Macquarie: The energy transition is changing infrastructure investment

“In some ways, wind and solar investments are old news,” says Chris Leslie, Global Head of Sustainability at Macquarie Asset Management. “The focus now is on technologies that enable the energy transition.”

Wind and solar energy may "in some way be old news", over the next three decades, the total required investments in the energy sector alone will be $3.5tn (€3.1tn) per year. Karsten Wurth / Unsplash


  • Global Head of Sustainability, Macquarie Asset Management, 2020-present
  • Executive Chairman, Americas, and other senior management roles, Macquarie Asset Management, 1992-2020
  • Tax Specialist, Arthur Andersen, 1991-2
  • Tax Specialist, KPMG, 1987-1991
  • University of Melbourne, Business & Economics 1983-6

Infrastructure has moved front and centre in the fight against climate change. As former Bank of England governor Mark Carney observes in his paper ‘Building a private finance system for net zero’ [pdf] the net-zero transition is “creating the greatest commercial opportunity of our age,” with infrastructure investment playing a key role.

The world’s largest infrastructure manager, Sydney-based Macquarie Asset Management, appointed last year one of its most senior executives, Chris Leslie, as Global Head of Sustainability.

His promotion reflects “considerably increased demand from clients for ESG strategies across the investment spectrum,“ Leslie tells Impact Investor.

Over the next three decades, the total required investments in the energy sector alone will be $3.5tn (€3.1tn) per year, Carney estimates. And then there is the enormous need for investments in key infrastructure such as energy and sanitation in the developing world.

“There exists currently an annual investment gap of approximately $2.5trn in developing countries. Around 75% of that gap is made up of critical infrastructure projects,” stressed CEO Peter Mueller of BlueOrchard recently to Impact Investor.

“I believe sometimes observers can be too ‘purist’ in emerging markets," says Chris Leslie, Global Head of Sustainability at Macquarie Asset Management. "If you can switch a country from coal to gas that is a major positive step. Sometimes achieving significant incremental improvement should be preferred to chasing revolution.” Macquarie Asset Management

No more investments in coal

Against this background, Leslie’s promotion can be seen as a clear signal that Macquarie wants to play a leading role in these developments. Macquarie has A$595bn (€381bn) in assets under management and employs more than 15,000 people worldwide.

Leslie says Macquarie’s “sustainability policies have evolved under my direction. We no longer invest in coal. We made a net zero 2040 commitment last year. It's important to have a flag to rally around.”

Leslie says he had “a personal epiphany” in 2018 when he heard an architect of the US Federal Government talk about resilience in architecture at a small conference. She directed the audience to the US Fourth National Climate Assessment (NCA4, Volume 1, 2017). “Reading this made me wake up to the scale of the problem,” Leslie says.

Three categories of ESG infrastructure strategies

The other side to this is the scale of the opportunity. “I think for Macquarie there are huge commercial opportunities in funding and financing the energy transition and creating the strategies that focus on this,” Leslie says.

He says there are at least three broad groups of ESG infrastructure strategies. “First, those that seek to exclude fossil fuels, second, those that deliberately target decarbonisation and the energy transition, and third, strategies that are focused on the transformation of the underlying investments.”

Leslie says “within the third category, some managers are seeking to deliberately buy assets to decarbonise them. In other words - ‘buy dirty and clean them up,’” particularly in developing markets.

“I believe sometimes observers can be too ‘purist’ in emerging markets. If you can switch a country from coal to gas that is a major positive step. Sometimes achieving significant incremental improvement should be preferred to chasing revolution.”

‘Infrastructure investment is changing’

Macquarie has long been a major investor in renewables. Earlier this year it announced €1.6bn investor commitments for the second close of its Macquarie Green Investment Group Renewable Energy Fund 2.

However, Leslie says the nature of infrastructure investment is changing. “In some ways, wind and solar investments are old news. The focus now is on the technologies that will enable the energy transition.”

This should be seen in the context of Macquarie forming its Green Investment Group which it says has deployed “over £25bn (€30bn) of capital to green energy assets.” Leslie believes “The speed of the shift we are seeing to support the energy transition means many new technologies are arising to fill the gaps.”

Macquarie’s stewardship role

In addition to how it directs capital, Macquarie has a stewardship role with its existing assets. According to Leslie the firm is “undertaking a review of all of our assets globally for climate risk and resilience and interacting with some 150 different corporate management teams.”

In terms of what can be achieved, Leslie feels “there is an important balance to be struck. We believe management should be allowed to manage, but at the same time we seek to have an impact with respect to sustainability.”

For many years “we have had safety metrics, but now we are introducing sustainability key performance indicators to give management appropriate targets.”

Of course, there are some limitations: “Transformation by shareholders can be easier to achieve in private equity than in public companies.”

There is also a data issue. “On the public side, there are a lot of screening tools available. On the private side, the situation is so much more complex. There is less uniformity,” Leslie notes.

“We make considerable effort to collect data manually. It is an issue for the industry that ESG reporting is not yet standardised.”

In Leslie’s opinion “non-financial reporting is still a bit amateurish compared to the sophistication of general ledger and audited accounts. It is my belief that in a few years we will see the same level of rigour and standardisation in non-financial reporting as we do in financial reporting today.”

Political and regulatory action

Macquarie believes political change and the regulation of financial assets is driving the debate in the right direction. “Rules and regulations are changing quickly, with significant practical implications. It’s hard to keep up, even as a specialist, and there are different regimes in different geographies.”

As Leslie sees it, “European regulators are leading the way in improving ESG regulation. By introducing requirements for raising money that is ESG-related they are going to the heart of any asset management business model.”

This commercial reality will exert pressure in itself. “We are beginning to see businesses that are not considered ESG compliant struggling to access credit and insurance markets in some parts of the world,” Leslie notes.

Fortunately, “whilst Europe is advanced in clean energy, the United States under President Biden is catching up fast.” The recent US infrastructure deal has important green elements to it.

According to US broadcaster PBS they are worth $150bn and include measures like building electric vehicle charging stations, upgrading renewable energy grids and sustainable public transport.

Leslie welcomes these initiatives and recites a quote by John Elkington, a leading authority on corporate responsibility and sustainable capitalism, bestselling author and serial entrepreneur from the UK. “At Macquarie, we believe a good sustainability framework is summed up by a phrase coined by Elkington: ‘people, planet, and prosperity’,” concludes Leslie.

You can read a review of Elkington’s new book, Green Swans: the Coming Boom in Regenerative Capitalism, here.