The era when Environmental, Social, and Governance (ESG) considerations sat on the periphery of investment decisions is over. ESG has moved from the margins to the centre, becoming the decisive filter through which global capital now flows. For alternative investments, especially in infrastructure, this shift is rewriting the rules. It is reshaping deal structures, altering investment timelines, and redefining what constitutes value.

Those who treat ESG as a compliance exercise will be left behind. Those who see it as a strategy will shape the future of development finance.

At Old Mutual Alternative Investments, we stand firmly in this second camp. For us, ESG has never been an add-on. It is the foundation of our mandate. Our work places us directly at the intersection of financial return and social impact. This dual responsibility requires us to go beyond financial metrics, weighing ethical, environmental, and governance considerations with equal rigour.

ESG is embedded in our mandates, in investor expectations, and in our governance systems. Brand and reputation have long been inseparable from our strategy, grounded in people, process and technology. Risk management and compliance are not secondary filters; they are as critical as financial performance. What has changed is the intensity of scrutiny and the breadth of reporting now required. ESG outcomes carry greater weight than ever before, and with them comes accountability.

Within the Public Private Partnership (PPP) framework, the evolution is explicit. Every project is accompanied by mandatory “target group” schedules that embed empowerment of black people, women, youth and persons with disabilities. They demand demonstrable outcomes in local economic development, skills creation, health and safety, employment equity, and financial inclusion. This makes one truth undeniable: financial performance alone can no longer greenlight a project. ESG impact is equally decisive.

This is not theoretical. Treasury’s recent updates to PPP regulations – particularly the provision for unsolicited bids above certain thresholds – signal a decisive shift. They empower the private sector to identify pressing needs in areas such as healthcare, education, and student accommodation and propose tailored solutions directly. These reforms acknowledge that historic bottlenecks eroded confidence and delayed delivery. With clear frameworks and genuine policy dialogue, the investable pipeline in South Africa could be unlocked at scale.

Yet ESG remains a double-edged sword. For large institutions like us, with scale and expertise, ESG integration is a competitive advantage. For smaller developers, however, the compliance burden can appear prohibitive – seemingly. ESG reporting is costly, resource-intensive, and requires specialised capability. Without credible, verifiable data, smaller players risk exclusion from funding even when their project fundamentals are strong.

The solution, we strongly believe, lies in partnership. The PPP model is, at its core, about partnership – but alignment of objectives is critical. Smaller developers must seek out funding partners whose philosophy matches their own. The right partner can structure funding packages that open access to capital while easing reporting burdens. Building ESG capability internally or sourcing it externally is no longer optional; it is the price of entry. For us, we engage actively with investee companies to ensure institutional ESG objectives translate into operational practice.

Some projects do fail on ESG grounds. This is not new – PPP initiatives have historically stumbled on affordability or technical complexity. But the reality is that projects which fall short on ESG metrics now rarely advance to financial close. This is not a passing phase. It is evidence that sustainability has become a mainstream determinant of capital allocation.

Our due diligence processes reflect this reality. Assessing alignment with regulatory and investor expectations is now central. Industry benchmarks and best practices provide the standard. Continuous learning, unlearning, and relearning are essential.

ESG data must be sustainable, measurable, achievable, relevant, and adaptable.

At the same time, the costs of data aggregation and its comparability must be carefully assessed to ensure the insights generated are both meaningful and actionable.

To dismiss ESG as a “tick-box” exercise is to misunderstand its trajectory. While early sustainability reporting was compliance-driven, today the focus has shifted to outcomes. With sufficient data accumulated, the question is no longer whether companies are reporting but whether reporting improves decision-making and drives change. The real value lies in using insights to shape better strategies and deliver measurable impact.

By late 2024, ESG assets were still projected to reach between $35 and $50 trillion globally by 2030, according to University of Chicago lecturer and Impact Engine CIO Priya Parrish in Fortune, as she wrote in Fortune in October 2024. Recent challenges are seen as minor setbacks compared to the broader growth trend. The momentum continues because investors view ESG as a long-term, strategic play, with its focus on adaptation and governance offering clarity on companies’ future success.

Does ESG compliance slow deal timelines? Sometimes. But where priorities are set at the outset, integration avoids unnecessary delays. Investor expectations are best managed by ensuring projected returns account for the costs of compliance.

The key is embedding ESG into project design from day one, rather than bolting it on later.

Looking forward, ESG regulation is both barrier and catalyst. In the short term, it may narrow the pool of viable projects and challenge smaller players. But in the long run, it will produce a stronger, more resilient class of infrastructure assets. Communities demand accountability. Investors demand transparency. Governments demand sustainability. The players who deliver all three will not only attract capital but define the standard for infrastructure investment.

For us, the conclusion is clear. ESG is not a hurdle to clear – it is the game itself. Far from constraining us, these frameworks provide the scaffolding for sustainable, long-term growth.

In South Africa’s fragile infrastructure environment, ESG is not simply a competitive advantage. It is an imperative.