects dedicated to the energy transition in Europe, promoting small and medium-sized initiatives. Our objective? Contribute significantly to reducing carbon emissions and promoting renewable energy, while providing our investors with a wealth diversification solution, sustainable returns, and volatility control.

How to successfully invest in infrastructure?

Investing in infrastructure allows you to finance energy, water, transport, and telecommunications networks through listed or unlisted investments. Whether it is social infrastructure (hospitals, schools, etc.), related to transportation (highways, ports, etc.) or telecommunications (optical fiber, transmission towers, etc.), they play a key role in the economy.

💡 Did you know?

There are several types of infrastructure grouped by category according to their sector of activity.

– Blue infrastructure: water treatment plants, marine wildlife restoration projects, or even dikes... All fall under blue infrastructure, because they aim to protect and manage water resources and the biodiversity found there.
– Grey infrastructure: in contrast to green infrastructure, they are energy-intensive and polluting, like coal plants. However, be aware that these buildings can be renovated to incorporate sustainability concepts, such as adding a carbon capture system.
– Green infrastructure: these are, of course, the ones we're going to talk about today! Wind farm, photovoltaic power plant, methanisation plant, vehicle charging stations... These environmentally friendly projects encourage the ecological transition and combat climate change.

If you are considering investing in unlisted infrastructure, prioritize a long-term strategy. Why? Because these are illiquid assets, they may present difficulties or a longer resale period. Also, consider the length of time the funds are locked up. Can you maintain your investments for a given period?

It is also important to note that, like any investment, infrastructure investments present a risk of capital loss and liquidity, in addition to those inherent in holding infrastructure assets. Which ones?

• Physical risks linked, for example, to natural disasters or the deterioration of infrastructure over time.

• Political risks that impact the profitability of infrastructure investments.

• Debt risks: Most of the time, infrastructure assets use leverage, which makes the project more sensitive to interest rate fluctuations.

For any additional information on Enerfip or Enerfip Gestion, do not hesitate to contact us! Our dedicated team will be delighted to assist you in your green infrastructure investment efforts.