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3.1 Why an ESG Taxonomy

In a recent industry survey (Blanc-Brude et al., 2022), we found that the majority of infrastructure investors require ESG (non-financial) data, primarily to understand and manage risks. This takes precedence over reporting to regulators, which is their third main concern, except in Europe, where it is their second main concern.

In a previous paper, we argued that the current demand for ESG data and reporting stems from two issues: 1) a lack of knowledge regarding the ESG impacts and risks of infrastructure companies and 2) the fundamental uncertainty that the ESG aspects of their activity create for investors. Addressing the first issue amounts to documenting the company's exposure (or beta) to certain risks.

Developing this proposed scientific body of ESG investment knowledge (or ontology) requires a number of key building blocks, which are:

  • The clearly stated aim to create knowledge that relates the ESG characteristics of  infrastructure companies -- the entities that investors decide to buy or hold -- to investment decisions made on financial grounds, i.e. considerations of risk and reward;

  • This helps clarify that the impacts of interest are those of an infrastructure company and that the relevant risks are those to which the same company is exposed. Hence, the relevant domain of knowledge: instances of ESG risks and impacts of infrastructure companies. By grounding the approach in this manner, it becomes clearer that impacts are also sources of risks.

  • Next, a classification system is needed for the various objects of interest, including, of course, infrastructure companies and their ESG risks and impacts, but also standard classes of attributes and relationships that allow the ESG characteristics of infrastructure companies to be described and create this knowledge. The definition of the attributes and relationships that create this knowledge can then be science- and theory-based, using the most consistent assumptions or models in order to create a broad user base and maximise potential commitment by users.

  • Finally, this enables the question of materiality to be addressed. Materiality is a weak point in existing ESG schemes: they provide lists of potential material information to report or collect but do not anchor this materiality in objective measures that relate to the activities of infrastructure companies. Developing science-based materiality profiles for each of the 95 types of infrastructure assets captured in the industrial activity pillar of the TICCS® classification is a key step in the development of a body of ESG investment knowledge for infrastructure investment and the object of ongoing research at EDHECinfra.

Note that, to define infrastructure, we follow the TICCS® classification system of infrastructure companies, which puts the firm at the centre of the approach. Infrastructure companies are what equity investors buy, and debt investors lend to. Hence, our focus is on the ESG impacts of an infrastructure company and the ESG risks it is exposed to. It follows that any ESG reporting or scoring, while it may spring from asset-level data, can be evaluated at the firm level, which is the correct unit of account for an investment reporting scheme.


Blanc-Brude, F., Manocha, N., & Marcelo, D. (2022). Do financial investors need non-financial data? Infrastructure ESG data investor survey 2022. EDHECinfra Research Publication

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