We appointed BlackRock for our infrastructure debt mandate. Their consideration of ESG was a well articulated component of their investment strategy. Risks are considered throughout their investment process, with a risk screen conducted at the beginning of the due diligence stage. For example, their initial risk screen of a loan to a hospital identified potentially corrupt procurement practices. Following discussion with BlackRock’s risk and financial crime teams, the investment team declined on the opportunity. BlackRock works with several external due diligence providers to identify and manage these often complex and technical risks, including engineering, environmental and energy management consultants. If material ESG risks are identified during the initial underwriting and investment phase, the team seeks to mitigate these through: requesting changes to the design or operation of the project or negotiating enhanced covenants in respect of ESG standards of operation, as well as additional reporting covenants in respect of the identified risks.
Our strategy aims to invest approximately 50 per cent of assets in infrastructure debt in positive impact sectors like social housing, health facilities and renewable energy including wind, solar projects and smart meter providers. BlackRock have developed metrics to measure the impact of financing these assets.