A sustainability concept for infrastructure equities
Making good even better
Our infrastructure equity fund would not need any big changes, since its performance was simply the best. But inaction has no place in either infrastructure or the financial markets. So we have made the fund even more sustainable and also more room was given for the increasingly important topic of “digital infrastructure”. Because looking ahead, data highways will soon be much more important than traditional highways, and already are in many cases.
Infrastructure equities tend to be less cyclical
First of all, Raiffeisen-NewInfrastructure-ESG-Aktien will continue to focus on companies from sectors that are involved in the construction and maintenance of infrastructure, thus covering industrials, technology, telecommunications, utilities, energy, and health care in particular. The construction and operation of infrastructure and the resulting revenues are generally less dependent on economic cycles, i.e. are less cyclical than in other sectors. This means that infrastructure equity funds often hold up better during periods of economic downturn compared to the broader equity market, and conversely they tend to generate below-average performance during periods of economic upswing. Consequently, they are well suited for the diversification of equity or mixed portfolios.
Sustainability and infrastructure: a perfect combination?
Infrastructure is also the key to a more healthy, sustainable, climate-friendly, and environmentally-sound world, whether it involves renewable energy, buildings and technologies that offer improved energy efficiency, modern channels of communication, intelligent power grids, or less resource-intensive routes and means of transportation. In accordance with this, Raiffeisen-NewInfrastructure-ESG-Aktien already had a strong sustainability aspect in the past. Nevertheless, the topics of infrastructure and sustainability do not automatically make a perfect match. Just like in human relationships, making it function takes work. And it’s easy to see why.
Sustainability doesn’t happen overnight
On the one hand, a great deal of the existing infrastructure is by no means “sustainable”. One need merely think of motorways with petrol stations or oil pipelines. On the other hand, for the time being the construction of a sustainable infrastructure is hardly possible without the involvement of non-sustainable or less sustainable companies and sectors, such as oil and coal suppliers, copper and iron ore mines, steel and cement works, etc. And even the construction and decommissioning of infrastructure that apparently is sustainable (such as wind turbines, for example) is often still too resource-intensive and not as environmentally friendly as one would wish. In this regard, it is important to understand that sustainable economic activity is a process and simply does not materialise overnight.
Multifaceted ESG concept
Consequently, the ESG investment concept in Raiffeisen-NewInfrastructure-ESG-Aktien applies a mix of negative criteria (exclusion of certain sectors and companies, such as coal or companies that violate human and labour rights), minimum ESG ratings for companies in the fund, and active engagement and communication with the invested companies. This is supported by our long-standing expertise in sustainable investing and active dialogue with companies. The latter in particular can be understood as an active effort to improve the relationship of sustainability and investment.
Megatrend: digitalisation
The second fundamental change in the concept for Raiffeisen-NewInfrastructure-ESG-Aktien is that we are focusing more on the strongly-growing area of digital infrastructure. Microchips are sometimes referred to as the oil of the 21st century, as they have long since taken over a central role in the modern economy and society. State-sponsored support and investment programmes are now also focusing more on sustainable infrastructure investments and digital infrastructure.
In this regard, digital infrastructure follows a self-sustaining cycle: The more data there is, the more applications are developed to use this data in a profitable manner. The more data and applications there are, the more digital infrastructure (e.g. bandwidth) is needed. The more bandwidth there is, the more data and applications are generated and developed, and so on and so forth.
Summary
The very successful infrastructure equity fund has become even more sustainable with the integration of ESG criteria as well as more active shareholder engagement and communication with the companies in the fund’s portfolio. At the same time, the fund focuses on the rapidly-growing area of digital infrastructure – modern society’s “new” infrastructure.
The fund exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.