Ridgewood: Building a business-first approach to sustainability – Infrastructure Investor

Report on Sustainable Infrastructure Investment and Alignment with Sustainable Development Goals (SDGs)

Executive Summary

Sustainable investment in United States infrastructure, particularly within the lower and mid-market segments, demonstrates continued appeal by focusing on fundamental risk mitigation and value creation. This approach is intrinsically linked to the United Nations Sustainable Development Goals (SDGs), leveraging the resources of infrastructure managers to enhance the sustainability performance of portfolio companies. Key priorities include environmental stewardship, such as water conservation and decarbonization, and the establishment of robust governance and safety frameworks. By integrating SDG principles into business strategy, investors and portfolio companies can ensure that sustainable practices generate tangible value and long-term resilience, irrespective of the political climate.

Integration of SDGs in Investment Strategy

Deal Screening and Due Diligence

Sustainability considerations are systematically integrated into the investment lifecycle, from initial deal screening through to due diligence. This process evaluates both risks and opportunities through the lens of the SDGs.

• Resource Conservation (SDG 6, SDG 12): Opportunities for resource conservation initiatives that enhance profitability and promote responsible consumption are actively sought.
• Climate Action and Clean Energy (SDG 7, SDG 13): Investments are evaluated for their potential to implement decarbonization initiatives, improve energy efficiency, and deliver attractive returns.
• Resilient Infrastructure (SDG 9): Due diligence includes a thorough assessment of exposure to environmental risks and the operational resilience of assets.
• Strong Institutions (SDG 16): A review of regulatory compliance and stakeholder relationships is conducted to ensure strong governance.

Risk Mitigation and Value Creation

Sustainability functions as a dual-purpose tool, providing critical risk mitigation while simultaneously serving as a primary driver of value creation. This strategy directly supports the achievement of multiple SDGs.

1. Risk Mitigation: Sustainable practices help to avoid stranded assets, regulatory penalties, and reputational damage, thereby safeguarding long-term value.
2. Value Creation: Proactive sustainability management creates value through several channels:
   • Improved energy efficiency reduces operational costs, advancing SDG 7 (Affordable and Clean Energy).
   • Investments in decarbonization position businesses to secure long-term contracts with climate-conscious customers, supporting SDG 13 (Climate Action).
   • Sustainable practices enhance brand equity and can open access to new markets aligned with SDG 12 (Responsible Consumption and Production).
   • Building robust supply chains contributes to SDG 9 (Industry, Innovation, and Infrastructure).

Thematic Investment Focus and SDG Alignment

Environmental Themes: Water, Energy, and Climate Action

Environmental factors are a cornerstone of the investment thesis, with a focus on resource conservation to address challenges posed by population growth and industrialization.

• Clean Water and Sanitation (SDG 6): Water conservation is an integral theme. For example, the water treatment business WRM implemented screw press infrastructure to reduce waste volume and disposal costs, enhancing both profitability and circularity in line with SDG 12.
• Climate Action (SDG 13): Decarbonization efforts are prioritized. The optimization of a route-based pickup system at WRM reduced vehicle idle time and fuel consumption, improving the company’s carbon footprint.

Social and Governance Themes

A holistic approach to sustainability extends beyond environmental factors to include critical social and governance elements that influence performance and resilience.

• Decent Work and Economic Growth (SDG 8): A focus on workforce safety and strong employee engagement drives productivity, talent retention, and operational excellence.
• Peace, Justice, and Strong Institutions (SDG 16): The implementation of robust governance practices, including data security and board accountability, reduces regulatory and litigation risks.

Impact in the Lower-Mid-Market and SDG Contribution

Investing in smaller, lower-mid-market companies presents a significant opportunity to achieve an outsized impact on sustainability. These businesses often possess a strong sustainability ethos but lack the resources to execute their ambitions. Investment provides the capital and expertise to implement bespoke initiatives that advance SDG targets.

Case Study: Carolina Marine Terminal

Upon acquisition, an immediate opportunity was identified to upgrade outdated, energy-inefficient heavy equipment. Replacing front loaders and forklifts delivered immediate gains in energy efficiency, contributing to SDG 9 (Resilient Infrastructure) and SDG 13 (Climate Action).

Case Study: Environmental Infrastructure Partners (EIP)

EIP develops projects that directly support public sector sustainability goals. For Hawaii’s Department of Transportation, EIP installed smart meters and vehicle fleet electrification infrastructure. This work advances SDG 7 (Affordable and Clean Energy) and SDG 11 (Sustainable Cities and Communities) by creating modern, clean transportation systems.

Case Study: Ecosave

Ecosave implements building automation and high-efficiency infrastructure upgrades, such as boilers and chillers. This allows customers to reduce energy consumption and operational costs, aligning with SDG 7 (Affordable and Clean Energy) and SDG 9 (Industry, Innovation, and Infrastructure).

Navigating the Regulatory Landscape

The complex regulatory environment in the US, with varying policies at the federal, state, and municipal levels, necessitates a sophisticated approach. A “business-first” framing of sustainability, centered on fundamentals such as efficiency, resilience, and compliance, ensures that initiatives remain value-accretive regardless of political sentiment. This focus on robust compliance and governance aligns with the principles of SDG 16 (Strong Institutions).

Outlook on Sustainable Investment and SDGs

The structural drivers for sustainability—including climate risk, consumer expectations, and supply chain resilience—are expected to persist and continue shaping the market. Businesses that effectively manage these factors and align their operations with the SDGs will prove more resilient and valuable in the long term. Despite potential shifts in policy, the momentum behind sustainable investing and operations is projected to remain strong, fostering continued progress toward global sustainability targets.

Analysis of Sustainable Development Goals (SDGs) in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 6: Clean Water and Sanitation

  The article directly addresses water issues, stating, “Population growth, urbanisation and industrialisation are putting severe strain on water resources… This is why water conservation has been an integral theme of our water-focused investments.” It provides a specific example of its portfolio company, WRM, which implements infrastructure for water treatment and waste reduction, promoting circularity and profitability.

• SDG 7: Affordable and Clean Energy

  This goal is central to the article’s discussion on decarbonisation and value creation. Numerous examples are provided, including investments in “energy efficiency and sustainability infrastructure, such as building automation, smart metering and renewable power sources.” The article also details specific projects like installing “high-efficiency boilers and chillers” and electrifying Hawaii’s state vehicle fleet.

• SDG 8: Decent Work and Economic Growth

  The article connects sustainability to social factors that influence economic performance. It mentions “workforce safety” as a priority and notes that “strong employee engagement can drive productivity and retention.” This highlights the link between sustainable business practices and creating a safe, productive work environment that fosters economic growth.

• SDG 9: Industry, Innovation, and Infrastructure

  The core subject of the article is sustainable investment in infrastructure. It emphasizes upgrading existing facilities, such as the Carolina Marine Terminal where “heavy equipment… were no longer fit for purpose from an energy efficiency perspective.” It also focuses on building new, resilient infrastructure through portfolio companies like Environmental Infrastructure Partners, which installs smart meter and electrification projects.

• SDG 11: Sustainable Cities and Communities

  The article’s focus on infrastructure projects directly impacts communities. Examples include electrifying Hawaii’s Department of Transportation and airport vehicle fleets and optimizing logistics to “reduce idle time and fuel usage, improving the business’s bottom line, as well as its carbon footprint.” These actions contribute to reducing the environmental impact of urban and transport systems.

• SDG 12: Responsible Consumption and Production

  The principle of resource efficiency is a recurring theme. The article states that investors “look for opportunities to implement resource conservation initiatives that drive immediate profitability.” It provides the example of WRM’s screw press infrastructure that “reduces the volume and cost of waste disposal,” directly addressing waste reduction and promoting circularity in production patterns.

• SDG 13: Climate Action

  Decarbonisation is explicitly named as a key environmental priority. The article frames investments in energy efficiency, renewable energy, and vehicle electrification as initiatives that “reduce costs while also positioning businesses to win long-term customer relationships with climate-conscious buyers.” These actions are fundamental to mitigating climate change.

• SDG 16: Peace, Justice, and Strong Institutions

  The article highlights the importance of governance in sustainable investment. It lists “building sustainable governance models, data security and board accountability” as priorities. It further explains that “robust governance practices can reduce regulatory and litigation risk,” which aligns with the goal of building effective and accountable institutions at the corporate level.

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 6: Clean Water and Sanitation

  • Target 6.3: Improve water quality by reducing pollution and increasing recycling. The work of the water treatment business WRM, which implements infrastructure to reduce waste disposal, directly contributes to this target.
  • Target 6.4: Substantially increase water-use efficiency across all sectors. The article’s emphasis on “water preservation” and “water conservation” as an investment theme aligns with this target.

• SDG 7: Affordable and Clean Energy

  • Target 7.2: Increase substantially the share of renewable energy in the global energy mix. This is addressed by the mention of investing in “renewable power sources.”
  • Target 7.3: Double the global rate of improvement in energy efficiency. The article is rich with examples supporting this, including “building automation, smart metering,” “high-efficiency boilers and chillers,” and replacing inefficient “front loaders and forklifts.”

• SDG 8: Decent Work and Economic Growth

  • Target 8.8: Protect labour rights and promote safe and secure working environments. This is directly referenced through the stated priority of “workforce safety.”

• SDG 9: Industry, Innovation, and Infrastructure

  • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure. The entire article focuses on this, from port logistics to building automation and energy infrastructure.
  • Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean technologies. The examples of Ecosave’s building upgrades and the modernization of the Carolina Marine Terminal are direct applications of this target.

• SDG 11: Sustainable Cities and Communities

  • Target 11.6: Reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management. This is supported by initiatives to reduce fuel usage and carbon footprints and to decrease the volume of industrial waste.

• SDG 12: Responsible Consumption and Production

  • Target 12.2: Achieve the sustainable management and efficient use of natural resources. The focus on “resource conservation initiatives” and “resource and energy efficiency” directly supports this.
  • Target 12.5: Substantially reduce waste generation through prevention, reduction, recycling and reuse. The WRM example of using a screw press to reduce the volume of waste is a clear contribution to this target.

• SDG 13: Climate Action

  • Target 13.2: Integrate climate change measures into policies, strategies and planning. The article describes integrating sustainability and decarbonisation into corporate investment strategies and business plans, which is the corporate-level equivalent of this target.

• SDG 16: Peace, Justice, and Strong Institutions

  • Target 16.6: Develop effective, accountable and transparent institutions at all levels. The emphasis on “sustainable governance models,” “board accountability,” and “robust governance practices” within portfolio companies reflects the principles of this target.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicators for Energy, Climate, and Infrastructure (SDGs 7, 9, 11, 13)

  • Energy consumption reduction: Implied through initiatives like “building automation, smart metering and renewable power sources” and “high-efficiency boilers and chillers.”
  • Fuel usage reduction: Implied by the optimization of “route-based pickup system… to reduce idle time and fuel usage.”
  • Carbon footprint: Explicitly mentioned as being improved through fuel usage reduction.
  • Energy efficiency: Mentioned as a key performance factor, for example, in replacing old equipment at the Carolina Marine Terminal.
  • Number of electrification projects: Implied by the description of EIP’s work electrifying Hawaii’s vehicle and airport fleets.

• Indicators for Water and Waste (SDGs 6, 12)

  • Volume of waste disposal: Implied by the statement that WRM’s infrastructure “reduces the volume and cost of waste disposal.”
  • Water usage: Implied through the focus on “water conservation” as an investment theme.

• Indicators for Work and Governance (SDGs 8, 16)

  • Workforce safety metrics: Implied by its inclusion as a key sustainability factor alongside data security and governance.
  • Employee retention: Mentioned as an outcome of strong employee engagement.
  • Productivity: Also mentioned as an outcome of strong employee engagement.
  • Regulatory and litigation risk: Mentioned as being reduced by robust governance, implying that tracking fines or legal actions would be an indicator.

4. Summary Table of SDGs, Targets, and Indicators

Source: infrastructureinvestor.com