Ardian on innovation in infrastructure investment strategies – Infrastructure Investor

Report on Infrastructure Investment Trends and Alignment with Sustainable Development Goals

1.0 Executive Summary

This report analyzes current trends within the infrastructure investment sector, focusing on the development of innovative fund strategies and the integration of digital technologies. It assesses these trends through the lens of the United Nations Sustainable Development Goals (SDGs), highlighting how capital deployment, technological advancement, and new financial products are being leveraged to support global sustainability objectives. Key areas of focus include the role of investment in advancing SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation, and Infrastructure), SDG 11 (Sustainable Cities and Communities), and SDG 13 (Climate Action).

2.0 Market Dynamics and Investment Strategy Innovation

2.1 Current Market Landscape

The infrastructure market is experiencing significant dynamism, driven by robust fundraising and increased investor allocation. This trend presents a critical opportunity to channel capital towards projects that directly support the SDGs.

• Europe is emerging as a leading global market for infrastructure investment, with government initiatives fostering large-scale development.
• A notable trend is the rise of thematic funds specifically targeting areas aligned with the SDGs, including:
  1. Energy Transition (SDG 7, SDG 13)
  2. Mid-market Renewables (SDG 7)
  3. Nature-Based Solutions (SDG 15)

2.2 Development of New Fund Structures for Sustainable Investment

The maturation of the infrastructure asset class has led to the adoption of innovative fund structures designed to meet diverse investor needs while facilitating investment in long-term sustainable assets.

• Semi-Liquid Funds: These vehicles are expanding access to infrastructure investment for retail clients. By enabling smaller ticket sizes and providing liquidity options, they direct private savings towards critical projects that underpin SDG 9 and SDG 11, such as transportation and energy networks. A disciplined approach is required to ensure this capital is deployed into high-quality, sustainable assets, aligning investor interests with long-term performance and SDG outcomes.
• Evergreen Funds: This structure is particularly well-suited for investments in renewable energy, directly contributing to SDG 7 and SDG 13. The evergreen model allows for the continuous growth of a diversified portfolio of clean energy assets (wind, solar, hydro, batteries) without the pressure of a fixed holding period. This scale and diversification are crucial for managing volatility and accelerating the clean energy transition.

3.0 Technology and Data Science as Enablers for SDG Achievement

3.1 Digital Tools for Measuring and Managing Sustainability Impact

The application of data science and digital tools is proving instrumental in enhancing the operational efficiency and sustainability of infrastructure assets. This technological integration is a key component of advancing SDG 9 (Innovation).

• Ardian AirCarbon: This data tool was developed to monitor and manage the carbon emissions of airports, with a specific focus on Scope 3 emissions, which constitute the majority of an airport’s carbon footprint. By providing granular analysis of emissions from aircraft movements and passenger transit, the tool enables the implementation of targeted decarbonization strategies. This directly supports SDG 13 (Climate Action) and contributes to the development of more sustainable transportation hubs under SDG 11.
• Opta Digital Platform: In the renewable energy sector, the Opta platform collects vast amounts of operational data from a multi-gigawatt portfolio. Analysis of this data has significantly increased the operational availability of wind assets, maximizing clean energy generation. This optimization of renewable resources is a direct contribution to SDG 7 (Affordable and Clean Energy) by improving the efficiency and financial viability of clean power.

3.2 The Role of Artificial Intelligence in Sustainable Investment

Generative AI is being adopted to accelerate execution speed and enhance productivity in investment processes. While offering significant potential, its deployment requires a strong framework of data governance and ethical oversight.

• Internal AI Applications (GAIA): Secure, in-house AI platforms allow teams to analyze market data, summarize complex documents, and screen investment opportunities more efficiently. This acceleration can improve the capacity to identify and execute investments in projects aligned with the SDGs.
• Risks and Governance: The effective use of AI necessitates a “human-in-the-loop” approach to validate outputs and mitigate risks such as data inaccuracies. Robust data governance is essential to ensure that AI is used as a responsible tool for advancing sustainable development.

4.0 Governance in Specialized Investment Vehicles

4.1 Continuation Vehicles and Fiduciary Duty

While standard exit processes like auctions are common, continuation vehicles may be utilized in specific circumstances, such as for strategic assets requiring shareholder continuity. The use of such vehicles demands stringent governance to ensure alignment with fiduciary duties and long-term sustainability objectives.

• Compliance and Transparency: Essential governance mechanisms include third-party asset pricing, advisory committee approval, and providing all limited partners with the option to exit or continue their investment.
• Alignment with SDGs: Proper governance ensures that even during ownership transitions, the asset’s management remains focused on long-term value creation, which includes adherence to environmental, social, and governance (ESG) principles and contributions to relevant SDGs.

Sustainable Development Goals (SDGs) Addressed in the Article

The article discusses several issues related to infrastructure investment, renewable energy, and technological innovation that directly connect to multiple Sustainable Development Goals. The primary SDGs addressed are:

• SDG 7: Affordable and Clean Energy
• SDG 9: Industry, Innovation and Infrastructure
• SDG 11: Sustainable Cities and Communities
• SDG 13: Climate Action

SDG 7: Affordable and Clean Energy

The article highlights significant investment and strategic focus on renewable energy, which is the core of SDG 7. Ardian’s activities support the transition to clean energy sources.

1. Investment in Renewables: The article mentions “thematic funds in energy transition, mid-market renewables” and a specific “Ardian Clean Energy Evergreen Fund” with a size of “€1 billion-plus.” This demonstrates a direct financial commitment to expanding clean energy.
2. Diversified Renewable Portfolio: The firm’s strategy involves creating an “international portfolio of several gigawatts in various technologies (wind, hydro, solar, batteries).” This diversification is crucial for building a stable and resilient clean energy supply.
3. Operational Efficiency: The use of the digital platform “Opta” to manage 3GW of installed capacity across nine countries improves the efficiency and availability of renewable energy assets, maximizing their output.

SDG 9: Industry, Innovation and Infrastructure

This goal is central to the article, which revolves around infrastructure investment, development, and the use of innovation to improve industrial processes.

1. Infrastructure Investment: The article opens by stating that Ardian “recently raised $20 billion for its European infrastructure platform,” showing large-scale investment in developing infrastructure.
2. Technological Innovation: The firm’s embrace of “data science and technology” since 2018 to “improve the operations of our infrastructure assets” is a key theme. The development of proprietary tools like “Ardian AirCarbon” and “Opta,” as well as the deployment of generative AI through “GAIA,” exemplifies the drive for innovation.
3. Sustainable and Resilient Infrastructure: The goal is to create “more resilient businesses for the long-term” by using data to decrease costs and negative externalities like carbon emissions, thereby upgrading infrastructure to be more sustainable.

SDG 11: Sustainable Cities and Communities

The focus on improving large-scale urban infrastructure, particularly airports, and reducing their environmental impact connects directly to making cities more sustainable.

1. Sustainable Transport Systems: The article details work with major airports like “Heathrow,” “Milan, Naples and Turin.” The “Ardian AirCarbon” tool is used to analyze and reduce emissions from airport operations, including “take-off and landing, taxi time, [and] passengers’ commutes,” which contributes to more sustainable transport infrastructure.
2. Reducing Urban Environmental Impact: The tool specifically targets “Scope 3 emissions,” which “represent 95 percent of an airport’s footprint.” By tackling these emissions, the firm helps reduce the adverse environmental impact of a critical piece of urban infrastructure.

SDG 13: Climate Action

The article explicitly details concrete actions taken to combat climate change by reducing greenhouse gas emissions from infrastructure assets.

1. Climate Change Mitigation: The development of the “Ardian AirCarbon” tool is a direct climate action initiative. Its purpose is to “monitor the carbon emissions of airports and supports our airports’ decarbonisation strategies.”
2. Focus on High-Impact Emissions: The strategy to tackle “Scope 3 emissions” shows a sophisticated approach to climate action, as these are often the largest and most difficult emissions to address for an organization.
3. Integrating Climate Measures into Business Strategy: The article states that reducing “negative externalities such as carbon emissions… affects the terminal value of an asset.” This shows that climate action is not just an externality but is integrated into the core financial and operational strategy of the firm.

Specific SDG Targets Identified

Based on the article’s content, several specific SDG targets can be identified.

• Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix.
  • Explanation: The article’s focus on “thematic funds in energy transition, mid-market renewables” and the creation of the “Ardian Clean Energy Evergreen Fund” with a portfolio of “wind, hydro, solar, batteries” directly contributes to increasing the share of renewable energy.
• Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure…to support economic development and human well-being.
  • Explanation: The firm’s investment of “$20 billion for its European infrastructure platform” and its use of data science to create “more resilient businesses for the long-term” align with the goal of developing high-quality, resilient infrastructure.
• Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies.
  • Explanation: The use of digital tools like “Ardian AirCarbon” to implement “decarbonisation strategies” at airports is a clear example of retrofitting infrastructure with clean and environmentally sound technologies to make it more sustainable.
• Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management.
  • Explanation: The effort to reduce airport emissions, which are a significant contributor to air pollution in and around cities, directly addresses this target. The article notes that “Ardian AirCarbon” creates a “dynamic and granular view of emissions” to help reduce this impact.
• Target 13.2: Integrate climate change measures into national policies, strategies and planning.
  • Explanation: While the article focuses on a private firm, its actions demonstrate the integration of climate change measures into corporate investment strategy and planning. The statement that carbon emissions “affect the terminal value of an asset” shows that climate considerations are embedded in financial decision-making, mirroring the spirit of this target at a corporate level.

Indicators for Measuring Progress

The article mentions or implies several quantitative and qualitative indicators that can be used to measure progress towards the identified targets.

• Indicator for Target 7.2: Investment in renewable energy and installed capacity.
  • Explanation: The article provides specific figures that can be used as indicators, such as the “€1 billion-plus” size of the Ardian Clean Energy Evergreen Fund and the “several gigawatts” (specifically “3GW of installed capacity” mentioned for the Opta platform) in the renewable energy portfolio.
• Indicator for Target 9.1: Financial investment in infrastructure development.
  • Explanation: The “$20 billion” raised for the European infrastructure platform serves as a direct indicator of the financial resources being mobilized for infrastructure development.
• Indicator for Targets 9.4, 11.6, and 13.2: Reduction in greenhouse gas emissions.
  • Explanation: The article implies this is a key performance indicator. It mentions the “Ardian AirCarbon” tool’s function to monitor and reduce “carbon emissions” and even provides a potential metric: “optimising take-off and landing routes, which could reduce the emissions of one take-off or landing by up to 10 percent.” This percentage reduction is a specific, measurable indicator.
• Indicator for Target 7.2 (related to efficiency): Increase in operational availability of renewable energy assets.
  • Explanation: The article states that the “Opta” platform has “increased the availability of our wind fleet by about a week per year.” This increase in operational uptime is a clear indicator of improved efficiency and resource use in the clean energy sector.

SDGs, Targets, and Indicators Analysis

Source: infrastructureinvestor.com