"We do not observe any questioning of ESG investment in the institutional business"
Jean-Francis Dusch
Jean-Francis Dusch, CIO of BRIDGE, the infrastructure debt platform of Edmond de Rothschild
Jean-Francis brings over 20 years of experience in international project and structured finance. Joining the Edmond de Rothschild Group in 2004, he co-headed the Project Finance department and later led structuring advisory services. In 2013, Jean-Francis headed the group's Infrastructure and Structured Finance department, leading to the establishment of the Benjamin de Rothschild Infrastructure Debt Generation platform in 2014, now managing over 鈧�6,5 billion. He began his career at Bouygues Construction in 1992 until 1997, then served at Basil Read, UBS, Citigroup and WestLB, engaging in major transactions in the infrastructure and TMT sectors across Europe, Africa, Middle East, and Asia. He graduated from the Ecole Sup茅rieure de Commerce de Paris and holds a law degree from the University Paris II
There is a growing weariness towards sustainable finance for various reasons. Do you sense this weariness on the client side?
At Edmond de Rothschild, we do not observe any questioning of ESG investment in the institutional business. Europe seems to be succeeding in its Energy Transition challenge. The demand for mandates with ESG/climate criteria remains strong, and clients are as demanding as ever. Our commitment is based on solid convictions and fundamentals. We continue to support our impact initiatives, and the current geopolitical climate vindicates our vision, which dates back two decades. More than ever, Europe needs to strengthen its energy independence by investing in the transition.
There seems to be a significant gap between the financing needs for transforming our economy and the willingness to invest: How can this gap be bridged?
The push for reducing emissions is supported by initiatives and regulatory frameworks such as Net Zero, the European taxonomy, SFDR, or Fit for 55, among others. Policymakers face an energy trilemma: providing decarbonized, affordable, and secure energy while maintaining energy sovereignty. To achieve these goals, investments of several trillion euros globally are necessary over the next decade. In Europe, "Fit for 55," aiming for a 55% reduction in CO2 emissions by 2030, requires 700 billion euros invested annually in new infrastructure projects to accelerate the energy transition. These projects require substantial capital flows, and institutional investors can play a crucial role. A growing number of institutional investors are investing in the energy transition, and the most advanced will have generally anticipated and integrated the SFDR/European Taxonomy directive, which officially came into force in March 2021. This evolution offers us the opportunity to be innovative, committed, and disciplined in our contribution to developing projects essential for environmental preservation, job creation, and economic support.
The barriers to entry for institutional and private investors seeking to impact the real economy are still relatively high. What can be done to lower them and mobilize more private capital?
We have a more positive vision of initiatives attracting liquidity from institutional and private investors. They have a key role to play in this transformation. Supported in their approach by regulatory reforms, institutional investors have understood the challenges and opportunities associated with the energy transition. Under the Solvency II directive, regulatory authorities have introduced measures to support investment, including favorable treatment for infrastructure debt. The SFDR regulation is also key. It is both reassuring and promising that political leaders, regulatory authorities, infrastructure developers and operators, and public and private financiers have aligned their interests and actions to accelerate the energy and environmental transition. For ten years, both in terms of equity and debt, institutional investors have taken a key part in financing infrastructure. They are attracted to real assets, which generate predictable and stable returns and are uncorrelated with politico-economic events, through a contractual framework and favorable regulation.
How do you manage the risk/return ratio at BRIDGE, knowing that investors expect both financial returns and real impact?
The Energy Transition and project debt financing allow us to identify investment opportunities where we can maximize collateral, financial covenants, and the credit quality of the financed asset, while creating a complexity premium that pushes the credit margin, and thus the return, upwards. Our positioning as arrangers of the debt in which we invest and our team's ability to anticipate new sub-sectors (without creating more risk for our investors) allows us, with an equivalent risk profile, to generate credit margins 25 to 100bps higher for our investors. All this while creating portfolios that have a real impact. We were pioneers in refinancing offshore wind farms ten years ago, biogas plants, and battery energy storage projects. These projects allow our investors to receive stable and higher returns while concretely contributing to the energy transition, creating jobs, and addressing environmental challenges.
BRIDGE has focused on the energy transition across all sectors and digital infrastructure since its inception. How do you define and apply this conviction?
At BRIDGE, we are fully committed to the energy transition across all sectors. We currently invest across the following five sectors: Energy Sector: We have financed energy projects in Europe, including wind, solar, biomass, as well as innovative projects such as biogas, methane recovery, and battery storage. Transport Infrastructure: This sector is undergoing major transformation with the Trans-European Network and the Juncker Plan promoting charging stations for electric vehicles, supported by private capital and debt investments. Social Infrastructure: Such as "sustainable buildings," which also play a key role in this transition, with a focus on energy efficiency in the health and education sectors. Public Utilities: These are also undergoing their energy transition, modernizing facilities, reducing CO2 emissions, and gradually but surely鈥攁nd within ambitious timelines鈥攑hasing out fossil raw materials. Digital Infrastructure (energy efficiency): This is also an integral part of the transition and offers a wide range of investment opportunities.
What about emerging markets where the opportunities to finance the transition are enormous?
The Energy Transition is a global phenomenon. Many countries are launching initiatives and accelerating their transition. That is why we are beginning to expand our geographical coverage with a concrete and well-advanced project to launch an infrastructure debt fund in the Middle East, which will initially support the infrastructure plan of the Kingdom of Saudi Arabia, which includes a large component of energy transition.