Peter Bachmann of Gresham House
Peter Bachmann, managing director of sustainable infrastructure at Gresham House, talks to Pedro Gonçalves ahead of COP26 on how we need real assets to tackle climate change
How can sustainable infrastructure help tackle the most pressing sustainability issues we face today?
We are all very aware of the big environmental societal challenges that we face. We see [rising] temperatures causing huge catastrophic floods and fires. There is a lot technology could fix. But if you want a new product or service, you need some sort of physical real asset to deliver. Infrastructure for us is about providing these essential services that you cannot always replace with technology. And we think about infrastructure as providing those elements in a way that they were not provided before. Because we cannot keep investing in the same things and expect a different outcome.
Can you give an example?
One of our businesses, Fischer Farms, does vertical farming. They are growing all the things that you have in a salad. We have now started to build a farm which is a four-acre facility in Norfolk. In those four acres we can grow what takes 1,000 acres to grow in a field. That is mind bending efficiency in terms of land-use. We also use about 95% to 98% less water than field-grown crops. The other big thing is that because of the way we grow it, we can get ten days plus longer shelf life. So that really improves on the waste efficiency but obviously it is good for the retailers and the buyers as well. That is a good example of where real asset-based solutions can create an incredibly new and beneficial product, which is good for society and the environment.
Can climate change targets like the Paris agreement be achieved without real assets?
You cannot do that without physical assets. You need physical new infrastructure, you need heat networks, you need heat pumps, solar and wind assets. You need those renewable energy assets. Infrastructure is [at]the core of everything that we need to do if we are to have any chance of achieving the Paris goal [of limiting global temperature rise to 1.5°C.]
Would you say government policies are driving or hampering sustainable infrastructure investments?
In terms of government policy, from a macro perspective, there is a relative inability for DC pension schemes to allocate to illiquid or private market strategies. There are trillions of dollars that are sitting within these DC pension schemes that are not being allocated to infrastructure and other key areas. That is something I know the government is talking about: trying to create a mechanism whereby these DC pension schemes are encouraged to invest into the illiquid market since the government has that ‘build back better' agenda. And they know they need to have capital allocated into these sorts of assets and strategies to deliver. From a top line perspective, that is the single biggest government policy that would really impact the sector.
How do you look at the UK's green credentials as host of COP26?
The UK is one of the most advanced in terms of the switch from fossil fuel to renewable energy. The UK and probably Germany have almost single-handedly created the mechanisms to enable wind turbine and solar [power] manufacturers to reduce the cost of energy.
Where the UK has not done too well is around biodiversity. If we look back a decade ago, the UK Government signed up to about 20 biodiversity metrics. I think on between 14 and 16 of those we failed. So, the government has been good on renewables, but has not necessarily been that great on nature.
What are your expectations for COP26?
I think the best hope would be some type of agreement around a carbon tax. To give a parallel example, in the UK we brought in the landfill tax about 15 years ago. That has probably had the biggest impact on changing the way in which we manage waste - we divert waste from landfill - it really created the financial incentive to change behaviours.
And that is a tax that the consumer does not see. I think we need to have a similar sort of mechanism to really drive change. Because until we have that carbon tax, I cannot see people changing. But I am not seeing enough of a unified legislative push to make it happen.
[Countries are trying to] create a unified global tax regime. If we could get a similar thing around carbon tax, which can be measured within each business's financial statements and then the levy is charged on that basis, then I think that would be a brilliant outcome. Unfortunately, I am a little bit less hopeful that will happen.
