Blue-green infrastructure for asset managers
Blue-green infrastructure for asset managers
Louise Walker, Senior Research Manager, CIRIA/susdrain
CIRIA has been at the forefront of Blue-Green Infrastructure implementation for many years, with for example the widely known SuDS Manual being the go-to guidance for the sector. To develop support further we have identified a growing need for the effective management of blue-green interventions, to ensure that ‘as-built’ assets are appropriately considered for their whole life. We initiated our project ‘Asset management for blue-green infrastructure’ – but the more I think about it maybe it should be the other way around. Blue-green infrastructure for asset management. This blog outlines why.
Roles and responsibilities are changing in the workplace. Sustainability and ESG (Environmental and Social Governance) have rightly risen up the corporate agenda. Society needs to collectively work toward reducing its impact because when the environment suffers, so does society.
The risks to society and businesses come from extreme heat, flooding, pollution, new emerging diseases and the associated costs, disruption, and tragedy these cause. Insurers and the financial sector are becoming acutely aware of future potential impacts and are looking for evidence of attempts to reduce these risks. Blue-green infrastructure or Nature Based Solutions can demonstrably reduce risks and provide a range of added benefits.
The interface between ESG and Asset Management
According to Indeed:
“An Asset Manager, or Investment Manager is responsible for managing the assets of their clients and growing their investment portfolios. Their duties include recommending new asset acquisitions, selling existing assets and providing detailed financial reports to clients.
Asset Managers are responsible for managing portfolios in-line with the desired goals and targets of the client. They grow their client’s portfolio over a set period and keep their client informed of the progress.”
All businesses need to manage their assets, whether or not they are large enough to have a defined asset management role within the organisation.
PWC (a large, international professional services brand of firms) say:
“Environmental, Social and Governance (ESG) issues are now front of mind for the asset management industry. The trend has been driven by changing public attitudes, increased investor demand for ESG-focused funds, and a realisation of the commercial growth opportunities.”
Research by PWC identifies that:
“Firms recognise the huge growth in investor demand for ESG – 31% point to changing consumer preferences over the past 12 months – and many regard ESG issues as front and central as they work harder to define corporate purpose. The COVID-19 pandemic has also accelerated the ESG focus, highlighting fundamental societal shifts in the context of environmental, social, and healthcare crises”.
In a recent report PWC go on to say:
“It may not be long before nature-related issues affect your company’s bottom line. For that reason, we recommend that executives place nature on a par with climate change in their risk assessments. Forward-thinking leaders will look for possibilities to create nature-positive business models that don’t just mitigate risks but also strengthen financial returns and benefit society.”
JBA a specialist environment, engineering, and risk consultancy business, point out that:
“As of 6 April 2022, it is mandatory for larger businesses to disclose their climate-related risks and opportunities. This impacts over 1,300 of the largest UK-registered companies and financial institutions, and the reporting requirements are in line with the recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD).
For now, the TCFD currently only impacts larger firms with at least 500 employees and turnover greater than £500m but it will eventually become applicable to smaller firms.”
A second task force, for nature-related financial disclosure TNFD is developing a framework for organisations to report and act on evolving nature-related risks.
What is the problem here?
Asset managers need to understand the risks to, and opportunities for their business assets provided by nature. If the business invests in BGI how does this reduce future climate risk, affect investment portfolios, and support the goals and targets of the organisation? How can BGI be protected to maintain its functionality when other essential work is undertaken? How can this be included in contracts? BGI is unfamiliar territory for asset management. As PWC point out:
“Although most asset managers have a clear ambition, our research highlights some worrying disconnects, particularly in relation to approaches to ESG investment – where some firms lack a coherent investment approach on ESG issues at an entity level. Firms are also having to overcome a range of hurdles as they progress their ESG journeys, such as data quality, skills shortages, and navigating the waterfront of regulatory initiatives.”
The CIRIA solution
CIRIA is reviewing established generic asset management approaches and exploring how these can be adapted and applied to blue-green infrastructure. This considers the functionality, the ecological qualities of BGI and the need for adaptive management. We are undertaking this work with the Institute of Asset Management (IAM), the international professional body for whole life management of physical assets. Using IAM frameworks will enable asset managers and the financial service sector to recognise how blue-green infrastructure and its management is rigorously included into asset portfolios using established procedures and where its current and future value lies.
Developing a common approach to asset management for BGI will provide a framework for data collection and reporting, for example on ESG targets and as part of financial disclosures. This will generate an improved understanding of the functionality of different BGI measures and will support their recognition as assets of value.
Use of recognised asset management frameworks will help BGI management align with existing processes, demonstrate regulatory compliance and increase investment in BGI. It will promote broader implementation of BGI as part of the iterative process of asset management.
A standard framework for asset management of BGI will allow a proportionate approach to be taken dependent on the type of BGI measure under consideration and the magnitude of potential risks and benefits associated with its implementation.
A conceptual framework for asset management of BGI is in production along with recommended next steps to define if and how existing asset management principles should be applied differently to BGI. This work is summarised in the infographic.
Key beneficiaries of the framework will be those financing, planning, designing, implementing, managing, and maintaining blue-green infrastructure including asset managers, engineers, designers, planners, and their organisations. This may include environmental regulators, infrastructure operators, water companies, local government, and NGOs.
Project outcomes
Key outcomes of the project will be:
- Clear definitions of the functionality of different elements of BGI and an improved understanding of:
- The multi-functionality, multiple benefits and multi-stakeholder requirements of BGI;
- The need for adaptive management of BGI throughout its lifecycle
- Clearer visibility and better understanding of medium to long term BGI asset management
- A systematic approach for the long-term management of BGI to enable its functionality and co-benefits to be maintained throughout its lifecycle
- Better involvement of stakeholders from owners and managers through to maintenance contractors
- A framework for planning and management for the continued integrity of BGI assets
- A clear means of communication of the functionality of elements of BGI to ensure they are not compromised by external works
- The wider multiple benefits achieved through BGI Asset Management, including improved surface water management, climate change adaptation, energy efficiency, health and wellbeing, biodiversity, amenity, carbon sequestration and improved air quality.
Blue-green infrastructure is a different type of asset to traditional infrastructure and sometimes it needs to be managed differently. We aim to identify where and how BGI is different in order to help asset managers with this essential part of their role.
Get involved
We have been working hard to identify guiding principles for asset management of BGI and are now preparing to produce a first of its kind guidance document on the subject. We need financial support and thought leadership from industry to make this happen.
To join us on this important journey, please contact louise.walker@ciria.org for details of how to get involved in the project and/or join us for our regular Blue-Green Conference on 25th July where we will discuss ‘Blue and Green targets – integrating delivery’.