Evaluating individual infrastructure projects from an environmental, social and governance (ESG) point of view is common practice for lenders. Yet providing an ESG evaluation of whole infrastructure sectors and their related risks is a much more challenging task, according to Frédéric Blanc-Brude, director of the infrastructure institute at business school EDHEC. Efforts to correct this are now being made, however.
Banks face a great deal of pressure to ensure infrastructure is sustainable; for example, through the fourth revision of the Equator Principles – providing a risk management framework to deal with environmental and social factors in project finance – which is due to be finalised by the end of 2019. It is set to include climate change provisions following the 2015 Paris Agreement and the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD).
