FAST-Infra label tipped as net zero infrastructure enabler

Hayden Morgan of Pinsent Masons said the ‘FAST-Infra Label’ can help businesses showcase the sustainability credentials of the infrastructure assets they own or operate, and give investors confidence that the assets they deploy capital in can conform to international sustainability standards.

Morgan was commenting after he explained the FAST-Infra Label to attendees at an event held alongside the recent Infrastructure Investor Network global summit in Berlin. The event was hosted by the FAST-Infra label secretariat, Global Infrastructure Basel, and Morgan was joined by Bloomberg, the data application provider for the label.

The FAST-Infra Label enables the sustainability performance of infrastructure projects to be measured and certified. The initiative is backed by leading lenders and agencies such as HSBC, Macquarie, the OECD, the International Finance Corporation, and the World Bank Group’s Global Infrastructure Facility. Its aim is to channel more finance towards sustainable infrastructure.

The FAST-Infra Label can be obtained for infrastructure assets anywhere in the world, provided projects contribute to one or more of the 17 criteria across environmental social governance and resilience and meet environmental and social risks safeguards.

Morgan has been involved with FAST-Infra since inception and coordinated drafting much of the original methodology for the FAST-Infra Label. He now sits on the steering committee for the label.

“The label provides project stakeholders in both public and private sectors with a globally consistent meta standard which defines ‘sustainable infrastructure’,” Morgan said. “The label is tagged at the asset level, meaning it is agnostic to type of capital, jurisdiction or regulation.”

“The label has benefits for infrastructure owners, managers and investors. For those behind infrastructure projects, labelling will help them demonstrate evidence of the project’s sustainability credentials, thereby mitigating greenwashing risk, supporting due diligence by both equity investors and debt financing, and facilitating insurance. A project can obtain the label at any point throughout the whole project lifecycle, from pre-feasibility, through planning, permitting, construction, commissioning and operational phases,” he said.

Morgan said the label’s methodology has been developed with reference to prominent global sustainability regulations and standards.

“Part of the development process for the label involved consideration of key regulation, including the EU’s Sustainable Finance Disclosure Regulation, the UK Sustainable Disclosure Regulation, and various global taxonomies, as well as existing global ISO standards, the Equator Principles on environmental and social risk management, the IFC performance standards, and other good practise mechanisms used in project finance and development finance,” Morgan said. “The result of all this work means that the label now offers a globally consistent, robust, and highly credible global standard of ‘sustainable infrastructure’.”

Since January this year, the labelling system has been complemented by a data platform provided by Bloomberg that will offer greater analysis and insight into infrastructure performance.

Morgan said the data can help inform investment and potentially make it easier and cheaper to insure labelled assets.

“This data not only supports primary project finance investment, but also significantly enhances fast growing, nascent private secondary markets, and derivatives, which can be used to access the new sustainable infrastructure asset class, and supports increased liquidity for those primary market investors looking for an exit and to realise their investment,” Morgan said. “Given the focus on climate resilience, the label also offers insurance benefits, with the prospect of labelled projects offering lower climate risk profiles.”

“This globally consistent data availability therefore will support global scale and mainstreaming of this new asset class – like what we’ve seen in the green debt market,” he added, citing parallels with the ‘green leaf’ logo used to signpost green bonds in the bonds market.

“In the future, investors and other interested parties will be able to access sustainability data for both primary and secondary markets for this new asset class,” Morgan said. “Such projects therefore will be differentiated in the market, attracting investors seeking access to this new sustainable infrastructure asset class. The label will also support development of new instruments such as sustainable infrastructure debt securitisation, leading to lower financing costs and ultimately potentially indexes, trackers etc.”

Morgan acknowledged that investment in sustainable infrastructure is often viewed as riskier and may deliver lower returns than investment in other types of assets. However, he said the data-backed FAST-Infra labelling system can help to change this and better align development and investment in the infrastructure and real estate sector with long term ‘net zero’ emissions targets.

“The label and associated data will be part of the solution contributing towards lowering that cost of capital and lowering the risk profile for project finance in many markets and jurisdictions across the globe,” Morgan said. “What brought us to where we are today is not going to get us where we need to be by 2050 – to meet our net zero and sustainable development goals.”

“We do need to consider where we are in the context of current evidence of climate change impacting quicker and more intensely than many scientists previously considered likely; biodiversity, on which many of our products, services and supply chains depend, becoming ever more fragile and in some cases close to collapse; unsustainable resource use and business models based on a linear economy, and social and geopolitical aspects causing disruption in supply chains and causing socio-economic migration. The demand for sustainable infrastructure is only going to increase, and many of these challenges can be mitigated through the design and application of sustainable infrastructure,” he said.

“The capital is there, ready to be deployed for high quality projects, and the FAST-Infra label supported by the Bloomberg data application is a market-led practical solution, to help support capital allocation, informed investment decisions, and the growth of this new asset class across the globe,” Morgan added.