Shami Nissan interview in New Private Markets: Actis on finding opportunities in climate resilience

In this sponsored Q&A with New Private Markets, Shami Nissan, Partner, Sustainability at Actis, discusses why it’s crucial to build resilience against accelerating climate risks and how investors can navigate these challenges. Click here to read the full article or read on below.

Disclaimer

Actis sponsored this article in New Private Markets, which was published on 8 April 2025, and compensated New Private Markets through this sponsorship. The statements contained herein regarding climate risks or the market are as of April, 2025 and represent the views of Actis which is not research and should not be treated as research. Historic market trends are not reliable indicators of actual future market behaviour or future performance of any particular investment which may differ materially and should not be relied upon as such. Moreover, there is no assurance historical trends will continue.

Actis on finding opportunities in climate resilience

The Global South offers increasing opportunities to invest in infrastructure. But, as climate change accelerates, assets in these growth markets can be particularly vulnerable to physical climate risks. We sat down with Shami Nissan, a partner and head of the sustainability team at Actis, to discuss how investors can ensure resilience.

What are the key opportunities around investing in sustainable infrastructure in growth markets?

We view this as the investment opportunity of a lifetime. We need to invest $2.8 trillion a year in clean energy infrastructure in the Global South, where 80 percent of the world’s population lives. In our view, many of these markets are blessed with excellent conditions for renewable energy and are well-placed to deliver attractive energy yields. But the build-out of transmission and distribution networks is also key. Investment in renewable energy generation needs to go hand-in-hand with grid upgrades, and this represents both a huge investment opportunity but also a means of accelerating the energy transition.

Another area we’re excited about is energy efficiency-as-a-service. EEaaS platforms combine software and hardware solutions to help commercial and industrial businesses achieve greater efficiencies and fast-track their own decarbonisation. The provider of that service then gets a cut of the cost saving achieved by its clients. That is the sort of business model that we’re looking at as part of the broader energy transition opportunity.

What are the main factors investors should consider around climate resilience?

Extreme weather is becoming more frequent, more severe and more volatile; we have less ability to rely on historic data patterns to predict future events. Infrastructure investors are building and operating assets that provide critical services and it’s imperative that these assets continue to operate well for decades. Infrastructure investors should therefore incorporate a holistic risk analysis as part of due diligence to understand exposure to physical climate risks, and quantify commercial consequences, over the multi-decade lifetime of their assets.

In growth markets, this is even more important, as these markets tend to be more vulnerable to physical climate events, but crucially also have less adaptive capacity. During due diligence, it’s crucial to understand the chronic and acute hazards that are relevant, the degree to which assets are exposed, and the level of resilience the assets possess.

With energy assets specifically, we need to consider how climate change will impact energy yield forecasts. How will changing weather patterns affect wind speeds for turbines or irradiation patterns for solar panels? And besides considering impacts on asset integrity, it’s important to factor in secondary impacts of extreme weather, such as how workers might be impacted. In parts of India and the Middle East, for example, temperatures are already exceeding safe biological thresholds for humans at certain times, and our companies are adapting shift patterns to reflect this.

In analysing climate risk holistically, we need to consider not only the site perimeter, but the surrounding areas and nearby communities. For example, a standard resilience measure is to ensure drainage systems can accommodate excess runoff from heavy rainfall. However, beyond channelling water away from a site, it’s crucial to ensure that large volumes of water are not then directed towards homes, farms, fields or even local watercourses, where damage threatens livelihoods, property, safety and licence to operate.

Many third-party technical and environmental due diligence partners are now using digital tools to help speed-up climate scenario analysis. This analysis involves crunching through large amounts of variables and undertaking a scenario analysis approach – it will be interesting to see how AI can advance this process and improve quality of outputs.

How should investors factor resilience considerations into investment decisions?

We did an important piece of work last year with AXA to undertake a top-down climate scenario analysis across our portfolio. Using GPS co-ordinates for our 225 assets, we carried out a climate hazard assessment against each asset to a resolution of 25 square kilometres. The assessment considered chronic and acute climate hazards that were most likely to negatively impact each asset under three different climate scenarios, using timeframes to 2030 and to 2050.

We then held a climate risk and resilience workshop where each of our companies received their specific climate scenario analysis outputs, and we’ve been part of comprehensive, cross-functional management discussions to dig into the consequences were those hazards to manifest. Several of our companies are now commissioning further site-specific assessments to quantify the commercial impacts, assess current resilience status and assess potential adaptive strategies.

As an example, we’ve worked with a gas power generation plant that we own in Bangladesh, which is a very flood-prone country. We undertook considerable work in the due diligence phase to understand the risk of flooding and inundation linked to sea level rises and tidal changes. Detailed technical analysis concluded that the site, which is elevated by more than four metres, can be considered sufficiently resilient as a result.

Clearly, this analysis will be crucial in the context of exit and safeguarding valuation, given future buyers will inevitably diligence climate vulnerability.

Alongside mitigating risks, how can investing in resilience impact financial returns?

Infrastructure investors need to think more than 20 years ahead. With an eye on exit, we need to show future prospective buyers that we have been diligent and invested sensibly in resilience. No one wants to inherit highly vulnerable assets where they’ll need to write large cheques to pay for consequences. Demonstrating that the asset is sufficiently protected from climate risk will ultimately lead to a higher exit value.

Insurance premiums are also an important factor. Some of our businesses have been able to negotiate lower insurance costs now they can demonstrate they’ve invested in resilience. It will increasingly become table stakes to invest in resilience to be able to secure insurance.

Beyond resilience, where do you see opportunities in adaptation infrastructure in the Global South?

Adaptation strategies are in high demand. Of course, governments have an important role to play – the private sector cannot do the job of adaptation alone. But there are interesting opportunities. For example, desalination is a growing area for adaptation investment. Water scarcity, water stress and water quality are all growing challenges globally, and desalination investments can help societies and economies to adapt.

Actis has invested in a district cooling business in the Middle East, where summers are already hitting 50 degrees, which is around the threshold for human bodies to function. Instead of having single-unit air conditioning in individual homes and businesses, district cooling provides a centralised solution that is much more efficient. It works by having large pipes within the shell of a building that carry the closed-loopchilled water, which then cools the air inside the building. We think of this as an adaptation investment. Itis critical infrastructure – we need cooling for people to live and work safely. It’s that simple.

It’s possible to consider whether entire investments and sectors can be classified as adaptation, but each infrastructure asset should also consider onsite adaptative opportunities. For example, at one of our southern Asia investments, we are deploying nature-based solutions by piloting a coastal mangrove restoration project on the perimeter of the site. The mangroves will reduce the quantum of water in an inundation event. They also bring great benefits for biodiversity and provide a thriving habitat for fish stocks, which helps strengthen the livelihoods of local fisher-people.

So, there’s a nexus of benefits: nature, biodiversity, social licence to operate, as well as the resilience of the asset itself.