Alternatives Watch 2022 Outlook: Climate Adaptive Infrastructure

In the fifth installment of the Alternatives Watch 2022 Outlook series, we take some time to ponder what the view is from the intersection of sustainability and private markets.

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Many investors are just now diving into renewable and sustainable investment initiatives, an area where Bill Green, managing partner at Climate Adaptive Infrastructure, has been active for three decades within roles in sustainable energy, infrastructure investment and corporate development.

Previously, Green was senior managing director at Macquarie and CEO of Macquarie Infrastructure Corporation Renewable Energy Holdings. He brings to the investment table experience in the banking, private equity and venture capital sectors.

Bill Green (provided)

In this interview, he provides a framework for a private markets approach to the triple-threat risk facing investors when it comes to facing the adversity and uncertainty brought on by the climate crisis.

Over the next 12 months, what types of investments are you considering for your funds? What is top of mind right now?

Climate Adaptive Infrastructure invests in large-scale, low-carbon infrastructure investments that can withstand the structural risks and economic pressures of the climate crisis and that can provide CAI and its funding partners a viable hedge against climate losses. The CAI team selects, finances, constructs and manages investments through the lens of proprietary climate screens and metrics designed to reduce carbon emissions.

Currently, the infrastructure sub-sectors that are a focus for CAI, (energy, water and urban infrastructure), are incredibly active. Specifically, we are enthusiastic about investments in offshore wind, renewable natural gas, transmission, hydrogen, various parts of the water value chain, both municipal and industrial, as well as select transport investments.

As we approach the third year of the pandemic, what are your thoughts about the macroeconomic picture?

Heading into year three of the pandemic, we continue to experience and forecast continued challenges in the supply chain. In particular, the key barriers to overcome are both labor and material shortages.  We expect the material shortages to ease towards the close of 2022, while the labor picture is less clear at this time.

Further, we are closely monitoring the US Federal Reserve’s approach to raising interest rates, which we applaud, and hope that it will succeed in lowering inflation. Ultimately, like many other players, we remain concerned about general market volatility.

What role do you see private capital playing in addressing the climate crisis in the years to come?

“Climate Adaptive Infrastructure,” is a phrase our team defines as large-scale, low-carbon infrastructure built to withstand the physical, policy and political risks and economic pressures of the climate crisis. This is infrastructure that supports the day-to-day needs of growing populations while addressing accelerating climate risk.

It seems that investors are increasingly recognizing that the triple-threat risk of the climate crisis – encompassing physical, policy and political risks— is real, accelerating as both an investment risk and opportunity. In the years to come, we expect, and welcome, an ongoing dramatic increase in the amount of private capital flowing into “climate adaptive infrastructure” and related climate crisis sectors.

As an infrastructure investor focused on climate change, how do your measures of success differ from other investors in real assets? How do you expect your portfolio returns to compare broadly?

Infrastructure is inherently about long-lived assets. At CAI, we take a methodic, multi-dimensional approach to screening for an additional set of risks and opportunities related to the climate crisis. 

Screening for climate risks is a common-sense approach, and a way to further minimize portfolio exposure to a set of significant risks. 

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