Introducing an ESG Analysis Framework for Energy Infrastructure

Highlights from Energy Infrastructure.

Nate Heywood, CFA

In an effort to provide transparency for Environmental, Social and Governance considerations for investors to make informed decisions, we have created a framework to appropriately capture the risks and opportunities that are unique to the Energy Infrastructure sector. Our analysis uses the Sustainability Accounting Standards Board (SASB) as a basis to evaluate companies on sustainability and through a deeper dive we have created an ATBesg approach in response to challenges in asset diversity and unique operating environments. While we are cognizant of the significant risks energy infrastructure names are exposed to in an ever-changing environment, we are supportive of the current opportunity set. We view existing operations and positioning in the broader energy value chain leave EI names as favourably exposed to developing unique solutions for helping customers and their energy transition-related goals. Please see our ESG thematic published concurrently with this report to understand our framework rationale and broader approach to ESG. 

The Sky is the Limit for Energy Infrastructure Sustainability Opportunities
Despite the historical shadow surrounding carbon intensive fossil fuels usage, the energy infrastructure sector is uniquely positioned to pursue a vast number of sustainable opportunities that can lower carbon emissions for the sector, its customers and broader economy. Through technological advancement and increasing social awareness, energy infrastructure companies are exploring options within renewable fuels, carbon capture, renewable power and efficiency improvements, while still maintaining attractive returns on capital. The appetite from both government and industry for sustainable energy options continues to increase and the sector is well positioned to widen its service offering toward low-carbon initiatives given the low cost of capital, existing infrastructure and development experience. 

The ATBesg Approach
We are using the Sustainability Accounting Standards Board (SASB) as a basis to evaluate companies on ESG. However, given the challenges of ESG analysis for vertically and/or horizontally integrated companies operating in various geographical markets, we have incorporated an ATB component, called ATBesg. Our ranking system generates both a Best-in-Class (BiC) score and a Best-in-Momentum (BiM) score, which helps frame current performance at the portfolio level for BiC and demonstrates who is moving the needle for impact-oriented and trajectory focused investors with BiM. See Appendix A for greater detail on our scoring methodology and metric assessment framework. 

Rankings; Best-In-Class (BiC) and Best-In-Momentum (BiM) 
While we analyze companies through both a SASB and ATBesg approach, we have further broken-down performance into a best-in-class (BiC) and best-in-momentum (BiM) scoring system.

Nate Heywood, CFA 403.703.7506

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