Creating a sustainable future through infrastructure
Investors can help plug the multi-trillion-dollar infrastructure gap while building a sustainable future.
Nearly USD 79 trillion of investment in global infrastructure will be needed by 20401 in areas spanning energy transition to digitalisation as the world adapts to seismic shifts caused by climate change and population growth.
Such a scale of investment will also need to focus on other global megatrends such as urbanisation; the rise of the middle class; evolving and diverging demographics; and sustainability, says Yves Meyer-Bülow, Head of Infrastructure Funds and Co-Investments at Allianz Capital Partners (ACP), AllianzGI’s dedicated infrastructure and private equity investment platform.
Plugging the USD 79 trillion infrastructure gap will require extensive investment in every region, including USD 44 trillion in Asia-Pacific and the Middle East, USD 17 trillion in the Americas, USD 12 trillion in Europe, and USD 5 trillion in Africa, according to Global Infrastructure Outlook (2022).
Building scale
Scale will be important – and here the involvement of ACP’s parent Allianz can help. Within the Allianz Global Diversified Infrastructure Equity Fund II (AGDIEF II), Allianz is committed to providing at least half of the capital to each target investment alongside AGDIEF’s third-party clients. This approach also ensures strong alignment of interest between Allianz and AGDIEF investors.
“Our investment approach focuses on key investment themes, such as the digital transformation, the energy transition, sustainable mobility and the circular economy,” said Mr Meyer-Bülow at the Allianz Global Investors Private Markets Day in May 2022.
The five broad infrastructure sectors targeted by the fund are energy, communications, transport, environmental and social.
By coinvesting with Allianz, investors in AGDIEF will also benefit from preferential access to investment opportunities and Allianz’s generally attractive terms on funds and co-investments.
ACP has built a portfolio of more than 50 infrastructure funds and co-investments with portfolio companies across six continents and more than EUR 10 billion in assets under management. In the autumn of 2022 AGDIEF II held its second close at close to EUR 700 million.
ESG agenda
The co-investment also offers investors the opportunity to push an environmental, social and governance (ESG) agenda and benefit from Allianz’s leadership on the topic. Allianz integrates ESG across its insurance and investment activities. For example, insurance transactions and unlisted investments in 13 sensitive business areas, including infrastructure and oil and gas, are screened and assessed for ESG risk.
AGDIEF will be classified as an Article 8 fund under the EU Sustainable Finance Disclosure Regulation.
Allianz has been an early adopter of sustainability principles and has remained committed to a fully integrated approach. The company aims to drive change within the portfolio companies that it funds. ACP has only invested in infrastructure fund managers to date that are United Nations (UN) Principles for Responsible Investment (PRI) signatories.
“Allianz has very high requirements when it comes to ESG, especially with climate topics,” said Mr Meyer-Bülow. “That means we have a very clean portfolio ESG-wise when it comes to the managers we invest in.”
The fund gains equity exposure through primary fund commitments, secondary transactions and co-investments. The targeted allocations are around 50% primary, 10-30% for secondary and 20% for co-investments.
