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Embracing the use of AI within Norges Bank Investment Management is clearly coming from the top, with CEO Nicolai Tangen, a former hedge fund manager, leading the charge.

“This is one of the most amazing things we are going to experience in our lifetime. It’s absolutely crazy,” said Tangen, speaking at this year’s Arendalsuka, Norway’s annual political gathering. “There are too many companies where it’s not happening enough, and if you’re not involved now, you’re falling behind and you’ll never get back on the offensive.”

Comparing himself to a “wasp” for “continuously irritating” staff on the matter – and likened to an AI “tornado” by NBIM’s chief technology and operating officer Birgitte Bryne who joined him on stage – Tangen said leading on AI integration involves attacking from all sides.

“Every time I get the microphone, every time we are doing something in the fund, I’m honking at everyone that ‘it’s AI that counts, it’s AI that counts, it’s AI that counts,’” he said.

There are tangible examples of AI’s deployment at the world’s largest investor, including an internally developed engine powered by AI to monitor and measure its portfolio managers’ skills, aiming to identify behavioural biases, improve decision making, efficiency of trades and save costs. (see How NBIM spots portfolio managers’ biases using AI)

Tangen has been on the record outlining the expected $400 million savings in trading costs per year, saying the fund has already achieved close to $100 million.

At Arendalsuka, he said the fund has now upped its goal to achieve a 20 per cent increase in efficiency in the hope that in two years NBIM will be almost “50 per cent more effective.”

And he’s vocal about the need for all employees to embrace AI – or get off the bus.

“We are not doing this to somehow save money, or fire people. On the contrary, we are doing this to achieve much more with the same resources. People [have to] understand that if they don’t do it, in the long run they will lose their jobs to the other person who uses AI because they are so much more efficient.”

In a presentation peppered with humour and infused with energy he said integrating AI gives employees purpose; it’s fun and is a chance to develop.

Pushing through organisational change

Taking the microphone, Bryne shared that the investor has introduced accessible training that includes mandatory 30-minute modules. This has helped create a level of knowledge amongst all employees whereby everyone “knows what we were talking about” and AI had stopped being “scary.”

NBIM has 40 specially trained AI ambassadors within the organisation. The investor recently ran a hackathon where all employees spanning offices in London, New York and Singapore gathered in small groups and were asked to solve specific tasks using AI, with the help of a technician.

Bryne said the investor has launched three tools, including a copilot/chatbot now used throughout the fund that allows staff to use AI without any knowledge of coding. Staff are supported though frequent “bumps” that often take three attempts to navigate. Meanwhile measuring AI gains includes monitoring which tools are most used, what tools people don’t use – and what it is they need to use.

“It’s very important feedback to have people themselves quantify what has helped them and what necessarily may not have helped them,” she said.

Fellow panellist Oscar Hjelde, who joined NBIM as a summer intern and is now a machine learning and AI engineer based out of NBIM’s London office, articulated the importance of “baking the cake internally” – aka in-house AI expertise. NBIM’s own tech stack enables it to be flexible introducing new solutions, and creates a proximity to the solutions the investor seeks, he said.

It has also helped build the investor’s developmental culture and allows AI integration to tap into NBIM’s “incredible number of talented colleagues.”

He said strategy involves taking the technologies “that we know are best, and make them available throughout the organization.” For example, GPT-5, the multimodal large language model developed and hosted by OpenAI was launched on August 7, 2025. That same evening “we had it available to the entire organization in a secure and scalable way.”

Hjelde reflected that the best way to predict the future is to build it – and the second-best way to predict the future is to talk to those who are building it.

It’s why the team regularly talk to Anthropic, the artificial intelligence startup backed by Amazon that allows them to “look into a crystal ball.” Proximity to companies at the cutting edge of AI also allows NBIM to have influence, and say to providers what is most important to them as a customer. “You get to be part of the latest adventure on the latest new technology and really sit at the forefront,” he said.

NBIM’s portfolio managers also regularly engage with portfolio companies on how they are investing in AI.

Bryne said that the next evolution will involve staff using technology that thinks for itself and carries out task “like an extra employee that is digital” in an “absolutely incredible boost for any business.”

It involves treating AI like a colleague and partner, rather than a tool.

Co-panellist Aleksander Stensby, founder of Norwegian AI company GritAI, said that when people think of AI as a tool they get “disappointed” when it doesn’t give the result they want. However, if they think of the technology as a partner they will give it feedback, and get the best results.

In this way people will move away from how they traditionally work on computers. Instead of typing on a keyboard and writing, they will live and talk to AI via microphones and cameras. These additional employees will share screens and press buttons in a multimodal future where they are assigned tasks.

“Nikolai can create his own little solution for whatever he struggles with during the day,” joked Stensby.

Integrating AI is not an IT project

Panellists reflected that some companies and their employees are progressive and forward-thinking AI natives. But many organisations have stalled because they lack a comprehensive strategy. They might have run pilot projects but have not strategically prioritised AI, and don’t have a belief or mission statement regarding the technology.

A successful strategy can also flounder because of a lack of urgency or shared ownership, which risks leaving people out in the cold.

Panellist Tine Austvoll Jensen, country director of Google Norway and board member, said that geopolitical unrest has also injected caution into AI strategies amongst Nordic companies concerned about the safety of American cloud solutions. Although Google and its competitors have solutions on European soil, she said uncertainty has held companies back.

Panellists concluded that such is the pace of development last year was “like the Stone Age” in relation to where AI is today.

This article was published in partnership with Blue Owl Capital.

This article was published in partnership with Blue Owl Capital.

The surging interest in generative AI has triggered a technological arms race, driving demand for high-density data centres. Investors are looking to capitalize on what is often described as a generational opportunity, but as Blue Owl’s James Clarke cautions, investors need to consider several important factors as they try to determine who to partner with for the long-term. Those who have a sustainable edge, coupled with subject matter expertise, local presence, and the right partnerships will stand out from the tourists in the space.

The Challenge
In the movie 28 Days Later, London has been savaged by a raging virus. What exists is just a deserted urban landscape.

I can’t help but think that at some point in the not-too-distant future, I could be flying over Northern Virgina or Silicon Valley and look down to see hectares and hectares of decommissioned data centres. It’s a haunting and dystopic vision, but not implausible. Amid all the hype on AI and infrastructure – and the possibility of disruption – it’s worth asking, could this boom go bust?

It is challenging to cut through the clutter and make sense of the fundamentals. Data centres make major headlines almost daily – from hyperscalers committing to levels of capital expenditure never seen before to DeepSeek’s disruptive emergence as a more cost-effective competitive threat. As some in the space note, “Market participants may be faced with making unprecedented infrastructure commitments while navigating rapidly evolving technology, uncertain financial models, and intensifying geopolitical competition.” Against this backdrop, what’s the long-term investment case and how should we think about investing in data centres and digital infrastructure? The right answer is often the simplest one: find the right partner with whom to navigate the uncertainty.

The Opportunity
“Crossing the Chasm” describes the critical point in tech adoption when a product moves from early adopters to the early majority. Have we made that crossing? Is AI as big a driver of demand as the market suggests? By all measures, the answer seems to be yes.

We are living through a wave upon wave moment in which both cloud computing – think video streaming, gaming, trading, medical devices, and autonomous driving vehicles – and AI are driving the demand for compute and therefore necessitate more data centres. Cloud is its own wave, growing by 20% to 30% annually and is for many a compelling rationale alone for investing in data centres. Our own digital infrastructure business was founded nearly a decade ago based solely on the demand for data centres from cloud adoption.

While cloud was enough, the even bigger wave came when OpenAI debuted ChatGPT in 2022, bringing with it an additional step-function of demand that is growing exponentially. From October 2022 to April 2025, ChatGPT went from zero to 800 million weekly active users, from zero to 20 million subscribers, and from zero in revenue to nearly $4 billion. Given the confluence of cloud and AI, McKinsey estimates that in the US alone, the demand for data centres will grow to 80 Gigawatts (GW) by 2030, which implies a buildout of an additional 50 GW to 60 GW over the next five years. Globally, “by 2030, data centres are projected to require $6.7 trillion to keep pace with the demand for compute power with $5.2 trillion for AI and $1.5 for cloud and traditional IT applications”.

As investors seek to capitalize on the AI boom through exposure to data centres, these trends explain the potential upside. But what are the risks? Could someone deliver compute more efficiently or could there be a breakthrough in quantum computing that renders today’s infrastructure obsolete? This is where Jevons Paradox offers a comforting lens: improvements in efficiency can amplify demand and consumption, not reduce them.

This is what crossing the chasm is all about – getting to the point of mass adoption. Thus, the risk of disruption becomes an argument in favour of investing in data centres. A good partner has the foresight from experience to anticipate the paradox.

Avoiding the Tourists
Given the imbalance of supply and demand of capital in data centres, investors need to be wary of the “tourists” raising capital in the space. These tourists – opportunists swooping in given the recent market hype– likely think all it takes is buying land. But those with experience know that the land is just the beginning. You must have a ground game to understand developing in these markets, which means knowing how to navigate the dynamics amongst local stakeholders — communities, regulators, utilities, grid operators, construction companies — to see a project through. Without expertise, it’s easy to blindly misstep.

What should you look for instead? Given that hyperscalers are the primary drivers of capital expenditure and are the players involved in the race for compute, look for the market participants who have a hyperscale focus and a proven track record with a reputation for their experience, expertise and are trusted and transparent partners.

Focus on managers who develop build-to-suit instead of build-to-spec. Having a long-term (10 to 15 year) signed triple net lease with an investment-grade corporate tenant provides stability, predictability of cash flows, and downside protection. There are only a select handful of managers that can achieve this: those with scale, global reach, local presence, and vertically integrated operating platforms. Managers who have done it before and are a partner of choice for the hyperscalers and who have seen opportunities where others did not.

Finding the Path Forward
There is no question that AI is a megatrend that has the potential to radically transform economies, triggering governments, organizations, and investors to spend billions of dollars on research and development, including the build out and innovative improvement of digital infrastructure. Investment in data centres is rightly seen as a generational opportunity; it’s real and it’s here to stay. Yet, the opportunity does not always guarantee results, profits, or success.

Many of us will remember the excitement of the internet in the early 2000s – and how many of the promising start ups at the time ended up in the investment graveyard. The only hope of banishing the fear of data centres decaying into rusting shells? Choosing the right partner. Because if the lights do go out – if the servers go cold and the racks fall silent – at least your partner knew to bring a flashlight.

While we don’t know what the future holds, it is very likely that those that succeed are the players with subject matter expertise and experience; those who built investment platforms optimized to work with the hyperscalers and structure investments with a focus on cash flows and downside protection. That is the way to invest: gauging the probabilities and searching for the attractive risk-adjusted returns.

In an interview with Top1000funds.com, CalSTRS chief investment officer Scott Chan says the one fund approach has already started to produce alpha. Sarah Rundell looks at the drivers of success including the ability to move more dynamically and cross-asset class collaboration to take advantage of opportunities.

The impact of dynamic asset allocation, made possible through a one-fund approach, was manifest in CalSTRS’ recent annual results and will be an increasingly important seam to investment strategy going forward according to chief investment officer, Scott Chan.

At the beginning of this year, the $367.7 billion fund adjusted its portfolio defensively, adding more to risk-mitigating cash and fixed income strategies to ensure above average liquidity to position the portfolio ahead April’s volatility. [See Cashed-up CalSTRS positions for opportunities in volatile markets]

The ability of the team to underweight or overweight in the context of total portfolio risk is the fruition of Chan’s determination to form a total fund management division – CalSTRS’ version of a total portfolio approach that is also under consideration at CalPERS, its neighbour across the river – to leverage insights from each division, see where opportunities sit and what kind of returns can be made.

“For the first year we have generated alpha based on a more dynamic asset allocation,” says Chan in an interview with Top1000funds following the fund’s latest results.

Chan says the pension fund produced about 8 basis points of alpha last year, contributing to a figure of 76 basis points over the five years. This year in addition to the team selecting the right assets and beating the benchmark to do better than average, they also created value through dynamic asset allocation, he says.

“If we hadn’t [done this] we wouldn’t’ have produced positive alpha,” says Chan.

The ability to invest tactically to position the portfolio to benefit from volatility has required putting in place cultural and organisational structures, notably a total fund team that maps a common language of risk, and how portfolio risk is shifting.

Different teams need to be able to collaborate to truly understand where the return opportunity sits and how returns might fall in the future, continues Chan.

For example, the early 2025 decision to overweight fixed income and underweight hedge funds contrasted to previous years when fixed income was forecast to return less because interest rates were zero and hedge funds do better, took a new level of collaboration.

“It required one team to say we believe we will make more returns on a forward basis, and another to say we think we will earn less.”

One team one dream

A successful one fund approach also involves making sure CalSTRS takes advantage of its scale.

For example, three different divisions at the pension fund – real estate, infrastructure and sustainability – share expertise in data centres. By working together, they can create a level of expertise that supersedes acting individually to find the best long-term value creation.

Looking ahead, Chan believes this kind of collaboration will position the portfolio to benefit from opportunities in AI like data centres, but also the net zero build and the “huge” transfer of the banking system to long term investors in the form of private credit. Collaboration has already informed a strategy whereby CalSTRS has shifted its direct lending focus to opportunities in Europe and in asset-backed private credit in response to squeezed premiums in the US.

“This kind of collaboration is a growing element of the one fund approach. In a broader strategy than just moving the portfolio more dynamically, we are also moving our partnerships more dynamically at scale. These will both be important value drivers for CalSTRS.”

He says the one fund approach signposts a new type of portfolio construction focused on greater diversification, risk and liquidity management, and dynamic asset allocation, and is a response to an investment environment now characterised by different geopolitical and trade relationships and a new interest rate environment.

He also doubts that growth will continue as it has in recent years. Global equity has led returns at CalSTRS for the last three years in a row, most recently returning 16.4 per cent.

“[Global equity] doesn’t do that year-in year-out. If we have reached the point where valuations are high and we hit pause, it wouldn’t surprise me.”

A new interest rate environment means interest rates are more likely to be higher going forward than they have been in the last decade. This flags opportunities in private credit and infrastructure, which will also become more interesting in an inflationary environment stoked by deficit spending.

“A lot of what we are doing is finding out where the environment is providing the best opportunities in a different world,” he says.

Still, he is hesitant to call an inflection point in real estate where the increase in interest rates and the lingering impact of the pandemic continues to hit hard. But in a reflection that the market might finally be “closer to the bottom” he notices that for the first time investors are beginning to deploy more capital back into debt portions and write equity cheques.

The 8.5 per cent net return for the fiscal year ending June 30 contributes to strong long-term five-year (9.4 per cent) 10-year (8.1 per cent) 20-year (7.4 per cent) and 30-year (7.8 per cent) numbers.

“It’s important to remember that one year is a mile in a marathon,” concludes Chan.

Scott Chan will be speaking at Top1000funds.com’s Fiduciary Investors Symposium on campus at Stanford University from September 16-18. For the program and more information click here.

Donald Trump’s next appointee as the Federal Reserve chair will be a defining moment for global investors, potentially escalating current market caution into a widespread exit from US assets, warns leading Stanford economist and finance academic Ross Levine.

Levine, who is senior fellow at the Hoover Institution and co-director of its Financial Regulation Working Group, is concerned about how investors’ view of the next Fed chair – and their potential actions – would impact the US debt and the US dollar.

All eyes are on Jackson Hole, Wyoming where the Fed chair Jerome Powell will deliver his annual speech this week and the market will be paying close attention to any signs that the world’s most powerful central bank might lower interest rates.

Trump has hammered the institution and Powell personally for holding rates steady over the last eight months and with Powell’s term wrapping up in May next year, Trump has made it clear that the next Fed chair has to support interest rate cuts.

“If I think somebody’s going to keep the rates where they are or whatever, I’m not going to put them in,” he said in an Oval Office media briefing in June, putting a significant question mark on future Fed independence.

Levine says the choice of Powell’s successor will be “very consequential”. Front-running candidates include former Fed governor Kevin Warsh (who is set to speak at the Top1000funds.com Fiduciary Investors Symposium next month), National Economic Council chair Kevin Hassett and incumbent Fed governor Christopher Waller.

“If President Trump appoints somebody that is seen as his agent at the Fed, markets are unlikely to respond well, and that’s both domestic and international markets, because they will anticipate inflation and potentially financial fragility,” Levine tells Top1000funds.com in an interview.

He says that credibility risk is not just a monetary policy issue, with the fact that the Fed is the regulator of banks and major financial institutions collectively holding about $150 trillion in assets an often overlooked function.

“To the extent that the President has control over the supervision and regulation of institutions with $150 trillion, that gives one human being enormous discretionary power over the allocation of credit throughout society. One can also think about the allocation of credit as the allocation of opportunities,” he says.

“The central banks were made independent based on experience, meaning that when central banks are controlled by politicians, economies were more likely to experience much higher and more volatile inflation and more financial crises. So, if the Federal Reserve were now to become more politicised, the risks of macroeconomic instability would rise and people might also lose faith in the very political institutions that exist in a society.”

Levine’s best-case scenario for the Fed succession is that Trump appoints a candidate who will keep inflation low, buoy investor confidence, and thereby foster long-run economic growth and financial stability.

“I have some confidence that he’s going to go that route,” Levine predicts.

“The alternative could be very damaging politically, to the extent that markets respond violently to a Fed chair that they don’t view as credible.”

On the flip side, this worst-case scenario – a chair who would immediately reduce interest rates at Trump’s discretion – would have enormous flow-on effects for the ballooning US debt and whipsawing US dollar.

The burgeoning problem of US debt

What worries Levine most about the US debt is not the sheer level of it – currently standing at around 120 per cent of its economic output – but the unfunded liabilities including social security and healthcare promises which are projected to amount to $78 trillion over the next 75 years.

The US dollar’s reserve currency status has been a great advantage for the country to borrow at low rates and keep the debt situation under control, but he notes that the US dollar dominance is “a privilege, not a birthright”.

“The thing that would make it go away is if the world starts to lose faith that the US can pay its debt, or that the US will have excessively low interest rates that trigger high inflation rates,” he says, adding that having a Fed chair who can be seen to keep inflation under control is essential.

“The recent budget suggests that the political system in the US seems unable at this point to deal with this [debt] challenge. My guess is that things will have to get worse before it becomes politically advantageous to deal with it, because right now, it seems to be politically expedient to ignore it.”

With that said, Levine acknowledges that the trust in the US economy has been built over an extremely long period of steady growth, which may explain why investors are relentlessly directing their capital into the nation despite risks.

“When you graph this [real per capita GDP] over time – and reasonable data started to become available after the US Civil War in the 1860s – what you see is remarkably steady growth over five-year periods and over decades,” he says.

“You had wars, you had women entering the labour force like never before, you had the introduction of federal income taxes for the first time, you had fiscal debts, you had fiscal surpluses. [But still], 2 per cent per year real per capita GDP growth for 150 years.

“This suggests that economists should be something that they are innately not – and that is humble, because there have been remarkable policy changes, and growth has stayed remarkably constant.”

But investors can do themselves a favour by not underestimating the political risks.

“There’s something about the resilience of the entire US political system, such that when policies get out of whack… there’s an adjustment. That doesn’t mean that there will be an adjustment [this time].”

Office remains a highly challenging allocation for real estate investors like the State of Wisconsin Investment Board. In a recent podcast broadcast on SWIB’s website, Jason Rothenberg, head of real estate at the $162 billion investor set out the challenges.

SWIB’s $12 billion real estate portfolio is overseen by a team of seven in a diversified strategy across type, geography and structures that spans wholly-owned assets to co-mingled funds. But only 5 per cent of the allocation is invested outside the US because taxes, legal structures and currency risk make investing at home preferable.

Although the two largest exposures in the allocation (each around 30 per cent) comprise residential and industrial, the balance lies in office, retail and a growing allocation to alternative real estate that includes thematic trends such as data centres and senior housing. SWIB also has exposure to credit strategies where the underlying collateral is in commercial real estate.

Many investors were protected from the initial impact of office shutters during the pandemic because leases for office buildings are long-term. Large tenants typically sign a lease for 10-15 years, so many companies continued to pay rent even if their employees didn’t come into the office. However, as leases have matured companies are now rethinking how much space they need.

Rothenberg noted an uptick in companies increasing the number of days employees must spend in the office and some employers are asking staff to come in full-time. However, he said in general most companies have adopted a hybrid between in-person and remote. As a result, companies are signing leases for less space and prioritising buildings that have ground-floor facilities like gyms and coffee shops to persuade people to come in.

It has driven a flight to quality in the office sector, creating an environment of winners and losers. Investors must hunt out the winners or risk investing in office buildings that are “the next candidate for demolition or conversion.”

In another market characteristic, Rothenberg said the sector is defined by pockets rather than broad opportunities. New York came back quickly and is doing well, and central business districts have rebounded in cities like Seattle, San Francisco and Denver in terms of street-level activity compared to three years ago.

But small retailers, which comprise an essential part of the ecosystem in a “winning” neighbourhood, are not out of the woods. Moreover, other areas of these same cities may be less vibrant, creating sub-markets and the need for investors to adopt a building-by-building approach that avoids buildings with low occupancy.

The impact of the pandemic continues to be felt in other sectors too. The sudden demand increase during the pandemic for sectors like warehouse space linked to the surge in consumer demand for online purchases; apartments in sunbelt cities like Austin and Phoenix, and self-storage, has now reversed, leaving over capacity.

“Developers raced to accommodate outsized demand, and now demand has normalised,” he said.

In the current market SWIB is leaning into both its reputation in the marketplace, and with its 40-50 external managers. He is also prioritising accessing the best research so the team have the right lens to evaluate long-term assets. That includes analysis of future constraints in supply that helps target the right quarter and neighbourhood, and requires digging into local knowledge.

Other factors dampening the market

Higher interest rates (another fallout from the pandemic) continue to impede returns because many investors use financing to buy real estate. He said the higher cost of borrowing means market values have moved down, and people pay substantially less for a property now than they did three-to-four years ago.

“The increase in interest rates is challenging,” he said.

Still, he said that real estate investors are supported by a vibrant debt market and competition between lenders will help reduce the cost of borrowing. Construction costs have gone up, and he said supply could also be crimped in the future once the market absorbs what is being delivered. He added that because values have already fallen to capture higher interest rates, it is a good starting point for investors.

The current policy environment is also challenging for real estate investors because corporates are delaying decision-making. Although companies are not looking for shorter leases, he observed a corporate “chill” in committing to new investments or leases in an uncertain future.

Tariffs haven’t spiked demand for stockpiling or warehouse space, and he said the US administration’s ambition to onshore manufacturing could have an impact on real estate demand. However, this will take several years to manifest because new manufacturing facilities require approvals and a suitable workforce.

APG Asset Management, Europe’s largest pension investor, is set to double its global infrastructure allocation in the next five years and is stepping up its push into infrastructure assets in the Asia Pacific with a focus on Australia, India and Southeast Asia and opportunistic investments in Japan and Korea.

The $690 billion investor will inject $652 million into Octopus Australia’s renewable energy platform OASIS, joining several domestic pension investors down under including Rest Super and Hostplus.

Around a third of APG’s $37 billion infrastructure allocation is in the energy sector and it has been looking to expand its footprint in the Australian renewable market for some time, says Hans-Martin Aerts, head of infrastructure and private natural capital for Asia Pacific.

“Together with them [Octopus Australia], we will mainly seek to develop and build new projects and only look at acquiring projects where we can exercise control and typically have 100 per cent ownership, so that we can put together a portfolio of assets that allows us to optimise the revenue profile as much as possible,” he tells Top1000funds.com in an interview from the fund’s Hong Kong office.

To achieve that optimisation, it is important to match the demand and supply of energy, but due to renewables’ intermittent output the task is more complicated. It requires deeper consideration and matching of different sources of energy – for example solar farms, which generate the most energy at midday when the demand tends to be the lowest, can be paired with the complementary generation profile of wind farms, or battery storage that can store and distribute energy for future use.

Aerts says reduction in technology costs makes renewable assets more attractive as alternatives to fossil fuels.

Australia is also an appealing destination for APG due to the stable regulatory framework supporting the energy transition. Although a large part of the Australian economy is still hinged upon fossil fuels, being the second largest exporter of thermal coal and liquefied natural gas, the current Labor government wants the nation to become a “green superpower” in the next decades. It has established more stringent corporate rules for climate disclosures and last year issued the first batch of sovereign green bonds that will be used to finance green projects.

The Australian government also tweaked the mandate of the $307 billion Future Fund in 2024 – a move that sparked enormous controversy – to consider national priorities such as the energy transition in its investment decisions.

“For us, it’s all about all about partnerships. There’s always merit in working together with like-minded investors that have a local presence, and share similar beliefs and objectives as we do,” Aerts says, adding that the fund prefers to create value from projects over the long-term rather than spinning off an asset as soon as feasible.

“We would certainly be seeking closer collaboration with not just the Australian super funds, but other international parties as well that share the same values and interests as us.”

The private natural capital portfolio accounts for $3.5 billion and the fund is also looking to expand that to $5-6 billion, but Aerts says that is dependent on the opportunities available. Asia Pacific investments in that part of the portfolio include 170,000 hectares of forests in Tasmania, Australia (Forico) and a New Zealand timber producer which manages a 30,000-hectare plantation estate (Wenita).

In addition to Australian infrastructure, APG is homing in on India and Southeast Asia (predominantly Indonesia and the Philippines) due to attractive macro factors like the rising middle-class population, urbanisation and fast-growing GDP.

“Coming back to decarbonisation, Asia Pacific offers the biggest opportunity… because more than half of global emissions are created in this part of the world,” Aerts says.

“The other megatrend is digitisation. We see a lot of opportunities across the region, but especially in developing Asia where digital penetration rates are still very low compared to more developed markets.

“In India and the Southeast Asian markets, you really see a strong need for new infrastructure, not only to support the economic growth in the short term, but also to sustain long-term growth. That’s more of the top-down approach. But a top-down perspective alone is not enough. We are combining that with a bottom-up approach where are leveraging on our local market expertise, on the ground capabilities, and trusted partnerships established throughout our long-term presence in the region. Bottom up, it’s really about what are the investable opportunity sets that we’re seeing.”

Aerts says the fund is always conscious of regulatory and political risks when investing in emerging markets but against the global geopolitical background, the risk is higher everywhere.

“People may have thought it’s something only relevant for emerging markets, and they may not have paid as much attention to some of these risks in developed markets.

“For us, we always take these risks into account in our underwriting… If certain risks are too material, for example, when it comes to reputation, then it’s something that we would just avoid.”