Hermes Investment Management (Hermes), the £28.6 billion manager focused on delivering superior, sustainable, risk adjusted returns to its clients – responsibly, is calling for an enhanced corporate governance code for private infrastructure assets. The code would provide essential social services to help close the governance gap and ensure consistent and optimal outcomes for investors, employees and other stakeholders.
The paper ‘Corporate Governance of Public Service Infrastructure Assets’, outlines two key areas for consideration, designed to help close the governance gap created by the lack of existing relevant and/or appropriate reference points for these businesses. Those areas include:
Peter Hofbauer, Head of Infrastructure, Hermes Investment Management, said: “Few asset classes are as necessary, or significant, to the daily lives of individuals as infrastructure. These businesses, which can provide essential social services, including access to water, energy, health and social care, and vital transport services, are the basic physical and organisational structures and facilities needed for the operation of a society. However, ownership of these assets continues to transfer from the public to the private sector. While the listed company corporate governance guidelines are helpful, some of the principles may not be appropriate (nor accepted) in a more bespoke private market environment. The result, therefore, may not always be a consistent, or optimal, outcome for investors, employees and other stakeholders.”
Regarding the wider consultation that the Government is carrying out, we believe the time is right for the authorities and the infrastructure industry to consider implementing some or all of the options set out in our paper. There is a distinct need for initiatives that will deliver an enhanced governance framework for the benefit of infrastructure company boards, shareholders, stakeholders, the public interest, and increase accountability.
Hofbauer said: “A clear best-practice reference point for the governance of privately-owned essential service businesses that helps to articulate and align the objectives of Government, private investors and the public, can only be beneficial.”
Read the full paper here