Sustainable mobility and infrastructure

It is increasingly clear that we need to reshape mobility and infrastructure systems to address some of the biggest challenges of our time, not least the need to reduce and control the level of our global greenhouse gas (GHG) emissions. The overall world population is expected to increase in the next decades, although at a decreasing rate and very unevenly across regions, while it is predicted that people will increasingly concentrate in cities and urban areas. Globalisation, technological developments and financialisaton have all contributed to longer, global supply chains. The COVID-19 emergency has exposed the vulnerabilities deriving from long value chains, and urged to rethink the way we plan, organise and value logistics.

We have built an economic system that deploys massive amounts of energy and resources for transport and infrastructure, contributing to environmental pollution but also more broadly impacting the quality of life in urban areas and beyond. For our society to thrive within planetary boundaries, a lot must change in the way we think and implement our transport and mobility and in the way we plan, develop and maintain essential infrastructure and buildings.

Our investment focus

Transition to sustainable mobility, buildings, and infrastructure

Within this theme, we invest to support a widespread dissemination of technical and technological advancements and solutions that can contribute to more liveable urban areas, greener and more durable buildings, integrated transport solutions and more distributed and resilient infrastructural networks.

Transport needs to shift away from fossil fuels, moving towards increased electrification, with electric power generated from renewable resources. It is also essential to build integrated and smarter transport solutions that can help reduce the number of polluting vehicles for individual use, facilitating collective and shared modes of transport. Importantly, for an integrated mobility system to be effective, (public) transport needs to be flexible, reliable, safe and, not least, affordable, and cheaper than individual mobility solutions, to ensure adoption by the most disadvantaged segments of the population. Similar considerations hold for freight transport. Traffic infrastructure should also be designed to facilitate green(er) mobility solutions, such as cycling for shorter commutes and railway infrastructure between cities.

These are essential elements in our response to increased urbanisation, but also to reduce the environmental impact of long-distance travel as well as of freight transport, for which solutions fostering more resilient value chains, less prone to disruption, are also needed.

For the transition to sustainable mobility, we look for:

Car and car component manufacturers that contribute to the electric mobility transition as well as to increased safety standards for vehicles.
Products and services that contribute to energy and resource efficiency for all types of vehicles.
Public transport, such as railway companies and companies managing urban connections.
Products and services that facilitate the development and adoption of integrated mobility solutions.
Technological solutions for improved traffic management as impactful tools to increase road safety.

At the same time, we should strive for resource efficient and sustainable cities, which also implies but is broader than carbon-neutrality. New and existing buildings need to be increasingly designed or converted to increase their energy and resource efficiency, using materials and designs that are circular, sustainable, and responsibly sourced and ensuring proper maintenance. They should also be designed and operated to create inclusive spaces that are accessible, convenient, and enjoyable to use for everyone.

Power grids and water and sanitation infrastructure need continuous maintenance and can be updated with new materials and solutions delivering more efficient resource use and mitigating negative environmental impacts. Importantly, infrastructure needs to be both efficient and reliable. Sustainable infrastructure should be socially, economically, and environmentally sustainable. Social by providing accessibility to all and providing basic services that contribute to social wellbeing and climate resilience for communities. Economically, it should be affordable for governments and users and help to create jobs in local communities. Environmentally, infrastructure should limit pollution and support conservation and sustainable use of natural resources for example through energy and water efficiency.

For the transition to sustainable infrastructure, we look at:

Buildings: the construction industry contributes heavily to air and groundwater pollution, is responsible for a large share of natural resource extraction and at the same time generates a massive amount of waste, that goes in large part directly to the landfill. At the same time, buildings themselves can be sources of energy and resource waste. One of the aims should be to limit both embodied carbon and operational carbon of buildings.
We invest in companies and initiatives that develop and implement best practices for sustainable construction, both of new buildings and when improving and converting existing ones. Examples are materials that increase building insulation, or buildings provided with heat pumps or water saving toilets and faucets that improve energy and resource efficiency. We also apply a social lens, ensuring that companies pay attention to building design that is inclusive and allow for flexibility in use.
Utilities: resource efficient, well-maintained, and responsibly developed utility networks are vital for the functioning of our economies as well as for ensuring wide-spread access to basic services. We invest in companies that contribute to transmitting and distributing energy and clean water in the most resource efficient ways, increasing the amount of energy from renewable sources, and ensuring high quality and care of ground water and other water resources.
Urban and national infrastructure: governmental and local institutions are best positioned to develop and implement infrastructural plans that shape our cities and landscapes and have a fundamental interest in ensuring that utility networks are reliable and efficient. In addition, part of the success of the transition to greener infrastructure depends on improved practices in heavy industries such as steel and cement, where lower costs of renewable power and new technologies can help decarbonizing the sector.

Our impact objectives

Environmental impact, sustainable design, and efficiency

To identify and select companies that contribute to this theme, we have established a set of core impact objectives. We individually look at each company and use both qualitative information and quantitative data to screen companies and monitor alignment with our theme specific impact objectives and SDGs.

We use impact indicators based on sources of revenue data to track companies’ contribution towards these objectives. We further substantiate our analysis by looking at companies’ product offering and relevant sustainability indicators as well as other qualitative evidence of sustainable practices as stated by companies’ policies and active programmes.

In some instances, contribution to impact objectives cannot be captured fully through revenue analysis, or data might simply not be completely available. This is the case of process-related impact, for example:

Waste reduction
Efforts to reduce greenhouse gas emissions
Upholding fair and transparent value chains
Use of hazardous chemicals

In such cases our analysts look at qualitative evidence of contribution to these objectives, for example in the form of policies and programmes, or active participation to relevant platforms. This allows to also tackle challenges that can be traced back to other relevant SDGs, in a more qualitative fashion.

Minimum standards

Do no harm

After screening companies for positive impact, the selection is further reinforced by the application of minimum standards, which are internally developed and regularly updated.

The main objective and rationale of minimum standards is ensuring that we do not invest in companies offering products or adopting behaviours that clash with our vision and beliefs.

As with some other themes, this theme relates to different industries and therefore multiple minimum standards are relevant. A few of them are highlighted below as they are considered most important for the theme and related companies.

Most car manufacturers are still transitioning to greener energy sources. We therefore require such companies to have strong carbon reduction targets and programmes in place.

For infrastructure, and in particular large infrastructure projects like dams, the overall impact on local biodiversity can be very high. Companies involved in controversial infrastructure projects without clear sustainability-related improvement plans, including biodiversity, are excluded.

For energy transport and logistics, as well as for utilities, we carefully assess companies on revenues from nuclear power related activities. We do not invest in companies that are involved in the production, retail or distribution of nuclear power, the manufacture of nuclear power stations or supply of crucial components or services that are tailor made for nuclear power production, transportation or depositing of (spent) fuel, or transportation or depositing of spent fuel.

For mobility, including public transport, electric vehicles (EV) and related activities, the topics of labour rights and conflict minerals are very relevant. Labour rights relate to workers’ rights in public transport or logistics, but also to conditions in the supply chain of, for example, manufacturers of vehicles. As with most new technologies, including EVs, conflict minerals may be used and therefore need to be addressed by the company.

In addition, land use and ownership related to large infrastructure projects can violate the rights of indigenous people, and of the local communities. Companies involved in controversial infrastructure projects without clear sustainability-related improvement plans are excluded.

For building and construction, sustainable sourcing of wood and wood related products is an important aspect of sustainability. We require companies that purchase wood, paper or pulp products that these originate from certified forests according international sustainability standards such as FSC or PEFC.

Less visible but also important is the corruption risk related to construction (both buildings and infrastructure). Companies active in construction need to have precautionary policies and programmes in place to prevent and fight corruption.

We track controversies related to our minimum standards for all companies we invest in and engage with companies on material controversies that violate our minimum standards or that could lead to a breach of our minimum standards, e.g. following a merger.

Engagement

Positive change

Although all companies in our funds are selected based on their good sustainability performance, we always strive for improvement and we constantly exert our investor pressure to push for substantial results. Engagement is part of continuous monitoring of companies in our portfolio, and we see it as the way we can move forward together.

Transport, energy, and the construction industry substantially contribute to total CO₂ emissions, one of the most recognised drivers of climate change. For this reason, we especially engage with companies in this theme to encourage them in adopting science-based targets of CO₂ emission reduction, in line with the Paris Climate Agreement. Besides, we hold individual conversations with companies on specific sustainability issues as already highlighted through our minimum standards.

Investment examples

Investing in sustainable mobility and infrastructure

For Sustainable Mobility and Infrastructure, we invest in companies that are already well aligned with our vision (upper right), and also in companies that display a clear commitment to move towards more sustainable practices, and that we deem suited for the challenge (upper left). We are also open to smaller, innovative actors that can benefit the business ecosystem with their solutions (lower left).

Here we have selected three examples of companies we invest in, and placed them on the transition curve. Scroll down for more examples and an up-to-date list of our investments in this theme.

ADIF-AV (Administrador de Infraestructuras Ferroviarias-Alta Velocidad) constructs and manages high-speed rail infrastructures in Spain and is controlled by the Spanish government.
Rail transportation is a readily available sustainable mobility solution, causing significantly less CO₂ emissions per passenger kilometer compared to other transport modes. It therefore contributes to solutions for sustainable mobility,and with that to both SDG9 ‘Industry, Innovation and Infrastructure’ and SDG11 ‘Sustainable Cities and Communities’.
The company has issued a green bond, the proceeds of which will be used to finance new highspeed rail tracks, track maintenance and upgrades, including improvement of the energy efficiency of the rail network.

Sekisui Chemical is a Japanese company with a wide variety of operations. The company is active in three business segments: environmentally friendly housing, high performance plastic materials, and urban infrastructure.
The company provides prefabricated housing, which reduces carbon emissions by 30-40% compared to traditional on-site construction methods. Sekisui Chemical is one of the leaders in Zero Energy Housing (ZEH). By using solar power generation systems, energy efficient equipment and high-performance insulation, these houses can achieve an annual net energy consumption of approximately zero or even less.
Sekisui Chemical is one of the first companies in Japan that has based its value creation processes on integrated reporting, defining six social capital inputs (financial, manufacturing, intellectual, human, natural and social) for its business processes and outputs to result in five social outcomes to which the company wants to contribute: security & safety, comfort, health, urbanisation and the environment.
The company has set criteria for products that enhance sustainability for example by using recycled materials or reducing water consumption. Currently, 61% of sales are certified to significantly contribute to the social or natural environment. As part of its 2030 vision the company continues to broaden its business centered with ESG management. Through its zero-energy houses it contributes to the transition towards more sustainable buildings and infrastructure.

Toyota Motor is a global car company selling over 10 million vehicles per year. The company has the scale to develop, invest and roll out new type of vehicles and technologies.
Toyota is a leader in reducing CO₂ emissions. 1997 Toyota introduced the world’s first hybrid electric vehicle (HEV), the Prius, and in 2014 it introduced the first hydrogen powered vehicle (FCEV), the Mirai. In Europe, the company will be the only major car manufacturer that can achieve the 95-gram CO2/km norm in 2021. On a global basis it has a 40% market share of alternative fuel vehicles, with a 64% share in the hybrid and plug-in markets.
The company deliberately skipped the current generation fully electric vehicles (BEV) that use ion-lithium batteries, which it deemed not ideal for fully electric vehicles in terms of costs and performance and focused on the next generation solid state batteries that have much better performance, are safer, cost less than half to manufacture and require substantially less rare earth metals and chemicals. Toyota holds more than 50% of global patents related to solid-state batteries, which will come to the market in 2022, far ahead of competitors. By 2025 Toyota wants to have an electrified version of all its models and has built a global production platform that enables that ambition.
Toyota has a very good track record on safety and reliability. In many surveys of consumer groups and industry organizations Toyota shows low maintenance costs and above average residual values. This keeps total cost of ownership for car owners low and helps in extending the life of cars.

Sustainable Mobility and Infrastructure Investments

Sustainable Mobility and Infrastructure