Head of Foresight Australia, Kim Nguyen, explains in an article for ASFA’s Superfunds magazine why allocating to renewable infrastructure debt in 2019 makes good long-term sense for superannuation funds. Kim writes that the rising pressure on the coal mining industry mean investments in fossil fuels are at growing risk, and points to increasing investor concerns about investing sustainably and ethically – while Australia’s unstoppable transition to renewable offers great opportunity for investors.
“92% of people expect responsible and ethical treatment from their super fund, and 80% would consider switching their super or other investments if their manager engaged in activities inconsistent with their values”, according to the industry body Responsible Investment Association Australasia (RIAA).
Kim Nguyen encourages superannuation investors to look towards sustainable energy investing, especially renewable infrastructure debt, and to choose superannuation funds that invest responsibly.
As an asset class, infrastructure debt is characterised by stable and resilient demand, provision of essential services, and typically long-term highly-predictable revenue streams. Compared to equity, investing into senior secured loans is to invest in the safer part of the capital structure, while infrastructure debt provides an alternative investment class in the current low and falling interest rate environment.
It also offers institutional investors exposure to an asset with expected stable cash flows and attractive yields, while also offering borrowers access to much needed liquidity.
Capital at risk.