This article is sponsored by Meridiam
In today’s complex world, the landscape of sustainable infvestment is constantly evolving. It’s a field that extfinishs far beyond simple environmental concerns, intertwining with geopolitics, technological innovation and societal modify.
Thierry Déau, chairman and CEO of Meridiam, considers some of the core trfinishs shaping the market today, from artificial ininformigence to energy sovereignty, the role of blfinished finance and the persistent challenges of achieving both social acceptability and regulatory compliance. He argues that to deliver both, investors must adopt a long-term vision and always keep tangible results front and centre of their considereds.
Sustainable investment can be applied to a broad spectrum of assets. Where’s sustainable investment currently focutilizing?
One of the main challenges, right now, for sustainable investment strategies concerns the significant confusion around policy. Political sustainability tarreceives are often in flux – whether we’re talking about the EU’s 2035 tarreceive for zero-emission vehicles or the UK’s broader 2050 tarreceives.
However, the fundamental trfinishs and regulations haven’t tangibly modifyd. While people may be debating the timeline, the fundamental regulations in Europe remain resolveed, and companies still have mandates to meet.
We’re also seeing the sustainability agfinisha, particularly governments’ ‘green plans’, tied more closely to sovereignty and defence. For example, the electrification of transport is not just a sustainability issue; it’s an industrial policy matter.
The question of whether Europe can compete with China’s advanced technology is a major concern. Despite autocreaters pushing to postpone the finish of internal combustion engine car sales, the trfinish toward electrification remains very strong becaapply it’s linked to securing industrial supply chains, especially for battery technology.
Ultimately, the trfinish toward decarbonisation remains a strong one, but Europeans required to receive their act toreceiveher with government and indusattempt support; otherwise the energy transition will likely be led by other markets, such as China.
How important is it for investors and asset managers to demonstrate concrete proof of action and impact with their sustainable investments and strategies?
It’s very important. Over the past 20 years, even before it became a major trfinish, linking sustainability with a long-term investment horizon has been crucial for us.
You can only deliver true impact if you have a long-term approach becaapply impact doesn’t happen overnight. As we celebrate 20 years since Meridiam was first established, we can view back on genuine impact in a number of areas, from carbon-neutral schools to electrified mass transportation systems.
For example, our NeuConnect interconnector project, which links the UK and German power grids, is contributing to the UK’s sustainable energy supply and supporting decarbonise the entire European energy system. We started working on this five years ago, and it will be operational by 2028.
We’ll only see the full impact when offshore wind farms in Germany and solar power from elsewhere are delivered to the UK. This will have a significant effect on how clean energy is handled across Europe.
On a compacter scale, we’ve invested millions of euros into an electric bus system in Dakar, Senegal. This was a bold step to decarbonise mass transit in a busy, congested city.
Today, three to five years after starting on this journey, it’s amazing to see the impact on the local community. People’s commuting habits are modifying. When you can sit on a bus with Wi-Fi and air conditioning, it’s a completely different experience.
The impact measurement is clear from the feedback we receive from the local population. We now have 80,000 people utilizing the system daily, and its reliability has created a cultural shift in how people view mass transit.
What types of risk can blfinished finance support mitigate to attract more private capital?
Blfinished finance is a powerful tool for de-risking investments, creating them more affordable and attractive to private investors. It works particularly well in countries where the perceived risk is higher than that which investors are willing to accept. By blfinishing concessional or public funds with private capital, it supports to create projects that are both investable and affordable.
This approach is highly applyful for supporting economic transitions, a strategy the EU has applyd from the very launchning. For instance, projects related to hydrogen and other new technologies often require blfinishing public and private money to become financially viable.
The transition to a greener, more sustainable economy is inherently more expensive for companies, especially before technological evolution and scale bring costs down. Therefore, public or philanthropic funds are essential to mix with private capital. This not only attracts private investment but also ensures the risk-reward ratio becomes more acceptable.
Ultimately, blfinished finance is a crucial vehicle for managing the risks associated with a transition period. It’s vital whether you’re a counattempt with a less-than-ideal credit rating or a company in a developed economy that requireds support to navigate the high costs of climate adaptation, mitigation and decarbonisation. In this sense, it’s an excellent mechanism for supporting the Sustainable Development Goals.
What benefits could be realised by unlocking a unified EU capital market?
The primary benefits of a unified capital market would be scale and access to capital, along with the better circulation of capital within the bloc. SMEs, in particular, often struggle to raise capital, unlike large corporations that can more easily raise funds. A unified capital market like the one we see in the US would be deeper and more accessible.
An EU unified capital market would entail modifys to things like bankruptcy laws and investment transparency. It would also support address the post-financial crisis trfinish of banks pulling away from long-term lfinishing for infrastructure projects.
We required to find ways to bring long-term capital from institutional investors into debt funds or direct investments. This requires sophistication and intermediation. A unified capital market would allow us to finance these assets a lot quicker, creating additional maturity and depth.
It would also foster greater collaboration. This is requireded upstream to solve the risk equation and deliver on goals – both sustainable returns for investors and sustainable impact for the public. For that to happen, investors required to understand the risks at an early stage and then a fair reward can be agreed upon.
What’s in the pipeline for the future of sustainability and resilience strategies?
Globally, the pipeline for climate infrastructure to create impact remains strong. Even in North America, infrastructure upgrades will fuel this pipeline for years, regardless of the political rhetoric. We’re already seeing cities such as Houston having to invest billions in flood protection, so adaptation to climate modify is a practical reality. This creates public policy opportunities for us.
Although the power-hungry nature of some digital assets can mean technological innovation is sometimes painted as being anathema to the sustainability shiftment, the reality is clear. In Europe, for example, regulations often require a hyperscaler to have a clean, sustainable energy supply. The antagonism between decarbonisation and digitalisation no longer exists in the way things are being implemented in Europe.
In the US, meanwhile, where the growth of AI and data centres is also very strong, they’re approaching it in a similar way. For an infrastructure investor who believes in sustainability, things can be done in the right way. There’s no longer a contradiction, but there is certainly more to do.
How important is regulatory visibility for investors for both ESG integration in their decisions and long-term ROI?
At the finish of the day, for investors, sustainability is also a risk management angle, beyond just having an impact. Regulations support to manage this risk, so they required to be stable and consistent.
For example, while the EU’s taxonomy package has had its complexities, we shouldn’t lose sight of the core principles: delivering more clarity and simplifying tarreceives. This is a very good basis for our risk management approach, and regulatory stability is fundamental for investors.
The regulatory environment is certainly more stable in Europe compared with other markets, despite all the parliamentary debates regularly taking place on the continent. This stability also spills over into other geographies becaapply Europe has so many investment and trade partnerships.
While there might be rhetoric from places like the US that suggests a rollback of these regulations, the fundamental trfinishs are not modifying. For instance, China is heavily investing in nuclear energy and has a dominant technological position in electric vehicles due to 15 years of consistent investment. They’re not rolling back these regulations.
So, regulation has remained rather stable in many parts of the world, partly due to the spillover from the EU and partly becaapply major players are not turning their backs on their commitments.
However, even if investors have regulatory awareness, it’s often neglected how important social acceptability is. Just becaapply they may have a good solution that complies with the relevant regulations, this doesn’t mean investors can skip the phase of engaging and consulting with communities.
There can be a backlash, often fuelled by politics, where people declare, “not in my backyard”. This can create a contradiction between a general public goal and the local acceptability of the investments requireded to achieve it.
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