Georgia Hall

The exponential growth of data centers raises critical questions about electricity sourcing and the infrastructure investment needed to support digitalisation and decarbonisation. According to Maple-Brown Abbott, insatiable demand for data centers is creating attractive investment opportunities in the US power sector where one third of the world’s data centers are situated.

“We are positive on the US electric utilities sector because of compelling valuations coupled with emerging opportunities around data center growth, digitalisation and decarbonisation” says Georgia Hall, ESG Analyst, Global Listed Infrastructure at Maple-Brown Abbott.

“Data centers form the backbone of the digitalised world, supporting various services from cloud computing to e-commerce and artificial intelligence – but they are voracious consumers of electricity. According to the Electricity 2024 report by IEA, estimates suggest global power demand from data centers could surpass 1,000 terrawatts per hour (TWhs) by 2026 – roughly the equivalent of Japan’s entire electricity consumption. While data centers are driving electricity consumption to unprecedented levels, we also believe their growth is helping to accelerate energy transition infrastructure investments.

“Data center growth presents a major opportunity for regulated electric utilities to expand their customer base and revenue streams while spreading the energy transition costs across more consumers. This is especially true in the US, where landmark policy incentives such as the Inflation Reduction Act are turbocharging investments in renewables and grid infrastructure.

“We believe underappreciated structural growth tailwinds will persist for decades to come but are not yet reflected in the market prices for these assets. Our current allocation of 37 per cent to US electric and multi-utilities in the Maple-Brown Abbott Global Listed Infrastructure strategy reflects our conviction in the sector,” Ms Hall said.

‘Hyperscalers’ such as Amazon, Apple, Alphabet, Meta and Microsoft all have zero carbon or 100 per cent renewable commitments and rely heavily on data centers as part of their core business. According to research by S&P Global Market Intelligence, these five companies alone account for over 45GW of corporate renewable purchases worldwide – more than half of the global corporate renewables market.

“Grid capacity is critical not only for the decarbonisation of the transport, industrial and residential sectors – but also for data center interconnection. Integrating large quantities of variable solar and wind generation, whose peak output may not match moments of peak demand, requires significant investment and the sophisticated management of electrical grids. Hence, the timing of grid investment has never been more important.

The long lead time of grid planning versus the shorter timeframe to plan and build data centers creates a potential shortfall of capacity, thereby placing pressure on utilities and regulators to accelerate investments.” Ms Hall said.

The recent energy crisis in Europe and the ongoing need for zero carbon baseload power to complement renewables has re-ignited the debate around nuclear power, especially in the context of data centers.

“It is reasonable to assume that greenfield large and smaller-scale nuclear power plants are unlikely to solve the near-term need for load growth. However, existing nuclear fleets with spare capacity have potential to assist hyperscalers with their electricity and zero carbon needs.

“That said, not all nuclear plants have this optionality. Nuclear power could solve for some, but not all, data centers’ electricity needs. Therefore, more creative solutions are needed for pairing renewables with baseload and/or energy storage technologies, where viable. Much of this comes down to technology and project development timelines, having the right policy incentives and ensuring bill affordability,” she said.

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Georgia Hall

Global listed infrastructure companies will be key to helping the world reach the goals of the Paris Agreement, and many are achieving very strong results in reducing their emissions, says Andrew Maple-Brown, Co-Founder and Managing Director of Maple-Brown Abbott Global Listed Infrastructure.

However, there are some that still have considerable work to do in order to achieve their ambitions, and the risk of greenwashing persists.

“For this reason, active investors have a crucial role to play in helping companies achieve their net zero ambitions, through engagement, scrutiny and constructive encouragement.

“While many companies have outlined some variation of a net zero target, there are notable inconsistencies between what is being said and what is actually being done.

“As investors, we believe it is vital to assess the financial impact of any targets as they can mean different things to different people, and any disconnect between claim and reality is a potential risk.

“We have found it is useful to have a degree of scepticism about the claims made, and to ask some tough questions of management in order to work out whether their statement of intent is authentic and achievable.”

Mr Maple-Brown says that as active investors, the intention isn’t to discourage companies from setting net-zero targets but to encourage and support them.

“We have a number of examples where we have worked closely with companies to better understand their targets and help them identify ways to achieve them.”

Georgia Hall, the Global listed Infrastructure team’s ESG Analyst, has found that these discussions are becoming much more welcome and fruitful.

“Even in the past 12 months, we have found that companies that were initially reticent to engage on certain topics – such as scope 3 emissions – are  now much more open and willing to take on more accountability. We’ve engaged with well over three-quarters of portfolio companies on emissions targets and decarbonisation.

“Nonetheless, one of the key challenges we continue to face is that there are no globally accepted and mandated standards for companies when setting net zero targets, which means many lack external and independent accreditation,” Ms Hall says.

Maple-Brown Abbott Global Listed Infrastructure recently became a signatory to the Net Zero Asset Management Initiative which calls on managers to align investments with net zero emissions by 2050 or sooner to support global efforts to limit warming to 1.5 degrees Celsius by mid-century.

Mr Maple-Brown says that by joining this initiative, Maple-Brown Abbott Global Listed Infrastructure is formalising its commitment to managing climate change risks and opportunities, and influencing the pace of decarbonisation through active engagement.

“We recognise the role we have in facilitating the decarbonisation of our clients’ assets, and joining this initiative gives us access to global best practice tools and resources.”

Key areas that Maple-Brown Abbott looks at when engaging with companies include:

1. how aligned the target is with the long-term temperature goal of the Paris Agreement, time frames, and unit of measurement
2. what it covers and whether it includes all business operations, subsidiaries, and geographies – in addition, how valid the baseline year is
3. which emissions scopes are captured and whether the target is limited to CO2 or other greenhouse gas emissions, such as methane emissions
4. whether the real economy emissions are being managed downwards, and whether offset measures are heavily relied on and/or ‘emissions avoided’ are factored in
5. what accreditations or reporting frameworks are used
6. any track record of emissions reduction prior to targets being announced, and
7. how detailed the plan is, whether there is a meaningful interim target, and how accountable the management team is and how they are being incentivised.

“Overall, we believe that investing in the transition to a net zero economy, and managing climate-related risks, will deliver better long-term results for investors. And as active managers, we have the opportunity to engage with companies and help ensure they are achieving their net zero goals, thus boosting returns and better managing risk,” Mr Maple-Brown said.

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Ms Pringle has a background in product governance and sustainability across superannuation, investments and insurance, gained at BT, most recently as head of customer governance and sustainability. Prior to this, she held strategy and operations roles in BT’s private wealth, superannuation, investments, platforms and advice divisions. Ms Pringle has also served as co-chair of the Australian Sustainable Finance Initiative (ASFI) technical working group on meeting community expectations.

Over the past 12 months, while in a maternity cover role, Ms Pringle has built on Maple-Brown Abbott’s long established ESG program.

This includes joining two leading investor collaborations aligned to Maple-Brown Abbott’s ESG focus areas: Climate Action 100+ and Investors Against Slavery and Trafficking Asia-Pacific. Maple-Brown Abbott also confirmed its commitment to managing climate risk, becoming a signatory to both the ‘Transition Pathway Initiative’ and the ‘Taskforce on Climate-Related Financial Disclosures’.

In her role, Ms Pringle will have oversight of the ESG process for all MBA’s Australian and Asian equity strategies and at the corporate level. In 2020, Georgia Hall was appointed to the newly created role of ESG Analyst for the Maple-Brown Abbott Global Listed Infrastructure business, an affiliate of MBA, to provide dedicated oversight of the Global Listed Infrastructure ESG process. Ms Pringle and Ms Hall have worked closely together over the past year on these important firm-wide initiatives.

“Emma’s appointment reflects Maple-Brown Abbott’s continued investment in the ESG space and how seriously we view integrating ESG factors into our investment process across all of our portfolios,” said Sophia Rahmani, Maple-Brown Abbott CEO and managing director.

“We expect this will be even more important as risks around climate change and social issues like modern slavery become more prevalent. Emma brings market-leading experience and talent and I’m confident that under her oversight we will continue to be a leader in ESG.

“Maple-Brown Abbott has been a signatory to the UN-backed Principles for Responsible Investment (PRI) since 2008 and was again being awarded an A+ for its approach in 2020. We have a long-standing commitment to integrating ESG factors into our investment process across each of our investment strategies. Our ESG strategy was formalised in 2008, one of the earliest for Australian-based boutiques, when the Board approved the first ESG policy and we became a signatory to the PRI.”

Emma’s appointment follows the departure of Natasha McKean as ESG investment analyst after she decided to take up a position in Brisbane, where she lives, following her maternity leave.

Garth Rossler, chief investment officer, said Ms McKean had been pivotal in developing and implementing MBA strategies over a decade.

“We thank Natasha for her immense contribution to Maple-Brown Abbott and wish her well for her future endeavours,” Mr Rossler said.

“With her strong ESG background, Emma will continue to build on what Natasha started. ESG considerations are playing an increasingly important role in our clients’ portfolios with the transition to net zero,” he said.

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Georgia Hall has been appointed as ESG analyst and Gitendra Pradhananga has joined as senior research associate.  

Ms Hall is an ESG specialist with over ten years’ experience in financial services. She was most recently senior manager, ESG & Corporate Responsibility, at the Commonwealth Bank of Australia.  Ms Hall has also worked at AMP Capital, Ironbark Asset Management based in Australia, and Wellington Management and Schroders, both of these in the UK. She is currently completing a Masters of Environmental & Human Rights Law LLM at the University of NSW and has completed a number of post-graduate industry courses on climate change risk, impact investing and sustainability including from the CFA Institute and the United Nations University. 

Mr Pradhananga joins the firm from Allan Gray Australia, where he was an investment analyst for over two years.  In addition, he has over seven years’ engineering experience. Mr Pradhananga holds a Master of Science and a Bachelor of Engineering (First Class Honours), both from the University of NSW. 

Andrew Maple-Brown, co-founder and managing director of MBA GLI, said the appointments reflect the growth in the business as well as the increasing focus on ESG considerations. 

“ESG has always played an important role in the MBA GLI investment process and Georgia’s appointment will allow us to further expand our capabilities, reflecting the importance we believe that ESG factors have in long-dated assets like infrastructure.  

“Georgia will be working to enhance the MBA GLI investment process across our research team, increase our company engagement, manage ESG reporting and further develop ESG insights.  

“Gitendra’s appointment provides further support for our research and analysis of the transportation infrastructure sector, where he will work with co-founder and portfolio manager Steven Kempler in conducting detailed stock research.  His role will also further develop the depth and capability of our research team overall,” Mr Maple-Brown said.

The new roles follow the appointment of Emma Pringle who joined Maple-Brown Abbott earlier this month, providing maternity cover for Natasha McKean.  Ms Pringle will focus on ESG requirements within the Australian and Asian equities strategies, as well as the Maple-Brown Abbott’s overall ESG strategy including its obligations as a signatory of the United Nations Principles of Responsible Investing (UNPRI). 

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