Alt Investments

ESG To Remain Key For Infrastructure Businesses – DWS

Amanda Cheesley Deputy Editor 10 August 2023

ESG To Remain Key For Infrastructure Businesses – DWS

Richard Marshall, head of research for infrastructure at Frankfurt-based asset manager DWS, discusses the market update for the first half of 2023 and the infrastructure outlook for the rest of the year and beyond.

With inflation becoming more benign and the interest rate environment looking more stable, Richard Marshall at DWS believes that the focus for infrastructure performance will be shifting towards how assets can deal with the softer demand picture presented by slowing economic growth.

“Assets with the ability to quickly capitalise on the inflationary environment but [which] also have strong downside protection are best placed to outperform,” he said this week in a statement. “The slowdown in both transaction activity and infrastructure fundraising will be relatively short-lived and positive momentum should build into 2024. Driving this will be the strong performance of the asset class in recent years and desire of investors to increase allocations, the strong tailwinds in the sector and unchanged value proposition relative to other alternative asset classes,” he added.

Marshall highlighted how Europe and the US are the core of the global unlisted infrastructure market, being the destinations for the majority of global assets under management, which target infrastructure and the majority of transactions within the sector. The implementation of the US Inflation Reduction Act in 2022 has also catapulted the US to the top of many investor watch lists given the attractive financial incentives it offers.

“As the Inflation Reduction Act's impact on the US market is becoming more apparent in terms of attracting investment interest, particularly regarding low carbon technologies, there are more questions over the competitiveness of the European market,” he said. However, Marshall believes that the strategic importance of European infrastructure investments for maintaining competitiveness, helps cut emissions and boosts resilience. Also, combined with a broader opportunity set of sectors and markets, it gives Europe an edge.

“Across transportation, telecommunications, environmental management assets like water and waste as well as social infrastructure, Europe offers significantly greater investment choice. Europe also allows for greater geographical diversification than the US, with each market able to pursue its own fiscal expenditure and reforms to attract private capital,” he said.

“With a growing sophistication of guidelines and availability of data, along with the tightening of regulations and a more demanding pool of investors, ESG will remain central to infrastructure businesses,” he continued. “The investor association which runs the Net Zero Asset Managers initiative released guidance for infrastructure assets, which is likely to help asset managers and asset owners strengthen their activities in this area,” he added. 

DWS, which has €859 billion ($940 billion) of assets under management, operates in Germany, Europe, the Americas and Asia.

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