Q&A with Matt Hammond, Partner, Foresight Group
Published 25 June 2021
By Sarah Casey, Portfolio Director, Climate Council
Q. What are Foresight’s sustainable infrastructure fund portfolios made up of?
Foresight manages a wide range of different investment vehicles backed by public and private institutional investors as well as retail investors. These funds have differing investment objectives and quite diverse portfolios. Taken as a whole, we have invested across the energy sector in solar, wind, biomass, waste, anaerobic digestion, hydro as well as batteries and reserve power. We have invested in sustainable transport and heating as well as digital infrastructure where we have started with fibre broadband networks. We have also accumulated a forestry portfolio.
Q. Are there any exciting technologies or projects that you have your eye on?
In the energy sector, we see further opportunities in developing new generating assets as well as more battery deployment. We are also tracking a few transmission and distribution assets such as interconnectors under development. The growing scale and sophistication of offshore wind also creates opportunities in port infrastructure like rail and cranes and increasingly bespoke service vessels. The heating and transport sectors will also provide opportunity as decarbonisation objectives continue to rise. Controlled environment agriculture will likely be a big area too and is just getting started.
Q. In December 2020 Foresight announced a partnership with CNG Fuels to build a UK wide network of refuelling stations for HGVs to run on lower carbon fuel. Can you tell us some more about how Foresight are working in the transport sector to help drive a clean energy future?
The transport sector is a tougher nut to crack than electricity. Electric vehicles and EV charging get a lot of attention but that’s only part of the challenge. The decarbonisation solution varies considerably across the transport sector. CNG Fuels is addressing the heavy good vehicle market enabling a swift move away from diesel. This may be an interim step towards hydrogen or battery trucks in a couple of decades but the physics of weight and energy density just don’t work for those technologies yet. Something similar may be useful in other sectors such as short haul shipping (we are an investor in a ferry business) and some non-electrified rail lines but those sectors are moving more slowly. Electric vehicle charging is an interesting area but not a simple one for infrastructure investors as contractual offtake or measurable demand are both pretty nascent.
Q. Are there any other sectors Foresight have already invested in or at looking at which will play major roles in achieving the 1.5c scenario?
All infrastructure plays a role in achieving a 1.5 degrees target. Energy, heating and cooling, transport obviously but digital infrastructure too. Aside from that, agriculture is the biggest challenge and that sector has barely begun to adapt to climate change, despite in many areas suffering the consequences of it. Regenerative agriculture, controlled environment agri- and aquaculture and supply chain investments such as more efficient cold storage facilities will all become more common financial investments in years to come.
Q. ESG reporting is a growing consideration. How do Foresight address this and report on ESG in the first place?
The best and really only workable approach for us is to ensure that we are assessing all relevant sustainability considerations pro-actively at every stage of our investment process and in our asset management stewardship once we have invested. If we start from that sustainability perspective, then the reporting can follow more easily. The reporting requirements of our investors and other stakeholders vary and change quite often in what is an evolving reporting environment. By focusing on sustainability first we can adjust the reporting more easily. Moreover, as a specialist manager, our investors look to us to take the lead on what the right approach to sustainable investment is in the areas that we cover. It’s necessarily a conversation.
Q. Biodiversity is being increasingly focused on and is set to be a topic of focus at COP26 in Glasgow later this year, how do Foresight consider biodiversity when reporting on ESG?
As we look more at the agriculture sector, this will become a bigger theme. Like so much of the sustainability agenda, it’s not just about climate change. We have biodiversity management plans on our existing sites (mostly solar parks) and bespoke plans for each of our forests. A lot of our forestry portfolio is afforestation of what was pasture so the opportunity to enhance the local biodiversity is substantial.
Q. Do you think there’s a compromise between financial reward and impact when it comes to ethical investing?
It will always be possible to find specific investment opportunities where there is money to be made by ignoring the impact of a particular asset or company. But generally, climate change mitigation, broader sustainability themes, and focused attention on social and governance issues are big themes that, thankfully, will not go away. These themes inform politics and policy. Investing with a long-term time horizon in mind ignorant of these issues risks being on the wrong side of legislation that may well be value-destructive. There’s no compromise really if you evaluate risk thoughtfully.
Q. What advice would you give to investors who are looking to get more involved in the renewable energy space?
The important thing is to develop a sound understanding of what is involved. Renewable energy funds and companies all do different things – some are developing tech, some selling equipment, some owning renewable assets. Mainstream financial media often doesn’t draw much of a distinction between these very different investment ideas. In infrastructure, another issue now is that areas like solar and wind are quite mature and well understood. They attract a lot of capital and the returns available are now very low having fallen consistently for over twenty years. Even for simple assets, there are risks and you can overpay.