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Climate and social strategies power a new wave of infrastructure funds

ImpactAlpha, May 15Among the 2019 impact investing trends to watch, according to ImpactAlpha’s “Institutional Shift” podcast in January: “Expect major asset managers from Ares Management to Blackstone to launch billion-dollar ‘sustainable infrastructure’ funds.” Last week, Blackstone (with $512 billion in assets under management) signaled its strategy (see, “What we know about Blackstone’s impact infrastructure, real estate and private-equity initiative).

Now comes Los Angeles-based Ares (with $137 billion in AUM) with Climate Infrastructure Partners, Bloomberg reports, citing an email to investors (Ares declined to comment). Investments from the climate infrastructure fund will be aimed at cutting greenhouse-gas emissions and making better use of natural resources. In volatile markets, investors may be attracted to infrastructure funds, which typically expect returns in the high-single digits, from long-lived assets with reliable cash flows.

  • Social infrastructure. Franklin Templeton’s Franklin Real Assets Advisors has published several reports on the social infrastructure opportunity in Europe. Social infrastructure, defined as the physical assets that facilitate social services such as healthcare, education and affordable housing, increasingly intersects with efforts to reduce greenhouse gas emissions, Franklin Templeton suggests. “By many measures, buildings use more energy than either industry or transportation, and will contribute more to CO2 emissions between now and 2030.” Chicago-based Harrison Street ($17.2 billion AUM) quietly launched a “social infrastructure fund” last year.

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