Within the investment industry, sustainability is an area that
has evolved significantly over the past few years. For
infrastructure funds, the regulatory environment and regional
differences have created a complex landscape to navigate.

Natalie Sinha, Head of Sustainability,
Infrastructure Investing at UBS Asset Management sits down with Peter Olds, Partner, and Rachel Lowe, Special Regulatory Counsel at
Proskauer to discuss the current state of play for sustainability,
and predictions for the year ahead.

Sustainability has had an eventful few years, with a wave of
regulation now in place in the EU and beyond. What does all this
mean for infrastructure funds?

Natalie Sinha (UBS): A few
years ago, with the EU’s Sustainable Finance Disclosure
Regulations (SFDR) and the focus on Net Zero, sustainability was
the new frontier. Since then, the space has evolved from
understanding SFDR and infrastructure funds making ambitious
commitments, to implementation, stabilization, and now potential
revisions.

Infrastructure funds are now subject to a broad range of
regulations, in line with other asset classes. The SFDR, launched
with the EU Taxonomy, was the starting point. Now, other
regulations like the EU’s Corporate Sustainability Reporting
Directive (CSRD) and Corporate Sustainability Due Diligence
Directive (CSDDD) are coming into force. Plus, climate risk
disclosures are becoming mandatory in the EU, US¹, and
APAC.

Apart from the US, the regulatory environment had shifted to a
period of relative stability, with sustainability now more embedded
in investment processes. Infrastructure funds generally have a
clearer understanding of expectations and how sustainability is
integrated, which would have been unimaginable a few years ago.

Rachel Lowe (Proskauer): Whilst SFDR and many
industry standards have bedded in and become somewhat routine,
sustainable finance regulation is rapidly evolving, creating some
uncertainty for infrastructure funds as we look to the future. The
EU’s SFDR 2.0 consultation is set for June 2025, while the
UK’s Sustainability Disclosure Requirements is rolling out. In
the U.S., Blue States are tightening investment climate criteria.
Meanwhile, corporate sustainability reporting under CSRD (and ISSB)
begins this year against the heated backdrop of the EU’s search
for simplification and competitiveness in corporate sustainability
reporting requirements.

The EU’s shift from “being green” to
“becoming green” offers potential for infrastructure
funds with transitioning assets. The EU Sustainable Finance
Platform has proposed a “transition fund” category for
real estate and infrastructure with a credible sustainability plan,
though the criteria remain unclear. New infrastructure funds should
ensure their net-zero plans are robust enough to secure this likely
useful and sought after label if it’s adopted.

Sustainability can have different meanings in regulations, and
interpretations by investors vary. What tips do you have for making
sense of all the sustainability regulations and reporting
requirements?

Rachel Lowe (Proskauer): Regular horizon
scanning with legal and regulatory advisers—at least
monthly—keeps managers ahead of updates and new
interpretations, while ensuring advisers are aligned with your
pressure points and evolving strategies. A unified approach across
legal, compliance, sustainability, and investment teams is key to
consistently interpreting sustainability from a house perspective.
This solid foundation helps in negotiating sustainability
provisions with investors. Practical steps include creating a
sustainability concept bank to ensure consistent terminology,
establishing clear governance for sustainability materials, and
offering tailored training from board level to junior staff.

Natalie Sinha (UBS):
Navigating the complex landscape of sustainability regulations
where acronyms abound can be challenging. However, these
regulations share common goals: focusing on transparency around key
impacts, risk mitigation, and sustainability performance. Energy,
decarbonization, transition, and supply chain management are
important themes.

A helpful approach is to use the principles of a Sustainability
Management System (e.g., ISO 14001) and follow the ‘Plan, Do,
Check, Act’ cycle. This starts with a materiality assessment,
with stakeholder views helping prioritize key sustainability
impacts. Develop a policy with specific targets and KPIs, supported
by risk management controls. Implement sustainability programs with
active stakeholder engagement, while regularly monitoring,
measuring, and reporting progress. Ongoing audits and performance
reviews are essential. The goal is to meet targets and drive
long-term sustainability outcomes at both the fund and asset levels
alongside financial performance.

How do you think regulation has impacted investor sentiment and
capital allocation decisions?

Natalie Sinha (UBS): While
sustainability disclosure regulations may not directly drive
capital movement, policies with a direct financial impact like the
US Inflation Reduction Act (IRA), Bipartisan Infrastructure Law
(BIL), the European Green Deal, and Fit for 55 have played an
important role in directing capital toward sustainable outcomes.
Since the Bipartisan Infrastructure Law was introduced in 2021,
there have been announcements of nearly $570 billion in funding for
over 66,000 projects in road, rail, ports and airports, which have
reached over 1,600 communities across the US.²

Investor sentiment toward sustainability remains strong when the
investment case is solid. From a private equity perspective, most
Limited Partners are increasingly prioritizing sustainability and
may avoid investments if managers lack a clear commitment to
it³. Climate change investments are a major focus, with
LPs allocating capital to both climate solutions and efforts to
decarbonize heavy-emitting industries. Sustainability related
investments remain an important part of the overall picture, with
some notable regional variations.

Peter Olds (Proskauer): SFDR’s Article 6,
8, and 9 classifications (though typically Article 8 vs. Article 9
for infrastructure funds) have become a key focus in pre-launch
planning, with many general partners seeing the fund’s
classification as influencing investor allocations. As SFDR has
taken hold, the emphasis has shifted to
reporting—specifically, whether regulatory periodic reports
are sufficient or if investors require more comprehensive, timely,
and detailed sustainability disclosures. Is the regulation a
“deal breaker”? Not usually, but it often requires
careful consideration and time to address during investor
negotiations, alongside broader sustainability commitments and
capabilities of the parties.

Greenwashing cases have been hitting the news, and there are an
increasing number of high-profile greenwashing cases. Do you think
this is impacting the way people are thinking about making (or not
making) sustainability claims?

Natalie Sinha (UBS): The
political landscape has shifted, moving away from overzealous
sustainability commitments. Infrastructure funds now face
increasing obligations and must clearly define their sustainability
strategies, with solid implementation plans to avoid litigation and
reputational risks. Some asset managers are reducing or relabeling
their funds to manage these concerns, and better reflect what is
being done. For those remaining committed to sustainability, many
are adopting a quieter approach in discussing their efforts,
reflecting the evolving environment for sustainability in
investment.

Another headline hitting the news is that some prominent asset
managers have left the Net Zero Asset Manager’s Initiative,
reflecting growing concern about political risks and potential
litigation. The review of NZAMI is ongoing.

Rachel Lowe (Proskauer): Regulatory enforcement
is rising, with the CSSF issuing its first SFDR-related sanction
and activist groups like ClientEarth pushing for tougher standards
on “sustainable investments.” With 2025 and 2030
emissions targets looming and regulations evolving, caution is key
when making sustainability claims. For now, infrastructure funds
can still leverage the flexible but flawed Article 8 regime under
SFDR, but managers should focus on the SEC’s principle:
“Say What You Do, Do What You Say.

What is your prediction for sustainability in 2025?

Natalie Sinha (UBS): In 2025,
the outlook for infrastructure investment remains positive. In our
view, investments in the energy transition will continue to
dominate, with a shift beyond traditional renewables into energy
storage, sustainable fuels, and low carbon transportation. Plus,
data centres are attracting billions in investment, with AI
supercharging the sector. We believe infrastructure debt markets
will remain particularly attractive for lenders.

Beyond this, political pushback on ESG, especially in the US,
will persist. Expect more greenwashing cases across sectors,
alongside ‘greenhushing’ as companies stay quieter on
sustainability. Sustainability will refocus itself towards
commercial wins, value creation, economic opportunities, and job
growth to stay relevant.

Peter Olds (Proskauer): 2025 is a pivotal year:
Infrastructure funds that have closed are now required to report
meaningfully on sustainability commitments, whether under SFDR or
directly to investors, as investments have been made. Uncertainty
looms—failure to meet targets or provide data could lead to
regulatory or investor action, potentially reducing future
allocations to funds which underperform versus their own
sustainability goals.

For those fundraising, investors increasingly seek deeper
involvement in sustainability, requesting site visits, meetings
with senior management, and audits, pushing commitments beyond
regulatory demands. This is set to continue apace in 2025.

Footnotes

1. Note: in the US, disclosure rules are under review
with the new administration.

2. US Department of Transportation, November
2024.

3. ‘Sustainability in Private Equity, 2024’ ,
BCG. The report draws on data from the ESG Data Convergence
Initiative (‘EDCI’).

Q&A: What Does 2025 Have In Store For
Sustainability In European Infrastructure Funds?

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