Introduction

Climate change is humanity’s most daunting challenge. As global temperatures climb, the urgency of aligning greenhouse-gas (GHG) emissions with the pathway delineated by the Paris Agreement intensifies. Real asset investors can play a role in this process.

Buildings and infrastructure networks are major contributors to carbon emissions. Currently, 38 per cent of global energy-related greenhouse-gas emissions are attributable to buildings and construction, and 85 per cent of today’s buildings will still be in use by 2050^1,2. This underscores the need to decarbonise the built environment, to minimise the emissions real estate produces and improve the energy efficiency of buildings.

By implementing a climate transition-aligned strategy, investors in buildings and infrastructure can make a tangible difference to emissions pathways while also identifying opportunities to generate long-term risk-adjusted returns.

85%

of today’s buildings will still be in use by 2050

In this report we explore some of the investments made by the fund in the July 2023 to June 2024 period, and focus in further on the outcomes of our direct engagement with portfolio companies and partners.

Luke Layfield, Head of Portfolio Management, Private Markets

¹ Maria Smith, et al., “Built for the environment report”, RIBA, May 2, 2023.
² Building renovation: where circular economy and climate meet”, European Environment Agency, July 19, 2023.

Our approach
to climate transition

Our Climate Transition Real Assets strategy adopts an approach based on four categories: we seek to avoid emissions, reduce emissions and remove emissions from the atmosphere, as well as align our portfolio to the broader climate transition through investments in cutting-edge technologies.

Avoid

To avoid emissions, our focus is on investments in low-carbon infrastructure. Our three investment themes are energy transition, decarbonisation of transport and digital infrastructure. The overall objective is not only to avoid emissions, but also target attractive returns from growing sectors with strong market demand.

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Reduce

The reduce part of our approach refers to actions that can be taken to decrease GHG emissions where avoidance is not possible. For example, it might mean enhancing fuel efficiency in vehicles, or improving energy use in buildings. This aspect is crucial because, while not eliminating emissions entirely, it can buy time to enable the development of more sustainable solutions.

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Remove

Removing CO₂, through methods like afforestation and carbon capture, is important because it addresses the accumulated GHG emissions already in the atmosphere. After all, even if all new emissions were stopped today, the existing concentration of CO₂ would continue to impact the climate system.

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Align

Finally, we invest indirectly into private equity solutions to “align” to the climate transition. This means investing in emerging climate technologies that are being developed to help speed the transition.

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Performance at a glance

358

Homes in our build to rent pipeline, heated and cooled by air source heat pumps

200,000

Homes connected to fibre broadband by our portfolio companies

30 million

Miles driven by Connected
Kerb charged electric vehicles
in 2023

350

Kilo-tonnes of emissions projected to be avoided per year by Innovo Renewables

£30m

Indirect investments into climate technologies including carbon capture, use and storage

AA

EPC Rating of our build to rent homes in Spain, a 10-20% improvement on local regulations

£255m

Capital committed to date in sustainable infrastructure

14

Machinery operators trained in peatland restoration techniques