How Australian investment giants are uniting for sustainable infrastructure

IFM Investors and QIC are, in their own right, investment giants with portfolios consisting of major infrastructure assets across the Australian landscape.

But the two have looked past their individual interests to join forces and facilitate the purchase of renewable power for their largest infrastructure assets, including airports, ports, toll roads, utilities and other infrastructure assets, helping them meet their net zero targets and save around 260,000 tonnes of carbon dioxide a year.

For IFM, the collaboration came about when it started to focus on its Scope 1 (inhouse) and Scope 2 (electricity) emissions and set an emissions reduction strategy of achieving net zero for every asset in its infrastructure portfolio by 2050.

“There were many assets in our portfolio that were struggling to deal with particularly their Scope 2 emissions. They could not get green energy at an economic price,” said Danny Elia, global head of asset management for IFM Infrastructure.

“We had to think about this creatively. So, we went out to the market and thought, how can we aggregate the buying of green energy as IFM across all the assets we're invested in, so that we could get more economic green energy?”

They found the buying power for IFM alone wasn’t going to stack up economically, so the investment manager teamed up with QIC to establish a program of power purchase agreements (PPA) for 15 different infrastructure businesses, including Melbourne Airport, Brisbane Airport, Port of Brisbane, NSW Ports, Northern Territory Airports, Southern Cross Station and Ausgrid.

PPAs can be structured in a number of different ways. For example, a corporate or retail PPA is a long-term contract between an electricity retailer and a customer to purchase renewable electricity from the retailer. In Australia they are often used to underpin the purchase of solar and wind energy, which is exactly what IFM and QIC did. IFM and QIC were the first to create a multi-state, multi-asset program for retail PPAs.

The two investment funds made procuring renewable energy easier for their assets by facilitating the program to ensure assets could access the best commercial and environmental outcomes, and that the specific terms and conditions required by each asset were included in their contracts. This collaboration has meant that the volume of energy has enough scale to make the economics more palatable, and the project a success, Elia says.

More wind and solar projects

The partners rolled the PPA out in three stages, starting in 2022 and with stage three completed in 2024. This staged approach was necessary due to its highly complex nature, involving the synchronising of multiple energy projects and the asset’s existing contracts, each with its own specific requirements and conditions.

Supplying 500 GWh of renewable electricity a year, the $700 million contract is the largest multi-asset, multi-site green energy program in Australia.

The program has also assisted in the facilitation of additional wind and solar generation by providing investors in these assets with the certainty that there would be a customer for the power they produce. “It has had direct impact on underwriting renewable energy projects and lowering the cost of capital in those investments because it actually reduces the risk,” Elia says.

Melbourne Airport is now an accredited green power retailer and is on-selling the power it sources from the PPA to its tenants – such as freight forwarders – to give them access to at-scale green energy. This reduces the tenants’ Scope 2 emissions which in turn reduces the airport’s Scope 3 emissions.

The power purchase agreement program has moved the dial on the climate change ambitions at some of IFM’s biggest assets, such as airports. Elia said that five or six years ago, asking an airport to cut its Scope 1 and Scope 2 emissions by, say 5 per cent, would have been considered “outlandish and delusional”.

“We now have a situation subsequent to this scheme where the airports in our portfolios are almost all committed to net zero by 2030 or in some cases 2025, with real and strong progress against this commitment already achieved” he says.

The importance of taking the first step

Elia credits the Clean Energy Finance Corporation with helping IFM scale up their carbon transition by setting expectations for carbon reduction across its infrastructure portfolio.

A key lesson from this project is the importance of taking the first step towards decarbonisation, because it can kick off a multitude of other decarbonisation actions. “The important lesson is you start with what you know, and sometimes other pieces just appear. I think that’s a really important principle to operate on in the transition space, because too often we try to solve 10, 20 or more years’ worth of problems now, instead of taking the impactful and no-regret actions we could take today” he says.

Elia says the project demonstrates the benefits of collaborative action on climate change, even between competitors such as IFM and QIC.

Through this important renewable energy program, we are contributing to the net zero ambitions of some of Australia’s most significant infrastructure assets, while also reducing our assets’ exposure to energy market volatility and delivering cost-savings through renewable energy.

Ross Israel

Head of Global Infrastructure at QIC

“The opportunity was too important, and both of us saw wisdom in collaborating together in order to achieve a really positive outcome for the environment – and it's great, I think the need for more of this is critical,” Elia says.

“Everybody's happy in this process – great sustainability outcome, great financial outcome and with our significant reliable energy demand, this strategy has supported the renewable energy industry get new projects up.”