The infrastructure sector can lead global industry in decarbonisation and help drive transition to net-zero emissions, however this will require significant investments, according to ClearBridge Investments’ paper.
The study, which looked at electric utilities, energy infrastructure, airports and rail transport, found that infrastructure firms and asset owners were traditionally embracing carbon emissions reduction, a trend that would be expected to accelerate with global policy support and growing social pressures.
Railroads were forecast as one of the likely environmental, social, governance (ESG) winners in the transport industry due to their unique ability to reduce greenhouse gas emissions as rails were, on average, four times more fuel-efficient than trucks.
As far as other transport sectors were concerned, aviation and airports produced low emissions levels compared with other parts of the transport industry, but to lower emissions further, airport operators would need to seek to procure renewable energy and install solar panels on their sites.
However, the more challenging task would be to cut indirect emissions, such as reducing unnecessary airline engine operation, emissions from ground support equipment and passenger travel to the airport, the study found.
In the electric utility sector, since the Paris Climate Agreement in 2016 most companies had put emissions targets in place and were pivoting from fossil-fuelled generation to renewables and, as a result, annual renewables generation capacity had doubled worldwide over the past decade, while utilities were decommissioning thermal and nuclear plants.
Nick Langley, ClearBridge investments managing director and portfolio manager, said that the trends were positive, but all these sectors faced challenges.
“The oil and gas sectors face greater challenges than other infrastructure sectors,” Langley said.
“Companies are transitioning away from gas, with some piloting hydrogen and renewable gas, while others invest in wind and other renewables. We are sceptical about the ability of all pipeline companies to benefit from the transition to net-zero emissions. In addition, the development of the electric vehicle market is threatening the future of oil.”
According to the white paper, challenges facing the electric utility sector included maintaining stable grids, the expiry of subsidy support and increased competition as barriers to entry come down, while the biggest challenge facing rail was the threat that regulators, responding to shippers’ complaints, will slow the pace of change.
Following this, airports had a complex array of stakeholders, including state, federal and local governments that needed to be taken along the net-zero journey.