How to get the best and most impactful returns out of this asset class

While investing in the energy transition has the power and the potential to change the world for the better, there is also no denying that it's an incredibly expensive undertaking. A Bloomberg calculation found that global investment in the energy transition topped US$1 trillion last year - eclipsing its own record that it had set 12 months earlier. 

And because of the nature of the task, that spend has to go towards infrastructure and real assets which will run the new global power grid. 

That's why Brad Frishberg, Chief Investment Officer at Macquarie Global Listed Infrastructure, is so passionate about the role that infrastructure investments can play in the wider green investing thematic.

"Infrastructure is critical to achieving energy transition as the ultimate result will be greater electrification of our economies and a massive build out of green energy production," he said. 

In this edition of Expert Insights, Frishberg also explains how recent policy tailwinds have helped the cause for green infrastructure investments. Finally, he shares with us how he finds value in the sector. 

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Edited transcript:

What role does infrastructure play in the energy transition?

Infrastructure is critical to achieving energy transition as the ultimate result will be greater electrification of our economies and a massive build out of green energy production. 

 This will require substantial investment by electric utilities worldwide to upgrade distribution networks, transmission networks, storage, carbon capture and electricity generation.

How has the IRA and the Bipartisan Infrastructure Deal impacted the infra space?

The tax credits are very supportive to the investments required in the space. 

Similarly, the $3/kg green hydrogen subsidy is potentially substantial enough to help kickstart meaningful growth in that industry. 

 It is great to see the US government helping to keep the momentum but much more is needed, globally.

What specific types of infrastructure do you invest in, and why?

We define our global listed infrastructure investible universe quite purely. 

By that, I mean we look to include those companies that own or operate the underlying infrastructure but not those companies that are infrastructure-related. We also look to exclude companies that have excessive commodity exposure. 

So to use examples, we would invest in airports but not airlines. Or we would invest in toll roads but not asphalt producers. 

We define the universe so purely because you then end up with a group of companies that is truly different than a broad global equity universe. 

 Our companies tend to have lower economic cyclicality, a favourable upside/downside capture ratio, higher yields and often inflation linkage. It is these four attributes that tend to attract investors to global listed infrastructure.